Enfranchisement: meaning of ‘tenant of a leasehold house’

In Freehold Properties 250 Ltd v Field and others [2020] EWHC 792 (Ch) the High Court was asked to interpret the meaning of “tenant of a leasehold house” within section 1(1) of the Leasehold Reform Act 1967 (the Act). The respondents were each long lessees of purpose-built terraced or semi-detached properties on an estate. The appellant was the freeholder and had retained the structural parts of the premises (load-bearing walls, roof, foundations and service media which did not exclusively service the properties). The respondents sought to exercise their right to enfranchisement under the Act, which the appellant opposed. On the fulfilment of certain conditions, section 1(1) of the Act conferred upon “a tenant of a leasehold house a right to acquire on fair terms the freehold or an extended lease of the house and premises… ”. At first instance, the court determined that the respondents’ leases fell within the scope of the Act and that the respondents were entitled to acquire the freehold. The appellant appealed. The appellant argued that the first-instance judge had erred in finding the respondents were “a tenant of a leasehold house”. The respondent argued that the natural and ordinary meaning of the words used in section 1(1) of the Act meant that “a tenant” had to be a tenant of the whole of “a leasehold house”. As the structural parts of the house fell outside the demise and were retained by the appellant, the respondents were “a tenant of only part of a house”. The respondents contended that “a tenant of a leasehold house” included not only “a tenant of the whole of a leasehold house” but also “a tenant of part of a leasehold house”. The High Court commented on the ambiguity of the phrase “a tenant of a leasehold house”. Accordingly, the first step in construing the phrase in context was to have regard to the statutory definition given either to the phrase itself or any term within it. The only statutory definition that existed was in relation to the term “house”. The word “house”, as defined in section 2 of the Act, sought to “isolate and define – within a single building – what may or may not be multiple houses”. Further, the distinction between a single building and the potential for multiple “houses” within that building” in sections 2(1) and 2(2) of the Act turned solely on the physical attributes of the building. It was not qualified or affected by the nature of the interest in the house or householder. In finding for the appellant, the High Court observed that the Act, having defined the unit to be enfranchised – namely, the house – it would be a curious outcome if “some legal interest “less” than an interest in substantially the whole of the leasehold house would suffice to qualify for enfranchisement. Parliament was seeking to enfranchise leaseholders so as to enable a lease to be turned into a freehold, thereby extending indefinitely the “term of years” that was the defining characteristic of a lease. It was not the intention of parliament to “expand the physical reach of a demise, so that a lease of part of a house was converted into the whole of it”. Elizabeth Dwomoh is a barrister at Lamb Chambers