Personal representatives, assigning the benefit of a notice and the registration gap

Villarosa v Ryan [2018] EWHC 1914 (Ch)

Prior to 2002, those inheriting a leasehold property were left in a disadvantaged position if they were to be left a flat with a short lease, as they would have to wait for two years from the date they took assignment of the lease and had that assignment registered before they would be entitled to a statutory lease extension under the Leasehold Reform, Housing and Urban Development Act 1993.  Section 132 of the Commonhold and Leasehold Reform Act 2002 remedied this by inserting Section 39(3A), which allowed the personal representatives of a deceased leaseholder to make a lease extension claim providing the deceased had accrued the necessary two years’ qualifying ownership.  A caveat was imposed on this right by a new Section 42(4A) of the 1993 Act, which states that the personal representative may make their claim on behalf of the deceased no later than two years after the grant of probate or the letters of administration.

These rights have been exercised quite merrily for the past 15 years or so with little occurring by way of dispute or disagreement.  That is, until the recent case of Villarosa v Ryan [2018] EWHC 1914 (Ch), which came about from a rather unusual set of facts.  A Mr Louis Vambeck died on 4th December 2007 and the executors named in his will obtained grant of probate on 27th April 2010.  On 26th April 2016, a transfer for the leasehold title to Mr Vambeck’s flat was executed in favour of a Ms Eugenia Villarosa.  It is important to note at this point that the transfer of the lease was not registered at the Land Registry at this time.

The executors then served on Mr Robert Ryan, the freeholder, a notice claiming a lease extension under Section 42 of the 1993 Act.  On either 7th or 8th June the executors assigned the benefit of the Section 42 notice to Ms Villarosa and on 27th June 2016 she became the registered proprietor of the lease of the flat.

A counter-notice under Section 45 of the 1993 Act was served on Ms Villarosa in which her claim was not admitted on two grounds: (i) the claim had been made by Mr Vambeck’s personal representatives more than two years after the grant of probate; and (ii) the lease had been assigned without the benefit of the Section 42 notice.

Addressing the latter issue first, the High Court decided that the claim notice had been validly served.  The transfer executed on 26th April 2016 had the effect of transferring the beneficial title only to Ms Villarosa.  It was only upon registration of the lease that the legal title would be vested in her.  Section 43(3) of the 1993 Act states that a claim notice “shall be assignable with, but shall not be capable of subsisting apart from, the lease of the entire flat”.  The High Court, quite rightly, restated the point that the legal title will only be transferred on registration and, thus, the executors were capable of serving the claim notice and assigning the benefit of that notice until they ceased to hold that legal title on 26th April 2016.  It is useful to know that the rules surrounding the ‘registration gap’ can be consistently applied in the context of 1993 Act claims.

Turning to the first issue on the personal representatives making a claim more than two years after the grant of probate, it was argued on behalf of the freeholder that the effect of Section 42(4A) of the 1993 Act was to limit the right of a personal representative to make their claim within two years of the grant of probate.  It was argued on behalf of the leaseholder, however, that Section 42(4A) simply stated that the personal representatives would be acting on behalf of the deceased leaseholder in serving the claim notice within the two years of grant of probate, but once those two years had expired then the personal representatives themselves would have accrued the necessary two years’ ownership in order to serve the claim notice in their own right.

In his lengthy and most informative judgment, Mr Justice Morgan took advantage of the rule in Pepper v Hart and looked back into the Parliamentary debates on the Commonhold and Leasehold Reform Bill and found that on 13th March 2002 the Parliamentary Under Secretary of State for Transport, Local Government and the Regions said the following in relation to the proposed rights of personal representatives under the new Section:

“it is worth noting that, after holding the lease for two years, the personal representatives will qualify for the right to a new longer lease in the normal way… Personal representatives will no longer need to rely on the special rights granted to them”

The learned judge, therefore, found in favour of the leaseholder.

It is worth noting that counsel for the leaseholder was one Anthony Radevsky, co-author of Hague on Leasehold Enfranchisement since 1999, in which this position on Section 43(4A) has been consistently stated.  No doubt this authority will be cited in a neat footnote in the next edition.

We can now be clear on the following points:

  • The registration gap between transfer and registration of title at the Land Registry can be an appropriate time for an assignor of a leasehold title to make a lease extension claim and assign the benefit of that claim to the assignee; and
  • Section 42(4A) of the 1993 Act does not operate to limit the time by which personal representatives are to serve a claim notice, as they will qualify to serve the claim notice in their own right once two years have passed from the date probate is granted.

Written by Associate Solicitor, Chris Last

Contact Chris: 
Call: 0208 667 2286