In LM Homes Ltd and others v Queen Court Freehold Company Ltd [2020] EWCA Civ 371; [2020] PLSCS 41 the Court of Appeal approved the “functionality test” approach in determining whether areas demised under leasehold interests fell within the definition of “common parts” under section 101 of the Leasehold Reform, Housing and Urban Development Act 1993 (the 1993 Act).
Queens Court was a purpose-built block of 45 flats. The qualifying tenants sought to exercise their right to enfranchise under the 1993 Act. Additionally, through their nominee purchaser, Queen Court Freehold Company Limited (QCFC), they sought to acquire the appellants’ leasehold interests in the airspace, basement and sub-soil pursuant to section 2(3(a) of the 1993 Act. The Upper Tribunal (Lands Chamber) (the UT) held that QCFC could acquire those interests as they fell within the definition of “common parts” under section 101 of the 1993 Act. Further, the acquisition of those interests was reasonably necessary for their proper management or maintenance. The appellants appealed.
Section 101 of the 1993 Act defines “common parts” as including the “structure and exterior” of a building or part and “any “common facilities” within it. The appellants argued that the basement, airspace and subsoil did not fall within the scope of that definition. If wrong on that point, they argued that it was not reasonably necessary for QCFC to acquire their leases for the proper management or maintenance of those areas.
The Court of Appeal found that the following common law principles applied to QCFC’s right to acquire the freehold of the building:
• The owner of the surface of land was entitled, within limits, to the airspace above it and the subterranean substrata below it.
• Once constructed, a building became part and parcel of the land itself.
• In the case of a lease of a whole building, the grant of the lease would carry with it the airspace above the building. This also applied to the purchase of the freehold of a building.
Accordingly, for the purposes of the 1993 Act, the airspace and subsoil formed part of the “premises” to the freehold, which QCFC was entitled to acquire. A contrary conclusion would produce an undesirable, impracticable and potentially absurd result.
Although “airspace” and “subsoil” were not defined in the 1993 Act the case law supported the proposition that they could be defined as part of the “building” within the definition of “premises” as “building” in section 3(1) of the 1993 Act.
The Court of Appeal fully endorsed the UT’s functional test approach to the question of whether the basement, airspace and subsoil formed part of the common parts of the building. What mattered was how the parts of the property were used. The purpose of the basement was to accommodate service installations used for the benefit of the whole building. The airspace and sub-soil were not within the envelope of the built structure, but fell within the meaning of building under section 3 of the 1993 Act. Accordingly, they could be considered as part of the building itself or part of the “exterior of the building”.
Lastly, acquisition of the appellant’s leases was reasonably necessary to enable QCFC to properly manage them as common parts. The leases granted redevelopment rights which meant those areas could cease to be common parts.
Elizabeth Dwomoh is a barrister at Lamb Chambers
