What are the rights of the lessees, the alterations tenant is allowed to do to any of the flat and the construction of under lease concerning the development right

Roof Development (Hannon v 169 Queen's Gate Limited)

Summary

This is an application relating to a proposed refurbishment development across the roof of a premises by 169 Queen's Gate Limited, the Freeholder, and an affected Mr. Hannon, who is a leaseholder. This application landed before the First-tier Tribunal (Property Chamber), and the First-tier Tribunal dismissed the application of the Freeholder. The Upper Tribunal then revisited the case, where the Upper Tribunal (Lands Chamber). It involved the rights of the lessees, the alterations tenant is allowed to do to any of the flat and the construction of under lease concerning the development right.

Facts                    

169 Queen's Gate Limited (169 QG) happened to be the freeholder of the property which happened to be a building consisting of several residential flats—one of the flats held by an under lease to Mr. Hannon. The freeholder had an intention to carry out a development of the roof space above the building. Extensively, it would be such that the works would be to the detriment of the present structure, at disadvantage to existing tenants, the leaseholders who occupy the buildings, or of the future owners of such leases, including Mr. Hannon. Advertised as enbloc, development would give new residential units in states or develop the roof space or in structural works in common parts of the building.

Mr. Hannon was resisting the development as it would infringe both his leasehold rights and also injure his future right to occupy the premises. He says that the interference will be considerable if the development is allowed, it will cause overshadowing and there may be construction related claims as to his flat. Additionally he maintains that the consents and improvements supplied by Freeholder were insufficiently favourable.

Issues

The main issues of this case are :

1. Whether, on the terms of the lease, the Freeholder could lawfully carry out the contemplated development of the roof.

2. The extent of the interference that the development would cause to Mr. Hannon's rights and to his occupation of his premises.

3. Whether the requirements of the leasehold covenants had been satisfied by proper compensation and/ or by offers to mitigate.

4. The construction of the differences/APM in the lease terms and the rights of development the Freeholder had

First Instance

Mr. Hannon argued before the First-tier Tribunal that the leasehold does not confer a free will upon the Freeholder to act for carrying forward development beyond on the roof and subsequent change in the building such that it departs from the development specifically leased to do so. He stated that the Lease debarred the Freeholder from an absolute right to effect further development of the building that will have some material effect on his own flat. The Tribunal's decision had in mind the imperative requirements of the Lease; the general character of the development that was purportedly about to be planned; and what this ended up meaning to the estate of Mr Hannon.

In an astonishing ruling, the First-tier Tribunal found for Hannon for a number of reasons:. The first and foremost thing, in the opinion of the tribunal, is that the right to alteration in the lease permitted a scenario by which the freeholder would be able to substantially alter the situation, taking away the right of the leaseholder to the premises and subjecting him to an intolerable experience without his consent. Then the Tribunal also states that the amount of compensation that is being offered together with all the other measures of mitigation were not sufficient to cover for the interference as well the prospective damages that were approaching Mr. Hannon's way .

Decision on Appeal

On Appeal, the Upper Tribunal (Lands Chamber) heard an appeal from 169 Queen's Gate Limited which wished to be set aside the decision of the First-tier Tribunal.  The issues in the appeal concerned the construction of the lease and the nature of the Freeholder's rights to develop the roof space. The Freeholder submitted that the lease had correctly been understood to allow for development and, in any application of the terms of the lease, the Tribunal had erred in law.

The Upper Tribunal seemed to think that to make leases into under leases would be all right if the Upper Tribunal was to assume the findings of fact made by the First-tier Tribunal in relation to the lease and the development schemes put before it, thus affirming that ,the First-tier Tribunal was right in its finding that the lease did not give a free unencumbered right to the Freeholder to make material substantial changes material to the rights and enjoyment of his property by the leaseholder. The extent of interference with the tenant's peaceful/enjoyment occasioned by the development will be very based on one of the two: either the disruptions' magnitude and duration, and the hours of day or night at which they occur.

Comments

Hannon v 169 Queen's Gate Limited is another case that paves the way for the reliance on the terms of the lease referred to as the construction of development rights and protection of the interests of the leaseholders. Out of the case, there comes a number of aspects significantly:

1. Interpretation of Lease Terms This is an instance of the exercise to "interpret ultra-cautiously the terms of the lease" and more particularly any rights of the Freeholder there may be to make alterations and developments of his own. A lease term must be stated in unmistakable and clear terms to prevent conflicts.

2. Leaseholder Rights: Leaseholders have the right to the quiet enjoyment of their property without unreasonable interference. Major Freeholder developments that materially affect Leaseholders need to be considered very carefully and in many cases by the agreement of the Leaseholders.

3. Alternative and Mitigation Compensation: The proposed developments will have to incorporate proper realms of compensation in addition to measures of mitigation, compensatory, to help in dealing with the consequent influences that the myriad developments would have on the lease holders. The ways will be financial compensation together with practical disturbance and damage minimization.

4. THE ROLE OF THE TRIBUNALS: The roles of the First-tier and Upper Tribunals are very significant in their adjudication of disputes between freeholders and leaseholders—for the way in which decisions made guide the maintenance of the balance between the rights of development and the interests of the leaseholders.

5. Precedent for Future Cases: This should set a precedent for other cases involving the development right and leaseholder protection and should add weight to the gravity of setting proper lease terms and critical consideration on leaseholder rights in any development proposal.

Summarizing then, Hannon v 169 Queen's Gate Limited does in fact balance the interests in regard to property development, that of the leaseholder, and a proper understanding relative to the lease terms in question. While applying the considerations of the principle of quiet enjoyment, proper compensation, and proper interests toward the leaseholder, the case leaves the other interests of the leaseholder untouched where the properties of alteration are of a dramatic nature.

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