Leasehold enfranchisement — Leasehold Reform Act 1967 — Enfranchisement of house — Meaning of “house” — Section 2(1) of 1967 Act — Property originally designed as house but part subsequently used for commercial purposes — Upper residential floors dilapidated at date of notice — Whether “designed or adapted for living in”
The appellant held a lease of an 18th century property in London W1. The second respondent was the appellant’s immediate landlord and held a headlease from the first respondent freeholder. The appellant’s predecessor in title had served notice to acquire the freehold under the leasehold enfranchisement provisions of the Leasehold Reform Act 1967. By their counternotice, the respondents disputed the right to acquire the freehold, contending that the property was not a “house” within the meaning of section 2(1) of the 1967 Act since it was not a “building designed or adapted for living in and reasonably so called” as at the date of the tenant’s notice. They argued that the property could not be said to have been designed or adapted for living in when, at the relevant date, it was not physically fit for immediate residential occupation.
The property had originally been built as a single house with a basement, a ground floor and four upper floors, but had been divided in the 1940s, with the upper three floors fitted out as a residence and the lower floors let for commercial use. Commercial use had ceased in the early 1990s, and residential occupation of the remainder had ended several years thereafter. At the date of the notice, the property was vacant and the three upper floors had been stripped back to the basic structure by the removal of plaster, ceilings and floorboards.
The appellant’s application for a declaration of its right to acquire the freehold was refused in the county court and in the Court of Appeal. The latter held that the property could not be said to have been designed or adapted for anything at the relevant date because of its state of serious dilapidation. The appellant appealed.
Held: The appeal was allowed. A property will be a house for the purposes of section 2(1) if it fulfils two requirements: (i) it is designed or adapted for living in; and (ii) it can reasonably be called a house. In deciding whether a property is designed or adapted for living in, there must be a consideration of: (i) the property as it was initially built and the purpose for which it was originally designed; and (ii) whether work that has subsequently been carried out has changed the original design of the property so as to adapt it for another purpose. The property must either have been originally designed for living in or subsequently physically adapted for that purpose. Section 2(1) is not concerned with whether a property is physically fit to be lived in at the relevant date.
The property in question was, at the relevant date, designed or adapted for living in within section 2(1). The fact that it had become internally dilapidated and incapable of beneficial occupation without the installation of floorboards, plastering, rewiring and replumbing did not detract from the fact that it had, when first built, been designed for living in, and that nothing had subsequently happened to change that. Further, so far as it had been adapted in the 1940s, for business use on the lower floors and for residential purposes on the upper floors, that adaptation was for mixed business and residential purposes; the property had been “adapted for living in” on the upper floors. A property does not need to be adapted solely for living in to be considered a “house”.
The following cases are referred to in this report.
Attorney-General v Lamplough (1878) LR 3 Ex D 214
Boss Holdings Ltd v Grosvenor West End Properties Ltd; Mallett & Sons (Antiques) Ltd v Grosvenor West End Properties Ltd [2006] EWCA Civ 594; [2006] 1 WLR 2848; [2006] 2 EGLR 43; [2006] 26 EG 156
Suffolk County Council v Mason [1979] AC 705; [1979] 2 WLR 571; [1979] 2 All ER 369, HL
Tandon v Trustees of Spurgeons Homes [1982] AC 755; [1982] 2 WLR 735; [1982] 1 All ER 1086; (1982) 44 P&CR 307; [1982] 2 EGLR 73; (1982) 263 EG 349; (1982) 4 HLR 1, HL
This was an appeal by the appellant, Boss Holdings Ltd, from a decision of the Court of Appeal allowing an appeal by the respondents, Grosvenor West End Properties and others, from a decision of HH Judge Cowell, sitting in the Central London Civil Justice Centre, refusing the appellant’s application for declaratory relief as to the right to leasehold enfranchisement under the Leasehold Reform Act 1967.
Edwin Johnson QC (instructed by Butcher Burns) appeared for the appellant; Anthony Radevsky and Mark Sefton (instructed by Boodle Hatfield) represented the respondents.
Lord Hoffmann said: My lords,
[1] I have had the advantage of reading in draft the speech of my noble and learned friend Lord Neuberger of Abbotsbury. For the reasons that he gives, with which I agree, I too would allow this appeal.
Lord Scott of Foscote said: My lords,
[2] I have had the advantage of reading in advance the opinion of my noble and learned friend Lord Neuberger of Abbotsbury and am in full agreement with the reasons that he has given for allowing this appeal.
Lord Rodger said: My lords,
[3] I have had the advantage of considering in draft the speech to be delivered by my noble and learned friend, Lord Neuberger |page:52| of Abbotsbury. I agree with it and, for the reasons that he gives, I too would allow the appeal.
Lord Walker of Gestingthorpe said: My lords,
[4] I have had the advantage of considering in draft the opinion of my noble and learned friend, Lord Neuberger of Abbotsbury. I agree with it and, for the reasons that he gives, I too would allow the appeal.
Giving his opinion, Lord Neuberger of Abbotsbury said:
My lords,
[5] The short issue in this appeal is whether a property at 21 Upper Grosvenor Street, London W1, is a “house” within the meaning of section 2(1) of the Leasehold Reform Act 1967 (the 1967 Act) as amended.
[6] Section 1(1) of the 1967 Act, as originally enacted, provided as follows:
[Part I] of this Act shall have effect to confer on a tenant of a leasehold house, occupying the house as his residence, a right to acquire on fair terms the freehold or an extended lease of the house and premises where
(a) his tenancy is a long tenancy at a low rent and the rateable value of the house and premises [is below certain limits]; and
(b) at… the time when he gives notice in accordance with this Act of his desire to have the freehold or to have an extended lease… he has been tenant of the house under a long tenancy at a low rent, and occupying it as his residence, for the last 5 years or for periods amounting to 5 years in the last 10 years…
[7] Section 2 of the 1967 Act defined “house” and “house and premises”; subsection (1) is the only provision of relevance for present purposes, and it was in these terms:
“house” includes any building designed or adapted for living in and reasonably so called, notwithstanding that the building is not structurally detached, or was or is not solely designed or adapted for living in, or is divided horizontally into flats or maisonettes; and
(a) where a building is divided horizontally, the flats or other units into which it is so divided are not separate “houses” though the building as a whole may be: and
(b) where a building is divided vertically the building as a whole is not a “house” though any of the units into which it is divided may be.
[8] Over the past 40 years, significant amendments have been made from time to time to the 1967 Act, with a view to extending its reach. Thus, the low rent and rateable value limits in section 1(1) were substantially amended by the Housing Act 1974, then again by the Leasehold Reform, Housing and Urban Development Act 1993 and, most recently, by the Commonhold and Leasehold Reform Act 2002 (the 2002 Act). More importantly for present purposes, any requirement that the tenant should occupy or should have occupied the house as his residence in section 1(1) was removed by the 2002 Act in all but a few cases. However, despite the significant amendments that have been made from time to time to the 1967 Act, section 2(1), the primarily relevant provision for the purpose of this appeal, has remained unchanged.
[9] The property is subject to a lease granted on 30 June 1948 for a term of 87.5 years from 25 December 1946. On 14 October 2003, the then tenant under the lease, Kingdom Properties SA, served a notice on the landlord, the first respondent to this appeal, Grosvenor West End Properties, which holds a headlease from the freeholder, Grosvenor (Mayfair) Estate. Both companies form part of the Grosvenor Estate and it is unnecessary to distinguish between them. By the notice, which was in the form prescribed by the 1967 Act, Kingdom sought to acquire the freehold of the property. Some two weeks later, Kingdom assigned the lease, together with the benefit of the notice, to the appellant, Boss Holdings Ltd.
[10] On 29 October 2003, Grosvenor served a counternotice disputing the tenant’s right to acquire the freehold of the property on the basis that it was not a “house” within the meaning of section 2(1). That issue came before HH Judge Cowell in the Central London Civil Justice Centre on 16 May 2005, when he upheld Grosvenor’s argument and dismissed Boss’s application for a declaration that it was entitled to acquire the freehold of the property. Boss appealed and, on 21 March 2006, the Court of Appeal upheld the judge’s declaration, in a decision reported at [2006] EWCA Civ 594; [2006] 1 WLR 2848*. Boss now appeals to your lordships’ House.
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* Editor’s note: Also reported at [2006] 2 EGLR 43
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[11] It is, quite rightly, common ground between the parties that the question of whether the property constitutes a “house” must be determined as at the date Kingdom gave the notice seeking to acquire the freehold, namely 14 October 2003. So, I turn to describe the relevant history of the property up to that date.
[12] The property was built in the fourth decade of the 18th century. The judge described it as “a fine looking house” consisting of a basement, ground and four upper floors “in a grand terrace of buildings… with an Edwardian façade added about 100 years ago”. It was built as a single private residence, and was continuously used as such for more than 200 years until 1942, when it was occupied by the Free French government in exile. From around 1946, the three upper floors were fitted out for residential use and the three lower floors were occupied for a dressmaking business. Under the lease granted in 1948: (a) the second and third floors were to be used as a self-contained flat, with the fourth floor for the occupation of servants; and (b) the lower three floors could be used in connection with dressmaking, subject to a prohibition against any show of business being visible from the exterior.
[13] The commercial use of the lower three floors continued until around 1990, since when those floors have been vacant. The residential use of the upper floors continued a little longer but ended well before October 2003, and quite possibly by 1995, save that a caretaker may have occupied the top floor until around 2001. Although there was evidence as to the planning history of the property, it quite rightly played no part in the parties’ arguments, particularly since there is no question of any of these uses being or having been unlawful.
[14] I turn to the physical state of the property. The judge had the benefit of scaled floor plans and of photographs of many parts of the interior around 14 October 2003. The floor plans showed the internal layout of the property, which appeared to be substantially appropriate for a house in single occupation built 275 years ago, and identified its gross internal area as just over 1,000m2. The photographs showed that the rooms on the three upper floors had been, at least to a very great extent, stripped back to the basic structure. Thus, most of the plaster had been hacked off the main walls, so that one could see the bricks of the outside walling; the ceilings had in many places been removed, so that one could see the underside of the joists and the flooring of the rooms above, and, on the top floor, the roof space; in some rooms, the floorboards had been removed. In effect, it looked as though the top three floors had been virtually stripped back to their outer skin, although the staircases, internal walls, and floor joists (and, in some rooms, the ceilings and floorboards and even some light fittings and pieces of carpet) had not been removed. There was less evidence about the state of the lower three floors, but they do not appear to have been stripped out, and, indeed, the doors, carpets, wiring and light fittings seem to have been retained, at least on the ground floor.
[15] It is clear that to be a “house” for the purposes of section 2(1), a property must satisfy two requirements, namely: (a) it must be “designed or adapted for living in”; and (b) it must be “reasonably so called” that is, it must reasonably be called a house. The judge concluded that the property was not a house within the meaning of section 2(1) because it was not, as at October 2003, “designed or adapted for living in”. Had he not reached that conclusion, he said that he would have accepted that it could “reasonably [be] called” a house. The Court of Appeal agreed. Before turning to the question of whether the property was designed or adapted for living in, it is right to record that, in the light of the reasoning of this House in Tandon v Trustees of Spurgeons Homes [1982] AC 755†, the judge was plainly correct to conclude that the property could reasonably be called a house. |page:53|
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† Editor’s note: Also reported at [1982] 2 EGLR 73
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[16] Grosvenor’s case is that the property was not, as at October 2003, “designed or adapted for living in” because it was not physically fit for immediate residential occupation. That was accepted by both courts below. The judge said, in [29] of his judgment, that the words “designed or adapted for living in” carried with them a notion of premises with “somewhere to sleep, to cook, to wash and simply to be when not out at work or out otherwise, and, depending upon the size of the place, that is commonly provided by a bedroom, kitchen, a bathroom and WC and maybe a living room of some kind”. In [6] of his judgment in the Court of Appeal, Laws LJ (with whom Tuckey and Carnwath LJJ agreed) described the three upper floors as “unoccupied and very dilapidated [and] incapable of being occupied as residences”, and, in [19], he said that “because of the grave dilapidation apparent from the photographs the upper floors of the [property] were not at the [relevant time] designed or adapted for anything”.
[17] Although I accept that, for present purposes, one is largely concerned with the physical state of the property, I disagree with these conclusions. It seems to me that, as a matter of ordinary language, reinforced by considering other provisions of the subsection and supported by the original terms of section 1(1), as well as by considerations of practicality and policy, the property was, as at October 2003, “designed or adapted for living in” within section 2(1). The fact that the property had become internally dilapidated and incapable of beneficial occupation (without the installation of floorboards, plastering, rewiring, replumbing and the like) does not detract from the fact that the property had been “designed… for living in” when it was first built, and nothing that has happened subsequently has changed that. Although internal structural works will no doubt have been carried out to the property from time to time over the past 275 years, it seems very likely from the floor plans that its layout, in terms of internal walls, partitions and staircases, has not changed much since the property was built. In any event, the upper three floors have always been laid out for residential use.
[18] In my judgment, the words “designed or adapted for living in”, as a matter of ordinary English, require one first to consider the property as it was initially built: for what purpose was it originally designed? That is the natural meaning of the word “designed”, which is a past participle. One then goes on to consider whether work has subsequently been done to the property so that the original “design” has been changed: has it been adapted for another purpose, and if so what purpose? When asking either question, one is ultimately concerned to decide whether the purpose for which the property has been designed or adapted was “for living in”.
[19] The notion that the word “designed” in section 2(1) is concerned with the past is reinforced by the later words in the same section “was or is solely designed or adapted…”. The use of the past tense is striking in a section that contains a number of verbs only in the present tense. In my judgment, the expression is to be construed distributively: thus, the word “was” governs “designed”, and the word “is” governs “adapted”. The present tense is appropriate for “adapted” because, as my noble and learned friend Lord Scott of Foscote pointed out in argument, there could have been several successive adaptations, and it is only the most recent that is relevant. The word “was” is, in any event, difficult to reconcile with Grosvenor’s case (as accepted by the judge and the Court of Appeal), since it would be irrelevant whether the property could have been fit for residential occupation at any time in the past.
[20] Furthermore, the notion that section 2(1) is concerned with whether a property could be physically lived in sits rather ill with the fact that section 1(1), as originally enacted, required, in every case of enfranchisement, the tenant to have occupied the house as his only or main residence. The requirement that a property be in such a physical state that it can be lived in seems somewhat arid and valueless if there is a requirement that it is, and has been, actually lived in.
[21] I also find it hard to see what policy considerations would have driven a requirement that a property be fit to live in before a tenant could enfranchise, especially if, as mentioned, there was an actual residence requirement anyway. I can, however, discern a reason for having a requirement that a property must either have been originally designed for living in or must subsequently have been physically adapted for that purpose. The legislature may well have thought it inappropriate to deprive a person of his freehold under the 1967 Act unless he (or his predecessor): (a) had built it, or permitted a tenant to build it, for living in; or (b) had subsequently permitted it to be adapted for living in.
[22] Furthermore, the issue of whether a property is fit for immediate residential occupation the test adopted by the courts below could easily lead to arguments and uncertainty. As the words I have quoted from the first instance judgment reveal, it may be a matter of debate whether a particular property is so fit if it has no bathroom or no kitchen or if there is no sitting room. The resolution of such an issue would inevitably be a matter of subjective opinion in many cases. Also, it appears that a tenant’s notice would be invalidated if it happened to have been served on the day he was having his only bathroom refitted: the property would not have been fit for immediate occupation on that day, since it had no usable washing and toilet facilities. Of course, the answer to this may well be that one does not treat the property as physically “frozen” on the relevant day. However, once one departs from the strict test of fitness for immediate residential occupation, the uncertainties multiply. No such difficulties, as I see it, are likely to arise if the words in question are given their natural meaning.
[23] I have referred to, and relied upon, the residence requirements in section 1(1) in its original form. In the Court of Appeal, in [25], Carnwath LJ said that he was inclined to think that no assistance could be gathered from provisions in the 1967 Act as originally enacted because one should construe the 1967 Act in its current form. Consequently, he considered that no help in construing section 2(1) could be gathered from the residence requirement of every enfranchisement claim originally contained in section 1(1). I do not agree. In Suffolk County Council v Mason [1979] AC 705, Lord Diplock said, at p714E, that certain “provisions… have since been amended by the Countryside Act 1968; but this cannot affect the construction of the 1949 Act as it was originally enacted”. There are earlier observations to similar effect from Bramwell and Brett LJJ, at pp227 and 229 in Attorney-General v Lamplough (1878) LR 3 Ex D 214. In my opinion, the legislature cannot have intended the meaning of a subsection to change as a result of amendments to other provisions of the same statute, when no amendments were made to that subsection, unless, of course, the effect of one of the amendments was, for instance, to change the definition of an expression used in the subsection.
[24] Having explained why I take a different view from the courts below of the words in issue, I revert to the facts of the present case, albeit at the risk of repetition. The property was designed for living in when it was first built in the 1730s and, with the exception of the past 10 years or so, all or at least half of the property, namely the upper three floors, has been used and laid out for residential purposes. Indeed, the layout of all six floors of the property does not appear to have been substantially altered from its original construction as a house in single residential occupation. It is true that it has not been occupied for a number of years, that it has become very dilapidated and that three residential floors have been stripped out to the basic structural shell (albeit that the internal walls, windows, staircases and joists are in place). However, none of that detracts from the point that at least the upper three floors were and remain “designed” to be lived in and that the lower three floors appear to be structurally laid out substantially as they were when the property was in single residential occupation, and, as pointed out by my noble and learned friend Lord Rodger of Earlsferry in argument, they are (or, at least the ground floor is) still internally fitted out in a way that gives a residential appearance.
[25] There are two further points concerning the words “designed or adapted for living in” that I should mention. The first relates to the facts of this case and the second is more general. On the facts of this case, I have concentrated upon how the property was originally “designed”, but it is arguable that it was “adapted” in the 1940s. It is unnecessary to resolve the point because, if it was so adapted, it was an adaptation for mixed business and residential purposes. In other words, the property would have been adapted for business use on the lower three floors and “adapted for living in” on the upper three floors. It is |page:54| clear from section 2(1) that in order to be a “house” the property need not be “solely” adapted for living in, so it would make no difference to the outcome of this appeal if that were the correct analysis. The issue was, unsurprisingly, not much debated, but I incline to the view that the original design of the property is what matters in this case. Its original internal layout as a single residence appears to have survived substantially unchanged throughout, the three upper floors have always been envisaged as being for “living in” and (perhaps less importantly) the internal fitting-out of the lower three floors has a residential character and the external appearance has not been altered since well before the property ceased being used as a residence in single occupation.
[26] The second further point concerning the words “designed or adapted for living in” is whether a property would be a “house” if it had been designed for living in but had subsequently been adapted to another use. As a matter of literal language, such a property would be a house because “designed” and “adapted” appear to be alternative qualifying requirements. At least at first sight, such a conclusion seems surprising, so there is obvious attraction in implying a qualification that if a property has been and remains adapted for a purpose other than living in, the tenant cannot rely upon the fact that it was originally designed for living in. However, a term is not easily implied into a statute, and further reflection suggests that the literal meaning of the words is not as surprising as it may first appear, particularly bearing in mind the existence of the residence requirement in section 1(1) of the original Act. It is unnecessary to decide this point and, particularly since it was touched on only in argument, I do not think that we ought to do so.
[27] In all these circumstances, I would allow this appeal, on the ground that 21 Upper Grosvenor Street, London W1, was “designed or adapted for living in” within the meaning of section 2(1) of the 1967 Act.
Appeal allowed.
