Collective enfranchisement – Leasehold Reform, Housing and Urban Development Act 1993 – Flats – Claimants seeking to enfranchise building containing four flats let as serviced apartments – Whether right to collective enfranchisement applying – Whether excluded on ground that serviced apartments not flats within section 101 of 1993 Act – Whether apartments constructed or adapted for use for purposes of dwelling within section 101 – Whether occupied for residential purposes within section 4 – Claim dismissed
The two claimants were the long leaseholders of four flats in a four-storey building with a basement in London EC1. The flats had been created by extensive refurbishment works carried out by the claimants’ company between 2004 and 2006 to convert the building into spacious “loft”-style apartments, with modern furnishings and fully fitted kitchen and bathroom facilities, to be let out as serviced apartments for use by the business community. The company held underleases of the flats and the rest of the premises.
The building was one of several in which the company had serviced apartments. It operated a computer booking system that allowed the customer to express a preference for accommodation in a particular building but did not guarantee that location. The bookings were frequently made by the employer rather than the employee who was to be accommodated. The company greeted each new occupant on arrival, gave them with a welcome pack and provided a cleaning and laundry service during their stay. Although it supplied a standard tenancy agreement for a three-month assured shorthold tenancy, the court found that that document was a mere formality and did not in fact regulate the terms of occupation. The company had initially hoped to let the apartments for several months at a time but, in practice, most of the bookings were for less than one month, to accommodate business employees for business trips or particular projects rather than for longer-term stays while relocating.
The claimants sought to exercise the right, under the Leasehold Reform, Housing and Urban Development Act 1993, to acquire the freehold of the building from the defendant freeholder by collective enfranchisement. The defendant disputed that entitlement and the claimants applied to the court for a declaration of their rights. A preliminary issue, as to whether the claimants were qualifying tenants within section 5 of the 1993 Act, was decided in their favour on appeal: see [2011] EWCA Civ 1251; [2011] 45 EG 97 (CS).
The main issue remaining in dispute was whether the four flats fell within the statutory definition of a “flat” in section 101(1) of the Act, namely premises “constructed or adapted for use for the purposes of a dwelling”, so as to attract the right of bringing the building within section 3 as premises to which collective enfranchisement could apply. If the units were “flats”, there was a further issue as to whether enfranchisement was excluded by section 4(1)(a)(i) on the ground that the flats were not “occupied, or intended to be occupied, for residential purposes”.
In determining the issues before it, the court considered the judgments of the Court of Appeal and Supreme Court in Hosebay Ltd v Day; Lexgorge Ltd v Howard de Walden Estates Ltd ([2010] EWCA Civ 748; [2010] 3 EGLR 66; [2010] 38 EG 106 and [2012] UKSC 41; [2012] 1 WLR 2884; [2012] 3 EGLR 31; [2012] 43 EG 116), dealing with the definition of a “house” in the enfranchisement provisions of the Leasehold Reform Act 1967; it sought to determine the ratio of the decision in those judgments and their applicability to cases under the 1993 Act.
Held: The claim was dismissed.
(1) The decision of the Supreme Court in Hosebay/Lexgorge was of considerable importance in interpreting the definition of “flat” in the 1993 Act but did not go so far as to determine the issue in the instant case. The Supreme Court’s conclusion, to the effect that the wholly commercial use of the premises in that case excluded them from being “houses” within the 1967 Act, did not compel the finding in the instant case that the commercial undertaking being conducted by the claimants’ company took the premises out of the scope of collective enfranchisement. The two statutes were different in that respect and commercial investors were not excluded from the scope of the 1993 Act. Furthermore, the Supreme Court had not decided the issue as to the first limb of the definition of “house” in section 2(1) of the 1967 Act, as to whether the a property was “designed or adapted for living in”, but had concerned itself with the second limb as to whether premises were a house “reasonably so called”, which had no equivalent in the 1993 Act.
(2) Although the Supreme Court had reversed the decision of the Court of Appeal in Hosebay/Lexgorge as to the outcome of the cases, it had not reversed that part of the decision that dealt with the first limb of the definition of “house”. The Court of Appeal’s approach to that issue was therefore of persuasive effect, and binding authority, in construing the materially similar definition of a flat in section 101 of the 1993 Act. The phrases “designed or adapted for living in” in the 1967 Act and “constructed or adapted for use for the purposes of a dwelling” in the 1993 Act were sufficiently similar as to be regarded as equivalents. The concepts of “living in” and “dwelling” involved similar considerations. Those concepts did not import any requirement that the premises in question be the “home” or the “main or only residence” of the occupant.
(3) The definition of a flat in section 101(1)(b) of the 1993 Act was concerned both with physical structure and with the purpose or intention of that physical structure. The definition of “dwelling” in section 101(1) dealt with actual or potential occupation. Overall, section 101 required a consideration of whether, at the time when the premises were constructed or adapted, the work had created a physical space for use for the purposes of a dwelling, which in turn involved considering both the physical characteristics of the premises and their subsequent and current use. The definition of “flat” described what the construction or adaptation had made the premises suitable for. The use to which the premises were actually put would be influential, and often conclusive, evidence as to the purpose of construction or adaptation.
(4) Although the construction or adaptation did not have to make the premises capable of occupation so permanent as to qualify as some kind of home, they had to make them capable of occupation that amounted to more than simply staying there for a time: Hosebay/Lexgorge and Boss Holdings Ltd v Grosvenor West End Properties Ltd [2008] UKHL 5; [2008] 1 WLR 289; [2008] 1 EGLR 51; [2008] 15 EG 174 applied. Where the physical characteristics of the premises were capable of accommodating both a transient population and those who wished to stay longer, then the intended or actual use would be relevant in deciding the purpose for which the premises were constructed or adapted. Current use was only one of a number of relevant factors; in some cases it might provide the complete answer as to whether the premises were constructed or adapted for use for the purposes of a dwelling but in others it might be outweighed by other factors.
(5) The concept of “residential purposes” in section 4 of the 1993 Act was synonymous with that of a “dwelling” in section 101. The difference between the two sections was that section 4 related only to current use, whereas section 101 pointed to a combination of the physical characteristics, the purpose of the works of construction or adaptation and the historic or current use. Accordingly, a two-stage approach was required to determine, first, whether premises were a “flat” and, second, whether the flat was none the less excluded from enfranchisement by section 4.
(6) Applying those principles to the instant case, the four flats in question were not “flats” within section 101(1). That decision was, however, finely balanced. The flats had been constructed or adapted to have the potential to provide the facilities necessary for the purpose of occupation with a sufficient degree of permanence to come within the definition of a dwelling. Moreover, while most occupants stayed for short periods, a smaller number remained for considerably longer periods that might be equivalent to those under a tenancy; that was evidence supporting the proposition that the premises were capable of use for longer-term occupation. Further, to the limited extent that it was relevant, the claimants had hoped for longer-term occupation. However, the deciding factor was the nature of the relationship between the company and the occupant. It was relevant that the centralised booking system that allowed for preferences but provided no guarantee of specific choice. Moreover, the relationship was regulated in all cases only by the booking and its terms and conditions. Although a formal tenancy was not necessary for premises to be characterised as a dwelling, the absence of valid tenancies in the instant case was evidence as to the claimants’ intention at the time of construction or adaptation. The fact that no formal longer-term relationships had ever been created, and that the booking system and general pattern of occupancy was more akin to that of a hotel, indicated that the adaptation did not create premises for use for the purposes of occupation with a sufficient degree of permanence to say that the occupant was living in the flat or using it as a dwelling. Those factors produced the conclusion that the claimants had not adapted the premises for use for the purposes of a dwelling.
(7) Furthermore, the flats were not occupied, or intended to be occupied, for residential purposes such that they would have been excluded by section 4 in any event. Section 4 was concerned with current use. Although it, too, required various factors to be balanced, those factors were fewer than needed to be considered in relation to section 101; section 4 was concerned not with the potential for occupation as a dwelling but with the nature of the actual occupation. Although commercial occupation was not excluded from being residential, the balance was tipped against residential occupation in the instant case by the booking system and the general way in which the claimants’ company operated. It provided places to stay that were similar to rooms and flats provided by hotels and aparthotels. That kind of occupation was outside the scope of the 1993 Act.
Stephen Jourdan QC (instructed by Forsters LLP) appeared for the claimants; Zia Bhaloo and Oliver Kalfon (instructed by Trowers & Hamlins LLP) appeared for the defendant.
Sally Dobson, barrister
Collective enfranchisement – Leasehold Reform, Housing and Urban Development Act 1993 – Flats – Claimants seeking to enfranchise building containing four flats let as serviced apartments – Whether right to collective enfranchisement applying – Whether excluded on ground that serviced apartments not flats within section 101 of 1993 Act – Whether apartments constructed or adapted for use for purposes of dwelling within section 101 – Whether occupied for residential purposes within section 4 – Claim dismissedThe two claimants were the long leaseholders of four flats in a four-storey building with a basement in London EC1. The flats had been created by extensive refurbishment works carried out by the claimants’ company between 2004 and 2006 to convert the building into spacious “loft”-style apartments, with modern furnishings and fully fitted kitchen and bathroom facilities, to be let out as serviced apartments for use by the business community. The company held underleases of the flats and the rest of the premises.The building was one of several in which the company had serviced apartments. It operated a computer booking system that allowed the customer to express a preference for accommodation in a particular building but did not guarantee that location. The bookings were frequently made by the employer rather than the employee who was to be accommodated. The company greeted each new occupant on arrival, gave them with a welcome pack and provided a cleaning and laundry service during their stay. Although it supplied a standard tenancy agreement for a three-month assured shorthold tenancy, the court found that that document was a mere formality and did not in fact regulate the terms of occupation. The company had initially hoped to let the apartments for several months at a time but, in practice, most of the bookings were for less than one month, to accommodate business employees for business trips or particular projects rather than for longer-term stays while relocating.The claimants sought to exercise the right, under the Leasehold Reform, Housing and Urban Development Act 1993, to acquire the freehold of the building from the defendant freeholder by collective enfranchisement. The defendant disputed that entitlement and the claimants applied to the court for a declaration of their rights. A preliminary issue, as to whether the claimants were qualifying tenants within section 5 of the 1993 Act, was decided in their favour on appeal: see [2011] EWCA Civ 1251; [2011] 45 EG 97 (CS).The main issue remaining in dispute was whether the four flats fell within the statutory definition of a “flat” in section 101(1) of the Act, namely premises “constructed or adapted for use for the purposes of a dwelling”, so as to attract the right of bringing the building within section 3 as premises to which collective enfranchisement could apply. If the units were “flats”, there was a further issue as to whether enfranchisement was excluded by section 4(1)(a)(i) on the ground that the flats were not “occupied, or intended to be occupied, for residential purposes”.In determining the issues before it, the court considered the judgments of the Court of Appeal and Supreme Court in Hosebay Ltd v Day; Lexgorge Ltd v Howard de Walden Estates Ltd ([2010] EWCA Civ 748; [2010] 3 EGLR 66; [2010] 38 EG 106 and [2012] UKSC 41; [2012] 1 WLR 2884; [2012] 3 EGLR 31; [2012] 43 EG 116), dealing with the definition of a “house” in the enfranchisement provisions of the Leasehold Reform Act 1967; it sought to determine the ratio of the decision in those judgments and their applicability to cases under the 1993 Act.Held: The claim was dismissed. (1) The decision of the Supreme Court in Hosebay/Lexgorge was of considerable importance in interpreting the definition of “flat” in the 1993 Act but did not go so far as to determine the issue in the instant case. The Supreme Court’s conclusion, to the effect that the wholly commercial use of the premises in that case excluded them from being “houses” within the 1967 Act, did not compel the finding in the instant case that the commercial undertaking being conducted by the claimants’ company took the premises out of the scope of collective enfranchisement. The two statutes were different in that respect and commercial investors were not excluded from the scope of the 1993 Act. Furthermore, the Supreme Court had not decided the issue as to the first limb of the definition of “house” in section 2(1) of the 1967 Act, as to whether the a property was “designed or adapted for living in”, but had concerned itself with the second limb as to whether premises were a house “reasonably so called”, which had no equivalent in the 1993 Act.(2) Although the Supreme Court had reversed the decision of the Court of Appeal in Hosebay/Lexgorge as to the outcome of the cases, it had not reversed that part of the decision that dealt with the first limb of the definition of “house”. The Court of Appeal’s approach to that issue was therefore of persuasive effect, and binding authority, in construing the materially similar definition of a flat in section 101 of the 1993 Act. The phrases “designed or adapted for living in” in the 1967 Act and “constructed or adapted for use for the purposes of a dwelling” in the 1993 Act were sufficiently similar as to be regarded as equivalents. The concepts of “living in” and “dwelling” involved similar considerations. Those concepts did not import any requirement that the premises in question be the “home” or the “main or only residence” of the occupant.(3) The definition of a flat in section 101(1)(b) of the 1993 Act was concerned both with physical structure and with the purpose or intention of that physical structure. The definition of “dwelling” in section 101(1) dealt with actual or potential occupation. Overall, section 101 required a consideration of whether, at the time when the premises were constructed or adapted, the work had created a physical space for use for the purposes of a dwelling, which in turn involved considering both the physical characteristics of the premises and their subsequent and current use. The definition of “flat” described what the construction or adaptation had made the premises suitable for. The use to which the premises were actually put would be influential, and often conclusive, evidence as to the purpose of construction or adaptation.(4) Although the construction or adaptation did not have to make the premises capable of occupation so permanent as to qualify as some kind of home, they had to make them capable of occupation that amounted to more than simply staying there for a time: Hosebay/Lexgorge and Boss Holdings Ltd v Grosvenor West End Properties Ltd [2008] UKHL 5; [2008] 1 WLR 289; [2008] 1 EGLR 51; [2008] 15 EG 174 applied. Where the physical characteristics of the premises were capable of accommodating both a transient population and those who wished to stay longer, then the intended or actual use would be relevant in deciding the purpose for which the premises were constructed or adapted. Current use was only one of a number of relevant factors; in some cases it might provide the complete answer as to whether the premises were constructed or adapted for use for the purposes of a dwelling but in others it might be outweighed by other factors.(5) The concept of “residential purposes” in section 4 of the 1993 Act was synonymous with that of a “dwelling” in section 101. The difference between the two sections was that section 4 related only to current use, whereas section 101 pointed to a combination of the physical characteristics, the purpose of the works of construction or adaptation and the historic or current use. Accordingly, a two-stage approach was required to determine, first, whether premises were a “flat” and, second, whether the flat was none the less excluded from enfranchisement by section 4.(6) Applying those principles to the instant case, the four flats in question were not “flats” within section 101(1). That decision was, however, finely balanced. The flats had been constructed or adapted to have the potential to provide the facilities necessary for the purpose of occupation with a sufficient degree of permanence to come within the definition of a dwelling. Moreover, while most occupants stayed for short periods, a smaller number remained for considerably longer periods that might be equivalent to those under a tenancy; that was evidence supporting the proposition that the premises were capable of use for longer-term occupation. Further, to the limited extent that it was relevant, the claimants had hoped for longer-term occupation. However, the deciding factor was the nature of the relationship between the company and the occupant. It was relevant that the centralised booking system that allowed for preferences but provided no guarantee of specific choice. Moreover, the relationship was regulated in all cases only by the booking and its terms and conditions. Although a formal tenancy was not necessary for premises to be characterised as a dwelling, the absence of valid tenancies in the instant case was evidence as to the claimants’ intention at the time of construction or adaptation. The fact that no formal longer-term relationships had ever been created, and that the booking system and general pattern of occupancy was more akin to that of a hotel, indicated that the adaptation did not create premises for use for the purposes of occupation with a sufficient degree of permanence to say that the occupant was living in the flat or using it as a dwelling. Those factors produced the conclusion that the claimants had not adapted the premises for use for the purposes of a dwelling.(7) Furthermore, the flats were not occupied, or intended to be occupied, for residential purposes such that they would have been excluded by section 4 in any event. Section 4 was concerned with current use. Although it, too, required various factors to be balanced, those factors were fewer than needed to be considered in relation to section 101; section 4 was concerned not with the potential for occupation as a dwelling but with the nature of the actual occupation. Although commercial occupation was not excluded from being residential, the balance was tipped against residential occupation in the instant case by the booking system and the general way in which the claimants’ company operated. It provided places to stay that were similar to rooms and flats provided by hotels and aparthotels. That kind of occupation was outside the scope of the 1993 Act.Stephen Jourdan QC (instructed by Forsters LLP) appeared for the claimants; Zia Bhaloo and Oliver Kalfon (instructed by Trowers & Hamlins LLP) appeared for the defendant.Sally Dobson, barrister
