Landlord tests freehold rules

US private equity investor Westbrook Partners has been to the High Court in its latest efforts to gain control of flats in major apartment block Dolphin Square, in a case that could have wide implications for homeowners buying flats.

Westbrook bought the head lease of Dolphin Square, with 1,223 flats, in 2005, paying £190 million. All of the flats are rented on assured short hold and short term leases, to individual tenants; the freehold of the property is owned by Friends Life Group.

Westbrook spotted an opportunity to exploit leasehold reform law dating from 2002, which gives any leaseholder of a flat with more than 21 years to run, or a group of them so long as no one owns more than two flats, the right to buy the freehold. It cleverly set up dozens of Jersey-listed companies, and sold each of them one or two flats on 26 year leases. It has then tried to exercise the right to buy the freehold.

The case has been through court, and the Court of Appeal, as Westbrook has tried to make the process stick. Most recently, the High Court is deciding whether the process is a valid one.

A law designed to stop tenants from being held to ransom by landlords, is in danger of being used against their interests, by some clever chicanery. Speaking to Property Week, Jeremy Hudson, who is a partner at law firm Speechly Bircham, commented: “This case has caused consternation. For a landlord to exercise the right to prise the freehold from tenants is against the spirit of the law.” If the claim by Westbrook is successful, there is a danger other landlords could see their way to grabbing back property that was leased long term, when it suits them.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>