A key issue for tenants serving notice on their landlords to purchase their freehold or extend their lease under the provisions of the 1993 Act will always be the offer figure put forward in their initial notice. ‘If the offer figure is too low, the claim will be invalid’ is the conventional wisdom. But is this quite correct?
The starting point is the case of Cadogan v Morris [1996] 4 All ER 643 a Court of Appeal decision in which it was held that simply putting forward a nominal figure (such as a pound) which could not represent adequate compensation in the particular case would invalidate the notice. Following Morris tenants have been advised (no doubt correctly) to obtain valuation advice in order to ensure that they put forward a ‘reasonable offer figure.’
This point was considered further in 9 Cornwall Crescent (London) Limited v Kensington and Chelsea Royal London Borough [2005] EWCA 324, a case which concerned the landlord’s counter-notice and whether this could be invalid if the response figure was too high. The Court of Appeal considered that a subjective element of genuineness was all that was required for the landlord’s counter offer to be valid and that this would meet the subjective test in Morris that it should be made in ‘good faith.’
However, a decision of the Central London County Court from the end of last year (Magnet v Renshaw) shows a further degree of latitude, which may open the door further for the tenant whose offer figure is under attack for being too low.
In Renshaw (which is perhaps more well known for its guidance on who has the actual capacity to serve the counter-notice when the reversion is sold) the court also considered a challenge to the tenants’ offer figure. The court held that the 9 Cornwall Crescent requirement of ‘good faith’ applies equally to the tenant’s offer. In Renshaw the judge rightly said that valuation evidence was of itself not conclusive as to the bona fides of the person making the offer.
Following Renshaw it seems that the tenant’s offer figure could be one that is below the acceptable range of values (as might be ascertained by later valuation evidence) provided that it is made honestly and in good faith (and presumably therefore not merely a nominal figure).
What this means in practice, is that in cases where a tenant has made an offer (honestly, and perhaps without the benefit of valuation advice) that all may not be lost, notwithstanding perhaps a large disparity between the offer figure and the landlord’s counter-notice figure.
Mark Chick
27 August 2008
Mark Chick is a partner at Bishop & Sewell LLP, a committee member of ALEP and is a solicitor specialising in leasehold reform and landlord and tenant matters: www.bishopandsewell.co.uk.