Acquisition of leasehold interests of common parts

Under sub-sections 2(1)(b) and 2(3)(a) of the Leasehold Reform, Housing and Urban Development Act 1993 (the 1993 Act), long lessees of self-contained flats in a building can acquire the interest of a tenant under any lease of “common parts of the relevant premises”. This right is exercisable where the acquisition of that interest is “reasonably necessary for the proper management and maintenance of those common parts”. In LM Homes Ltd and others v Queen Court Freehold Company Ltd [2018] UKUT 367 (LC) a dispute arose as to whether the nominee purchaser, Queen Court Freehold Company Ltd (QCFC), was entitled to acquire the appellants’ leasehold interests in the basement, sub-soil and airspace found to be “common parts”. The First-tier Tribunal (FTT) said it could and the appellants appealed. The Upper Tribunal (Lands Chamber) (UT) had to determine: whether (a) the FTT had jurisdiction to determine the terms of acquisition of the leasehold interests in the basement, subsoil and airspace; (b) those areas could be classified as “common parts” within the meaning of section 101 of the 1993 Act, and if so; (c) QCFC’s acquisition of those interests was reasonably necessary for their proper management or maintenance. By operation of section 13(11) of the 1993 Act, the appellants argued that an initial notice given under section 13 ceased to have effect when “a binding contract” was entered into in pursuance of the notice. Reference to “a contract” in section 13(11)(a) had to be construed in the singular. A binding agreement had been concluded for acquisition of the freehold. Accordingly, the FTT lacked jurisdiction to determine whether QCFC could acquire the appellants’ interests. This was rejected by the UT. Under the Interpretation Act 1978, words used in the singular included the plural. The statutory provisions in question required an initial notice to remain in force until contracts or vesting orders were in existence in respect of all interests that were sought to be acquired. “Common parts” as defined in section 101 of the 1993 Act included the “structure and exterior” of a building or part and “any “common facilities” within it. In determining whether the basement, subsoil and airspace fell within that definition it was necessary to have regard to the function served by those areas. The purpose of the basement was to accommodate service installations used for the benefit of the whole building. This was sufficient to render it a common part. The airspace and sub-soil were “common parts” of “the exterior” of the building. In its reasoning the UT relied on the case of Dartmouth Court Blackheath Ltd v Berisworth Ltd [2008] EWHC 350 (Ch); [2008] 2 EGLR 141, in which the High Court found that in the context of Part 1 of the 1993 Act the “exterior” of a building was not limited to non-structural external surfaces. In determining if QCFC’s acquisition of the appellants’ interests was reasonably necessary for their proper management or maintenance, the appellants’ intentions for those common parts had to be considered. The appellants had development rights under the terms of their leases. If realised, they would result in the areas demised ceasing to be common parts of the building. In the circumstances, QCFC’s acquisition of the appellants’ interests was reasonably necessary for their management and maintenance as common parts of the building. Elizabeth Dwomoh is a barrister at Lamb Chambers