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Leasehold Covenants & Corporate Governance: Houldsworth Village Management Co Ltd v Barton


Alice Richardson

In Houldsworth Village Management Co Ltd v Barton [2020] EWCA Civ 980 the Court of Appeal considered the correct approach to requests made to lessee-owned property management companies under s.116 Companies Act 2006 (‘the Act’).

Trinity Housing and Property barrister, Alice Richardson appeared as junior counsel for the appellant. 

Victoria Mill is a building in Stockport made up of 180 residential flats. The flats are let on long leases which are tripartite agreements between the landlord, the leaseholders and the Appellant, a lessee-owned management company. 

The Respondent is a leaseholder of one of the flats and is a member of the Appellant company.

On 3rd May 2019 the Respondent made a request to the Appellant company, under s.116 of the Act, to inspect the current register of members so that he could seek to persuade other members to support the removal of the directors and the managing agents.

The Appellant took the view that the Respondent’s request was not made for a ‘proper purpose’ because he was, in relation to the managing agents, attempting to further his rights as leaseholder rather than as a shareholder. The High Court found for the Respondent and the Appellant appealed to the Court of Appeal.

Dismissing the appeal the Court of Appeal held that, whilst the Respondent’s rights as a leaseholder and as a shareholder were distinct, it was impossible to draw a sharp dividing line between the covenants under the lease and the affairs of the company. The Respondent’s request was not, therefore, improper.

Comment

This decision is likely to have significant implications, not only for lessee-owned property management companies but for any company that is faced with a request from a member under s.116 of the Act.

The Court made clear that it did not consider that a request made by a member necessarily has to relate to his or her interests as a member of the company in order to be made for a ‘proper purpose’. That may not sit well with Burry & Knight Ltd [2014] EWCA Civ 604 in which Arden LJ held, at [29] that “Where a member seeks access to the share register so he can communicate with other members, it seems to me that proposed communication must, if it is to be for a proper purpose, be relevant in some way to the members interests as members of the company”.

Further, it may be difficult to reconcile the Court’s decision that there is a clear distinction between leaseholder and shareholder rights with its subsequent decision that it is ‘impossible’ to draw a line between enforcement of the covenants under the lease and corporate governance.

 

 

Alice Richardson deals with a wide range of property, landlord and tenant and housing law issues including leasehold disputes, property management and service charges. She also undertakes regulatory work in the housing, property and local government sectors including housing act offences, rent repayment orders and nuisance abatement. Alice was appointed to the Attorney General's regional panel of counsel in 2018 and the Equality and Human Rights Commission panel of counsel in 2019.

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