Malekshad v Howard de Walden Estates Ltd

Claimant lessee of town house and mews dwelling seeking to acquire freehold — Lessee seeking to enfranchise one or both properties under Leasehold Reform Act 1967 — Mews dwelling partly undercut by basement extending from house — Whether both buildings constituting a single house — Whether undercutting precluding claim limited to town house The appellant landlord (L) was the freehold owner of a site in London W1 that incorporated a house at 76 Harley Street (no 76) and a mews building at 27 Weymouth Mews (the mews). The respondent held a lease of the whole site. The mews was situated to the rear of no 76, at a slightly lower level. The two buildings, both built in 1775, were separated by a small yard. No 76 had a basement that ran beneath the yard and which, for many years, occupied the entire area (the extended basement) that would otherwise have formed the basement of the mews. Historically, the mews provided stables and servant accommodation for the benefit of the large family house located at no 76. Over a period of some 50 years prior to the dispute, no 76 was converted into a number of self-contained flats, one of which was occupied by the respondent, and the mews became a further self-contained residential unit with its own store rooms located beneath the ground floor. The creation of those rooms reduced the area of the former extended basement to approximately 27.3m². By way of notices served in April 1997, T made various alternative claims to enfranchisement under the Leasehold Reform Act 1967 (the Act). These were disputed by L. Before the courts below, T claimed that his rights extended: (i) to the entire site, on the basis that no 76 and the mews together amounted to a “house”, the same being “reasonably so called” for the purpose of section 2(1) of the Act (the wider claim); alternatively (ii) to no 76 (the narrower claim). The Court of Appeal allowed the wider claim, holding that so long as the property could reasonably be described as a house, whether it could also be described as two houses was immaterial. The court went on to hold that, if the wider claim had failed, the narrower claim would, by reason of the extended basement, have foundered on section 2(2) of the Act, which excludes “a house which is not structurally detached and of which a material part lies above or below a part of the structure not comprised in the house”. L appealed to the House of Lords. Held: The appeal was allowed. 1. Accepting that no 76 and the mews together constituted a “building”, that building as a whole could not be treated as a “house” because a vertically divided building (as distinct from the resulting units) was expressly stated not to be a house by section 2(1)(b) of the 1967 Act. Contrary to the approach taken by the Court of Appeal, the test introduced by the words “reasonably so called” (designed to exclude, for example, a block of flats or a purpose-built hotel) was not to be applied unless, and until, the structural requirements of the section were satisfied: Tandon v Trustees of Spurgeons Homes [1982] 2 EGLR 73 explained*. The trial judge had accordingly been correct when he first considered whether the claim related to one house or two, and when he concluded, on the evidence, that the wider claim failed because it related to two houses. 2. The narrower claim succeeded. On the facts, L could not rely upon section 2(2). Although a part of no 76 still lay beneath the mews, the question of whether that undercutting was “material” had to be judged by reference to no 76. From that standpoint, what was left of the extended basement was insignificant, representing as it did just over 2% of the overall floor area of no 76 and about 7% of the overall basement area of that house. On a proper application of section 2(1) as a whole, the presence of a “kink” or “dog-leg” in an otherwise vertical division could take the house outside the scope of the Act, but not where it was, as a matter of demarcation, trivial or unimportant. Contrary to the view taken by the Court of Appeal (relying upon the observations of Nourse LJ in Duke of Westminster v Birrane [1995] 11 EG 141 and Stephenson LJ in Parsons v Henry Smith’s Charity Trustees [1973] 1 WLR 845), the materiality of the feature in question was to be determined with little or no regard to the way in which it affected the enjoyment of no 76 or the support of the mews . Such matters fell to be regulated by section 2(5), which enabled the landlord to take steps to exclude certain features from the tenant’s otherwise successful claim. * Editor’s note: Lord Millett and Lord Scott further doubted whether the test was logically capable of being applied to the “one house or two” question. Editor’s note: Lord Hobhouse dissented on this point. Paul Morgan QC and Edward Peters (instructed by Mishcon de Reya) appeared for the respondent; Judith Jackson QC and Timothy Harry (instructed by Speechly Bircham) appeared for the appellant. Alan Cooklin, barrister