UKs 200,000 plus shared ownership leaseholders win the support of the Court of Appeal

The 200,000-plus shared ownership leaseholders in the UK breathed a sigh of relief when the Court of Appeal granted them the same legal rights as other private sector leaseholders. It was an important and long-awaited verdict. The Court of Appeal, in the case of Avon Ground Rents v Canary Gateway (Block A) RTM [2023] EWCA Civ 616 (30 May 2023), dismissed the appeal made by Avon Ground Rents, owned by Israel Moskovitz, the controversial landlord who objected to a claim for the right to manage seven blocks of apartments located in the East End of London. The leaseholders effectively challenged that 12 individuals who held shared ownership leases (but had not reached 100 per cent ownership) should be considered tenants under the right-to-manage legislation. The court agreed with their argument.

Legal Battle

After an extensive legal battle spanning four years, residents of the flats in London's East End have finally succeeded in removing Avon Ground Rents as the manager. However, this victory was not easily won, involving multiple visits to tenancy-agreements-made-easy'>planetrent.co.uk/blog/could-a-tax-tribunal-ruling-mean-btl-investors-avoid-3-stamp-duty-surcharge'>tribunals and courts. In 2019, the leaseholders initially attempted to take control of the management of their flats away from Avon Ground Rents. In November 2020, the Upper tenancy-agreements-made-easy'>planetrent.co.uk/blog/could-a-tax-tribunal-ruling-mean-btl-investors-avoid-3-stamp-duty-surcharge'>Tribunal (Lands Chamber) recognized that the 12 leaseholders had "long leases" according to the Commonhold and Leasehold Reform Act 2002. However, it rejected their application for the right to manage based on other grounds.

In response, Avon Ground Rents launched new proceedings, arguing that the 2020 Upper tenancy-agreements-made-easy'>planetrent.co.uk/blog/could-a-tax-tribunal-ruling-mean-btl-investors-avoid-3-stamp-duty-surcharge'>Tribunal decision was incorrect.

The critical aspect of the case hinged on whether the 12 shared ownership leaseholders, who had not fully acquired 100 percent ownership of their leases, qualified as having "long leases" according to section 76(2) of the Commonhold and Leasehold Reform Act 2002. If they were not considered to have "long leases," their housing association landlord would be regarded as the qualifying tenant, and separate preliminary notices would need to be provided to involve them.

The argument revolved around whether a landlord could be seen as a "tenant" under the Act's provisions.

In a previous ruling in 2020 (Avon v Canary Gateway (Block A) RTM Ltd and others [2020] UKUT 358 (LC)), the Upper tenancy-agreements-made-easy'>planetrent.co.uk/blog/could-a-tax-tribunal-ruling-mean-btl-investors-avoid-3-stamp-duty-surcharge'>Tribunal determined that the 12 shared ownership leaseholders were indeed eligible to be considered as the qualifying tenants of their flats. Ultimately, Avon Ground Rents agreed that half of the blocks could obtain the right to manage. However, in subsequent proceedings, Avon's legal team argued that the Upper tenancy-agreements-made-easy'>planetrent.co.uk/blog/could-a-tax-tribunal-ruling-mean-btl-investors-avoid-3-stamp-duty-surcharge'>Tribunal had made a mistake regarding the remaining blocks.

Despite their efforts, Avon's arguments were unsuccessful in both the First-tier tenancy-agreements-made-easy'>planetrent.co.uk/blog/could-a-tax-tribunal-ruling-mean-btl-investors-avoid-3-stamp-duty-surcharge'>Tribunal and the Upper tenancy-agreements-made-easy'>planetrent.co.uk/blog/could-a-tax-tribunal-ruling-mean-btl-investors-avoid-3-stamp-duty-surcharge'>Tribunal. They subsequently appealed the decision to the Court of Appeal. Avon Ground Rents claimed that the shared ownership leaseholders did not meet the criteria stated in section 76(2)(e) of the Act, which specifically states that a long lease includes "shared ownership" where the tenant's ownership share is 100 per cent. The leaseholders argued that they met the requirements based on the default provisions of section 76(2) (a). It states that a long lease lasts for more than 21 years.