In the recent Court of Appeal decision of Reiner & Anor v Triplark [2018] EWCA Civ 2151, the right to manage company did not give the required notice to the landlord. This was intentional as the buyer of the flat was also a director of the right to manage company and was concerned that the landlord would object. The right to manage company itself did not purport to give any consent for the sale or to refuse it. The sale proceeded to completion. After the seller had moved out, the landlord objected to the assignment and applied to Land Registry to prevent the new buyer being registered as the legal owner of the property on the basis that there had been a breach of the lease obligations in this regard.
The buyer appealed the decision that she had breached the covenant against selling the flat without the landlord’s prior consent and asserted that consent had been unreasonably withheld (and so given).
Firstly, the Court of Appeal decided that the buyer had become the flat owner even though legal title hadn’t vested in them by way of registration at Land Registry; completion had taken place as the seller had parted with possession and received the completion monies and so ceded all legal right to possession.
As a dealing with the property that triggered the need for landlord’s consent had taken place (parting with possession), the next question for the court to decide was whether the company’s withholding consent was unreasonable in which case it would be deemed to have consented and so the buyer would be relieved of the consequences of the breach.
It was decided that the landlord had not unreasonably withheld consent as the right to manage company was not able to grant consent until thirty days’ notice had been given to the landlord; the company was expressly prohibited by s98(4) of the Commonhold and Leasehold Reform Act 2002 from giving consent until then. The court stated this conclusion didn’t prejudice the buyer’s position as they could apply to court for an order requiring the right to manage company to fulfil its duty of giving notice to the landlord and so remove the blockage in a sale.
So this decision creates the potential for a sale to be seriously delayed or even lost due to inaction by the right to manage company as the seller would have to apply to the court firstly to force it to give the notice to the landlord and then for a declaration that consent had been unreasonably withheld in the face of continued inaction by the right to manage company once the landlord notice period elapses.
All of this would add huge cost and delay to a proposed sale of a flat, which in the current market would no doubt mean losing the buyer and potentially coming back into the market at a lower price point.
It is good news for landlords on the other hand as the onus is on the selling flat owner to ensure the right to manage company gives notice to the landlord of an intended disposal as opposed to the flat owner or their buyer being able to see a sale through to a successful conclusion without the landlord knowing about it and being able to object.
The practical outcome for flat owners in that they will need to ensure the right to manage company efficiently gives notice to the landlord of a proposed sale and that this is recorded so that the relevant time limits are clear if further action needs to be taken.
