“In 1996, the Ministry of Defence sold most of its married quarters estate (now referred to as service family estate) to Annington Property Limited and agreed to rent it back for up to 200 years. The deal has turned out to be disastrous for taxpayers, offering no protection against the private sector making excessive gains at the taxpayer’s expense. Worse could follow because the rent, which has been subject to a 58% downwards adjustment to date, is to be reviewed from 2021. Depending on the outcome of negotiations, the Department’s costs could increase significantly at a time when the defence budget is already stretched.”
“This Part of this Act shall have effect to confer on a tenant of a leasehold house … a right to acquire on fair terms the freehold or an extended lease of the house and premises where …”
“(b) the freehold of that house is owned together with adjoining land which is not occupied for residential purposes and has been owned together with such land since1st April 1997 (the date on whichsection 106 of the Housing Act 1996 came into force)”
“(1B) This Part of this Act shall not have effect to confer any right on the tenant of a house under a tenancy to which Part 2 of theLandlord and Tenant Act 1954 (c. 56) (business tenancies) applies unless, at the relevant time, the tenant has been occupying the house, or any part of it, as his only or main residence (whether or not he has been using it for other purposes)— (a) for the last two years; or (b) for periods amounting to two years in the last ten years.”
“(1) Where under this Part of this Act a tenant of a house has the right to acquire the freehold or an extended lease and gives notice of his desire to have it, the rights and obligations of the landlord and the tenant arising from the notice shall inure for the benefit of and be enforceable against them, their executors, administrators and assigns to the like extent (but no further) as rights and obligations arising under a contract for a sale or lease freely entered into between the landlord and tenant; and accordingly, in relation to matters arising out of any such notice, references in this Part of this Act to the tenant and the landlord shall, in so far as the context permits, include their respective executors, administrators and assigns.”
“(4) The provisions of Schedule 1 to this Act shall have effect in relation to the operation of this Part of this Act where a person gives notice of his desire to have the freehold or an extended lease of a house and premises, and either he does so in respect of a sub-tenancy or there is a tenancy reversionary on his tenancy; but any such notice given in respect of a tenancy granted by sub-demise out of a superior tenancy other than a long tenancy at a low rent shall be of no effect if the grant was made in breach of the terms of the superior tenancy and there has been no waiver of the breach by the superior landlord.”
“(1) Where a person (in this Schedule referred to as “the claimant”) gives notice of his desire to have the freehold or an extended lease of a house and premises under Part I of this Act, and does so in respect of a sub-tenancy (in this Schedule referred to as “the tenancy in possession”), then except as otherwise provided by this Schedule— (a) the rights and obligations of the landlord under Part I of this Act shall, so far as their interests are affected, be rights and obligations respectively of the estate owner in respect of the fee simple and of each of the persons in whom is vested a concurrent tenancy superior to the tenancy in possession (and references to the landlord shall apply accordingly); and (b) the proceedings arising out of the notice, whether for resisting or giving effect to the claim to acquire the freehold or extended lease, shall be conducted, on behalf of all the persons referred to in (a) above, by and through that one of them who is identified by this Schedule as “the reversioner”.” (a) the rights and obligations of the landlord under Part I of this Act shall, so far as their interests are affected, be rights and obligations respectively of the estate owner in respect of the fee simple and of each of the persons in whom is vested a concurrent tenancy superior to the tenancy in possession (and references to the landlord shall apply accordingly); and (b) the proceedings arising out of the notice, whether for resisting or giving effect to the claim to acquire the freehold or extended lease, shall be conducted, on behalf of all the persons referred to in (a) above, by and through that one of them who is identified by this Schedule as “the reversioner”.”
“In the following provisions of this Part of this Act the expression “the holding”, in relation to a tenancy to which this Part of this Act applies, means the property comprised in the tenancy, there being excluded any part thereof which is occupied neither by the tenant nor by a person employed by the tenant and so employed for the purposes of a business by reason of which the tenancy is one to which this Part of this Act applies.”
“the driving principle in the Ramsay line of cases continues to involve a general rule of statutory construction and an unblinkered approach to the analysis of the facts. The ultimate question is whether the relevant statutory provisions, construed purposively, were intended to apply to the transaction, viewed realistically.”
“Where, as in the instant case, we are concerned with the legal nature of the exercise of executive powers of government, I believe that some of the more Athanasian-like features of the debate in your Lordships' House could have been eliminated if instead of speaking of 'the Crown' we were to speak of 'the government' - a term appropriate to embrace both collectively and individually all of the ministers of the Crown and parliamentary secretaries under whose direction the administrative work of government is carried on by the civil servants employed in the various government departments. It is through them that the executive powers of Her Majesty's government in the United Kingdom are exercised, sometimes in the more important administrative matters in Her Majesty's name, but most often under their own official designation. Executive acts of government that are done by any of them are acts done by 'the Crown' in the fictional sense in which that expression is now used in English public law.”
“In my opinion, even although a health board falls to be regarded as providing services on behalf of the Crown, it does not follow that the health board falls to be accorded Crown status. The respondents contended that if a body was performing functions of the Crown and only functions of the Crown, then they were Crown bodies. In my opinion, however, that submission is fallacious. It is necessary to distinguish, as the Lord Ordinary did, between the nature of the functions performed on the one hand and the status of the person who performed them on the other hand. It is not every body which performs functions on behalf of the Crown which falls to be treated as the Crown. A body which is acting on behalf of the Crown may be entitled to claim Crown immunity so long as it is acting on the instructions and at the direction of the Crown, but that does not mean that such a body falls to be treated as being the Crown. In Lord Advocate v. Strathclyde Regional Council, Lord Cullen held that Crown immunity could only be claimed in respect of the actions of an independent contractor who had been engaged by the Crown to carry out work and who was acting at the direction of representatives of the Crown. That does not mean, however, that the independent contractor falls to be treated as the Crown or accorded the status of the Crown.”
“In my opinion what Lord Diplock states regarding English public law is also true of Scottish public law. In Scotland as in England I am of opinion that “the Crown” covers ministers of the Crown and members of the civil service acting under the direction of ministers. However, I see no justification for holding that “the Crown” also covers bodies such as health boards which exercise some of the functions which have been delegated to them by the Secretary of State. In my opinion, for the purpose of determining who are included in the expression “the Crown” it is important to draw a distinction between government departments on the one hand and bodies like health boards on the other. Counsel for the respondents expressly stated that they were not contending that a health board was a government department or part of a government department. The Crown and a minister who requires to discharge statutory duties can only act through servants or agents, but I see no justification in principle for holding that every agent or servant of the Crown falls to be equiparated with the Crown itself. As Lord Diplock pointed out in Town Investments v. Department of the Environment, the Crown will embrace certain civil servants employed in various government departments, but I see no justification for holding that every body or person who is a servant or agent of a Secretary of State should be held to have Crown status.”
“To hold that a health board is the Crown would be to extend Crown status further than it has been extended before. No doubt a health board is performing functions on behalf of the Secretary of State, but it is not everyone who performs functions on behalf of the Secretary of State who is the Crown. I see no justification in principle or on authority for extending the concept of the Crown beyond those persons comprehended in the description of the Crown given by Lord Diplock in Town Investments v. Department of the Environment.”
“The term “agent of the Crown” has become the common usage for a public corporation that enjoys the attributes of the Crown. Agent of the Crown in this context is a synonym for “servant of the Crown”, and the latter phrase is sometimes used. Occasionally, the question is said to be whether the corporation is “within the shield of the Crown” or is an “instrumentality of the Crown” or an “emanation of the Crown”
“The mere fact of incorporation, which is only for administrative convenience, does not make a Secretary of State or a minister or a ministry an entity separate from the Crown”
“63. The power of the Minister of Energy to undertake negotiations with CT Power as part of the conduct of the business of the Government is a wide one, conferring on the Minister a very wide discretion as to how best to proceed. The implication is that the Minister is permitted to participate in the commercial market in the usual way, i.e. through the exercise of the full bargaining power available to the Government in order to secure the best commercial deal possible and thereby promote the public interest. With that end in view, a court should be astute to ensure that application of public law standards in relation to the Minister does not cut down or undermine that bargaining power. Nor should public law standards be applied in such a way as to give a potential contracting counterparty a negotiating advantage which has not been bargained for.”
“33. Crown land. (1) In the case of a tenancy from the Crown this Part of this Act shall apply in favour of the tenant as in the case of any other tenancy if there has ceased to be a Crown interest in the land, and as against a landlord holding a tenancy from the Crown shall apply also if either— (a) his sub-tenant is seeking an extended lease and the landlord, or a superior landlord holding a tenancy from the Crown, has a sufficient interest to grant it and is entitled to do so without the concurrence of the appropriate authority; or (b) the appropriate authority notifies the landlord that as regards any Crown interest affected the authority will grant or concur in granting the freehold or extended lease. (2) For purposes of this section “tenancy from the Crown” means a tenancy of land in which there is, or has during the subsistence of the tenancy been, a Crown interest superior to the tenancy, and “Crown interest” and “the appropriate authority” in relation to a Crown interest mean respectively— (a) an interest comprised in the Crown Estate, and the Crown Estate Commissioners; (b) an interest belonging to Her Majesty in right of the Duchy of Lancaster, and the Chancellor of the Duchy; (c) an interest belonging to the Duchy of Cornwall, and such person as the Duke of Cornwall or the possessor for the time being of the Duchy appoints; (d) any other interest belonging to a government department or held on behalf of Her Majesty for the purposes of a government department, and the Minister in charge of that department.”
“14(1) This Schedule shall apply notwithstanding that the tenancy in possession is a tenancy from the Crown within the meaning of section 33 of this Act; and, where under section 33(1)(b) the appropriate authority gives notice that as regards a Crown interest the authority will grant or concur in granting the freehold or an extended lease, then in relation to the Crown interest and the person to whom it belongs this Schedule shall have effect as it has effect in relation to other landlords and their interests, but with the appropriate authority having power to act as reversioner or otherwise for purposes of this Schedule on behalf of that person: Provided that paragraph 4(1)(a) above shall not apply to the execution of a conveyance or lease on behalf of the person to whom a Crown interest belongs. (2) A conveyance or lease executed in pursuance of paragraph 4(3) above shall be effective notwithstanding that the interest intended to be conveyed or bound is a Crown interest or a tenancy from the Crown.”
“88. Jurisdiction of .... tribunals in relation to enfranchisement etc. of Crown land. (1) This section applies where any tenant under a lease from the Crown is proceeding with a view to acquiring the freehold or an extended lease of a house and premises in circumstances in which, but for the existence of any Crown interest in the land subject to the lease, he would be entitled to acquire the freehold or such an extended lease underPart I of the Leasehold Reform Act 1967 . (2) Where— (a) this section applies in accordance with subsection (1), and (b) any question arises in connection with the acquisition of the freehold or an extended lease of the house and premises which is such that, if the tenant were proceeding as mentioned in that subsection in pursuance of a claim made under Part I of that Act, the appropriate tribunal ... would have jurisdiction to determine it in proceedings under that Part, and (c) it is agreed between— (i) the appropriate authority and the tenant, and (ii) all other persons (if any) whose interests would fall to be represented in proceedings brought under that Part for the determination of that question by such a tribunal, that that question should be determined by such a tribunal, the appropriate tribunal shall have jurisdiction to determine that question.”
“shall apply in favour of the tenant as in the case of any other tenancy.”
“as against a landlord holding a tenancy from the Crown shall apply … ”
“Parliamentary sovereignty means that Parliament can, if it chooses, legislate contrary to fundamental principles of human rights.The Human Rights Act 1998 will not detract from this power. The constraints upon its exercise by Parliament are ultimately political, not legal. But the principle of legality means that Parliament must squarely confront what it is doing and accept the political cost. Fundamental rights cannot be overridden by general or ambiguous words. This is because there is too great a risk that the full implications of their unqualified meaning may have passed unnoticed in the democratic process. In the absence of express language or necessary implication to the contrary, the courts therefore presume that even the most general words were intended to be subject to the basic rights of the individual. In this way the courts of the United Kingdom, though acknowledging the sovereignty of Parliament, apply principles of constitutionality little different from those which exist in countries where the power of the legislature is expressly limited by a constitutional document.”
“The degree of presence and exclusion required to constitute occupation, and the acts needed to evince presence and exclusion, must always depend upon the nature of the premises, the use to which they are being put, and the rights enjoyed or exercised by the persons in question.”
“It is, to my mind, quite plain, with all respect to Mr. Blundell's argument, that subsection (1) of section 41 is dealing, and dealing only, with the case where, although the tenancy is vested in someone who is properly described as the tenant, nevertheless it is found that the tenant himself happens to be a trustee and the premises are actually occupied by, and the business is actually being, carried on, not by the tenant trustee himself, but by the beneficiary or beneficiaries, or one of them, for whom the tenant is a trustee. Inevitably, as it seems to me, the occupation by the beneficiary is an occupation which derives its existence from the fact of the trust and the interest of the beneficiary under the trust. It was suggested by Mr. Blundell that section 41(1) contemplated a beneficiary subtenant, a person being a beneficiary to whom the tenant had granted a subtenancy to put him in occupation. In my judgment, that cannot be right. If there was found in possession AB carrying on a business there and owing his right of occupation to his subtenancy, then that subtenancy would be the tenancy, and the only tenancy, to which Part II of the Act applied. I therefore approach subsection (2), which deals with the corresponding case of the landlord, bearing in mind that what subsection (1) has said, putting it quite shortly, is that a tenancy shall not be taken out of the Act and lose the benefit of renewal which the Act gives by reason of the circumstance that the actual occupant, the person carrying on the business, is, in truth, a beneficiary under a trust and is doing so because he is such a beneficiary. If that is right, then I think one naturally approaches subsection (2) with exactly the same notion. What the second subsection is doing is not to deprive the landlord of his chance of successful opposition merely because in the case of the landlord's interest, as had been set out in the case of the tenant's interest, the legal and equitable interests are distinct and the actual reversioner, the person who under section 44 is the landlord because he owns the reversion, does so as trustee for someone else, and it is that someone else, by virtue of his beneficial interest, who intends to carry on the business in the future. If one reads this section in its context, that inevitably seems to be the parliamentary intention, and the way in which the subsection is expressed supports that view.”
“That makes it plain, in my view, that what is intended is that the protection for the tenancy is not to be lost by the circumstance that the tenant is company A, but the actual occupant is company B, not by virtue of a subtenancy (because, as I have said in the case of a trust, if there was a subtenancy, then that subtenancy would qualify as the tenancy for section 23), but by virtue of the commercial association between companies A and B.”
“But if the conception is to be uniform - as I feel myself clearly it is - then just as the essential thing by virtue of which the occupation is to be had under section 42 is the qualification as an associated company, so, I think, if the intended occupation is to be that of a beneficiary, it must be shown that it is the intention that he should so occupy by virtue of his quality or right as a beneficiary.”
“In recognition of this, SFA accommodation is offered to eligible and entitled service personnel, located in close proximity to the service person’s duty station. Service personnel are however generally free to live where they want, regardless of the nature of their role, provided that they are able to carry out their duties. In complying with this requirement, service personnel can choose whether they live in SFA or private (owned or rented) accommodation. Indeed the MoD supports service personnel who wish to buy their own properties through the Armed Forces Help to Buy Scheme. According to a 2022 Armed Forces survey, 20% of service personnel live in property which they own, 29% live in SFA, 44% live in SLA with the remaining marked as other/ on board ship or submarine. …..”
“0101. Provision of Service Accommodation. It is a condition of service in recognition of their inherently mobile lifestyles, frequently remote bases and terms of service, that Regular Service (including FTRS(FC)) personnel are provided with high quality subsidised accommodation.”
“SFA is a fundamental part of the MoD’s offer to service personnel. It is viewed as crucial to the MoD’s ability to attract and retain talented personnel to deliver its objectives. Therefore, there is, and will continue to be, a long-term, large-scale requirement for the provision of accommodation to service personnel and their families.”
“5.4 However, I wish to make it clear that the MoD does not place any obligation on service personnel to live in SFA, or to live in SFA at the site of the base at which [they] serve. This would run contrary to JSP 464 which is designed to increase the flexibility and choice around where service personnel make their home, rather than restrict it. 5.5 To my knowledge, a service person and their family are free to live where they want, regardless of the nature of their role, provided they are able to carry out their duties. However, in complying with this requirement, they could choose to either live in SFA (provided they are eligible or entitled) or alternatively they could equally decide that is preferable for them and their family to live in private civilian accommodation. Service personnel who do not meet these criteria tend to live in Single Living Accommodation which are accommodation blocks near MoD bases. In my experience it is common for service personnel with families to elect to live in private civilian accommodation. Indeed, the MoD actively supports this choice. By way of an example, regular service personnel (subject to certain qualification criteria) can apply to the Forces Help to Buy scheme. This enables servicemen and women to borrow up to 50% of their salary, interest free, to buy their first home or move to another property on assignment or as their families' needs change ... ”
“Defence provides Service personnel with subsidised accommodation and support to aid workforce mobility, operational readiness and capability. Service personnel change jobs frequently, sometimes at short notice and in multiple, and sometimes remote locations. To mitigate the impact of this, Defence provides subsidised high-quality housing and support to Service personnel and their families. It is a key part of our offer as is the help we give to Service personnel who wish to buy their own properties through the Forces Help to Buy scheme. In supporting our people through the scheme, Defence gives them greater choice over their accommodation. (emphasis added).”
“I have read and agreed to the terms of this Licence. I understand that this Licence is to be granted because my occupation of the Property is required for the better performance of my service with the Crown and that this Licence is not a tenancy.”
“6.1.2. You must observe and comply with all security or other instructions issued by the Services, Us or by Our representatives or agents and ensure that members of Your household and any visitors also do so.”
“Whether, if the answer to any issue within §§5-6 above would otherwise be “yes”, the answer is different because some relevant occupation falls to be disregarded because of the de minimis principle. ”
“It is clear that no Minister or public authority can acquire any land compulsorily except the power to do so be given by Parliament: and Parliament only grants it, or should only grant it, when it is necessary in the public interest. In any case, therefore, where the scales are evenly balanced – for or against compulsory acquisition – the decision – by whomsoever it is made – should come down against compulsory acquisition. I regard it as a principle of our constitutional law that no citizen is to be deprived of his land by any public authority against his will, unless it is expressly authorised by Parliament and the public interest decisively so demands: and then only on the condition that proper compensation is paid: see Attorney-General v. De Keyser’s Royal Hotel Ltd [1920] A.C. 508.”
“43. The Board also considers that the decision of the Ministry of Energy to refuse to sign the Implementation Agreement is in principle within the scope of the court’s judicial review jurisdiction. It is true that a decision whether or not to enter into a contract involves deciding whether to accept obligations sounding in the private law of contract. However, a contract is made between legal persons, and where the person who is a proposed party to a contract is a public authority the way in which it may behave is subject to rules of public law; and whether the public authority has acted lawfully in accordance with those rules is a matter which may be subject to judicial review. The Board would add that the same point about the relevance of rules of public law can be made regarding a decision by a public authority whether and how to exercise rights sounding in private law conferred by a contract into which it has entered: see Mercury Energy Ltd v Electricity Corporation of New Zealand Ltd[1994] 1 WLR 521 (PC), in particular at p 526A-D (decision to give notice to terminate a commercial contract for the bulk supply of electricity). Again, it is a separate question what public law standards apply and whether the Ministry of Energy did anything unlawful in terms of those standards in taking the decision it did: see below.”
“64. In negotiating a commercial contract on behalf of the Government, the Minister, as a public authority, is not entirely free from constraints arising under public law. He is obliged to comply with basic public law standards which ensure that he properly seeks to promote the public interest. Accordingly, his decision-making as to how to conduct negotiations before a contract is entered into might be brought into question if, by way of purely hypothetical example, he acted out of personal spite or because he had been bribed. As a result, the potential counterparty is not exposed to what, if they were negotiating with another private party, might be the pure capriciousness of that private party in deciding whether to enter into the contract and on what terms. 65. However, when conducting negotiations, the Minister is entitled to have regard to a wide range of considerations, including political considerations, which would not typically play a role in negotiations between two private commercial parties. In the present case, for example, entering into the Implementation Agreement would involve a commitment potentially requiring substantial payments of public money. There is inevitably a possible political dimension to such questions which it would be legitimate to take into account. In the present case it appears that the incoming government after the general election in December 2014 may have been less convinced than the former government that the project was a good idea and that the commitment to be given in the Implementation Agreement was justified.”
“The limited scope for a judicial review challenge as indicated in this passage reflects the width of the relevant discretion enjoyed by a state enterprise (or … [a Minister]) when exercising its powers to negotiate a commercial contract or how to use its rights under such a contract.”
“5-094. However, the designation of a purpose as “improper” is distinct because of its connotation of moral impropriety. In most cases where the term “improper” has been employed the decision-maker either knowingly pursues a purpose that is different from the one that is ostensibly being pursued, or the motive behind the decision is illicit (based for example on personal factors such as financial gain, revenge or prejudice). Because, therefore, of its adverse moral imputation, the notion of improper purposes is more akin to that of bad faith, which will now be considered separately. Bad faith and improper motive 5-095. Fundamental to the legitimacy of public decision-making is the principle that official decisions should not be infected with improper motives such as fraud or dishonesty, malice or personal self-interest. These motives, which have the effect of distorting or unfairly biasing the decision-maker’s approach to the subject of the decision, automatically cause the decision to be taken for an improper purpose and thus take it outside the permissible parameters of the power.”
“We would therefore recommend that MoD establish a SPV and notify AHL of the intention to enfranchise at the earliest possible opportunity. We could make such steps publicly known in order to disrupt AHL’s IPO process. This will create commercial leverage that has hitherto been absent in MoD’s relationship with AHL.”
“Executing this transaction would create intense commercial leverage over Annington Homes; merely holding the threat of this could force Annington’s valuers and auditors to write down its book value. Such a threat would be of considerable benefit to MoD as it is in the process of arbitrating the rent for the next 15 years; the NPV of the rent is up to£13bn so it is incredibly important for MoD to exercise any leverage it can”
“Annington is held by Terra Firma in a closed fund. The fund’s end date is understood to be in the second half of 2022, the tenth anniversary of the acquisition of Annington by Terra Firma from Nomura. Therefore Terra Firma will either need to sell its interest in Annington, or place Annington in a new or continuity fund, before this point in time. Triggering Sycamore after any sale of Annington by Terra Firma would be undesirable: - A scenario in which MoD waited for Guy Hands to crystallise a very significant profit, walk away, and then MoD decided to exercise its rights against the new owner, (which may well be a socially responsible investor such as a pension fund, or indeed shares might be publicly traded further to an IPO exit) would be reputationally very damaging for MoD; and - There is a likelihood that purchasers will borrow to finance the purchase and that this debt load will be borne by Annington, thus reducing room for manoeuvre in any eventual settlement or negotiation. Similarly, even if Annington was not sold, given the relatively conservative financing structure in place (gearing <50%), the transfer of Annington into a new fund would represent an opportunity to increase debt to fund a dividend recapitalisation and enhance distributions to investors, which have been relatively modest since 2012. On the assumption that Sycamore is legally viable, any enfranchisement claim by MoD should immediately sterilise any potential sale or refinancing by Terra Firma. Therefore our advice is that MoD should ensure that it triggers Project Sycamore no later than the end of Q2 2022.”
“The 1996 sale and leaseback deal is openly acknowledged to be a bad deal for the taxpayer. The NAO’s 2018 report estimates that it represents a transfer of value from the public sector to the private sector of over£4bn . Furthermore, the nature of the private sector counterparty gives rise to additional presentational difficulties for MoD. APL is owned by Terra Firma. Terra Firma has restructured Annington’s holding company as a ‘Collective Investment Vehicle’, an aggressive form of restructuring which has avoided nearly£800m of capital gains tax liability which would otherwise would be payable by APL to HMRC as and when it disposes of properties. This is a source of ongoing embarrassment for MoD.”
“Having due regard to: - The increasingly poor value for money of the sale and leaseback arrangements for MoD; - The aggressive tax avoidance employed by Terra Firma; - The lack of commercial levers MoD has to improve VFM; - The lack of latitude shown by APL in administering the arrangements, and - The ongoing inability of MoD to remedy or re-set the relationship, despite its best efforts, the overriding commercial strategy remains unchanged: to exit the arrangements with Annington as far as is possible. The chart below shows the methodology we are using to determine which properties currently owned by Annington we would like to retain.” “Ideally a constructive, affordable and strategic relationship would support us in retaining [certain] properties … but as set out above we must consider the possibility that this will not be achievable and therefore consider options for exit. On the assumption that there persists an ongoing policy objective to provide homes for service families, there are two methods for exit: 1. Terminating the leases over a period of time, accompanied by re-provision. This was the strategic ambition which underpinned the 2019 Handback Agreement and the commitment to hand back no fewer than 500 units a year. 2. Buy back the units, either at open market rates (which is the only basis on which APL would sell them), or via enfranchisement. This latter option would be subject to successful execution of the Sycamore test case.”
“1. In December 2021, the arbitration with Annington Homes Limited (AHL) was brought to a conclusion following the agreement of a revised global discount rate to open market rents and other favourable terms to MoD. With a risk that this would be followed by a sale of AHL by Terra Firma, its parent company, notice was immediately served on AHL of MoD’s intention to enfranchise a property rented from AHL in a test case to establish the ability of the Department to enfranchise a large number of the houses leased from AHL.”
“5. Following the agreement reached with AHL as set out in the Review Note at Reference D, [redacted] it was decided that the proposed test case to enfranchise two properties should be accelerated in case Terra Firma had put in place plans to sell AHL on the strength of the Settlement Agreement. AHL is held by Terra Firma in a closed fund. The fund’s end date is understood to be the second half of 2022, the tenth anniversary of the acquisition of AHL by Terra Firma from Nomura. Terra Firma will either need to sell its interest in AHL, or place AHL in a new or continuity fund, before this point in time. 6. If MoD decided to exercise its rights against a new owner this could have been potentially reputationally damaging for the Department. A buyer (which could be a socially responsible investor such as a pension fund) acting in good faith could subsequently find that the value of AHL was impacted by potential enfranchisement.”
“Given our obligations to secure value for money, we have reviewed MoD’s current arrangements with Annington and now set out the steps that MoD is taking to deliver greater value for money for the taxpayer in relation to Service Family Accommodation. First, MoD engaged highly experienced advisers and counsel to deliver a settlement with Annington in the site rent review process. This settlement achieves value for money, and removes ongoing uncertainty for the Department; we believe it to be a good outcome and a fair settlement. The settlement resulted in a change in the overall adjustment to open market rents from 58% to 49.6%. Secondly, MoD continues to reduce the number of untenanted properties which it holds since these otherwise represent a liability for the taxpayer, by returning these to Annington under the terms of the lease. Thirdly, MoD can confirm that the Department will explore the exercise of its statutory leasehold enfranchisement rights to buy out Annington’s interest in the homes and gain full ownership rights. Initially, the MoD has made a single claim for one house, with the intention to submit a further claim in respect of another house in the near future. It is hoped that this test case will establish certain key principles. The cost of enfranchising these houses will be in accordance with the statutory enfranchisement formula, fixed at the date of the notice of claim, and the price will be agreed between the parties or determined by an independent Tribunal. If the cost of recovering full ownership of the units from Annington is less than the present value of MoD’s ongoing liabilities, such a transaction is likely to represent good value for money. The MoD would then benefit from any future appreciation in value of the units. Accordingly, the MoD has served notice on Annington underSection 5 of the Leasehold Reform Act 1967 of its desire to enfranchise a house currently leased from Annington. Annington, through its lawyers, has notified the MoD that it is considering the impact of the claim and has put the MoD on notice of a potential dispute. A successful enfranchisement programme would also provide the MoD with more flexibility in the management of its estate to the benefit of Defence, tenants, and potentially wider Government objectives.”
“Protection of property Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”
“The MoD would still be in the highly unusual position of paying a market rent on a very long lease of residential property. In nominal terms, if it holds the properties to term, the MoD will pay many times the value of these properties in rent.”