Hosebay Ltd v Day and another; Lexgorge Ltd v Howard de Walden Estates Ltd

Leasehold Reform Act 1967 – Enfranchisement of houses – Terraced properties originally built as single residences — Rooms furnished and let AS short-term holiday lets – Planning consent and lease covenants requiring use of second and third floors as self-contained maisonette — Long actual user of all floors as office accommodation – County Court finding properties constitutING houses for purpose of section 2(1) of 1967 Act — Appeals dismissedThe first appeal concerned three terraced properties in South Kensington, London SW7, that were constructed and first occupied as large houses,. Each property was let on a long lease. The leases stipulated that the demised premises were to be used only as residential flats, with a resident caretaker, and that the external appearance of the demised premises should be that of a private dwelling-house. The respondent, a company owned by M, acquired all three leases in 1996, and remained the tenant under each. It served notices on the appellant landlords, under section 8 of the Leasehold Reform Act 1967, to acquire the freeholds. Its claim to be entitled to do so was challenged by the appellants.The three properties were used to provide short-term accommodation for tourists and other visitors to London. An issue arose as to whether each property was a house within section 2(1) of the 1967 Act. The county court rejected the appellants’ case, that each of the three properties was not a house, because, under section 2(1), it was: (i) not “designed or adapted for living in”; and (ii) not a “house reasonably so called”, in the light of the use to which it was put: see [2009] PLSCS 318. The appellants appealed on both points.The second appeal concerned a property in Marylebone, London W1. It was built as a house and formed part of a terrace of substantial houses; it was for many years occupied as a residence. It was subject to a lease that was granted in 1952 for a term of around 109 years. In 1978, the lease was acquired by the respondent, who served notice on the appellant landlord, more than 25 years later, to acquire the freehold. The appellant objected on the basis that the property was not a “house … reasonably so called” within section 2(1). The county court held that even though the entire property was used as offices at the date of the notice and, under the lease, around half of the internal area of the property could not be used other than for office purposes, it could still constitute a house reasonably so called: see [2010 PLSCS 54. The appellant appealed. The appeals were heard together because they both concerned the meaning and effect of section 2(1) of the 1967 Act and required the court to decide what constituted a “house” for the purpose of that section.Held: The appeals were dismissed.(1) To determine whether premises had been adapted for living in, one had to look at the most recent works of adaptation and assess objectively whether they resulted in the property being adapted for living in. The subjective intention of the party responsible for the works would rarely, if ever, be relevant because what was in issue was how the building was adapted, not why. The use to which the building was being put at the date of the tenant’s notice was also irrelevant: Boss Holdings Ltd v Grosvenor West End Properties Ltd [2008] UKHL 5; [2008] 1 EGLR 5; [2008] 15 EG 174 applied. In the first appeal, the most recent conversions had adapted the three properties for living in. Ignoring one or two rooms, each room was a self-contained unit of accommodation; it would be entirely appropriate to let them out to students on three-year courses. Had that been the case, all the rooms, and therefore the three buildings, would have been used as dwellings. Even if that was not the use at the time, it did not mean that, viewed objectively, the three properties had not been so adapted. In any event, in so far as the subjective intention was relevant, it was likely that the works of adaptation had been carried out before the leases were granted and those leases required the premises to be used as a family house or as residential flats. Accordingly, the properties in the first appeal had been designed or adapted for living in within section 2(1).(2) Each of properties in the first appeal had been designed and constructed for use as a residence in single family occupation, having the external appearance of a town house and converted internally so that almost every room could also be used as a self-contained unit with cooking and toilet facilities. Even if they could be called something else, they could each reasonably be called a house. Where a property had been designed or adapted for living in, the circumstances would have to be such that nobody could reasonably call the building a house before it was excluded from being a house under section 2(1). Even assuming that actual user could be taken into account, the only sensible conclusion was that each of the three properties could reasonably be called a house. To hold otherwise would necessitate the conclusion that the actual user, even where it involved people occupying almost all the rooms albeit on a short term basis, trumped all the other factors: Lake v Bennett [1970] 1 QB 663 and Tandon v Trustees of Spurgeon’s Homes [1981] 1 EGLR 66; (1981) 258 EG 553 followed.(3) The fact that the property in the second appeal was used wholly for office purposes did not mean that it was not a “house… reasonably so called”. This was not a case in which the both the permitted use and the actual use of the building excluded residential use or limited it to a small area of the building. The property had been designed and built and initially used as a town house residence for a single family and, under the lease, the two upper floors had been restricted to residential use. The property was being used wholly as offices at the date of the notice, but the landlord had objected to that use in respect of the two upper floors. Had those floors been empty, the property could reasonably have been called a house, bearing in mind its external appearance, its internal appearance on the upper floors, the description in the lease as residential and the terms of the lease restricting the upper floors to residential use. It was hard to see why the fact that the upper two floors had been used, even for many years, as offices in breach of the lease should wreak such a change that the property could no longer reasonably be called a house: Prospect Estates Ltd v Grosvenor Estates Ltd [2008] EWCA Civ 1281; [2009] 1 EGLR 47; [2009] 02 EG 86 distinguished.(4) It followed that the right to enfranchisement under the 1967 Act applied to empty and substantially commercial buildings, even if nobody had recently lived there or intended to live there, provided that they satisfied section 2(1). The respondent tenant in each of the present appeals had to right to acquire the freehold of the properties.Edwin Johnson QC (instructed by Pemberton Greenish) appeared for the appellants in the first appeal; Katharine Holland QC (instructed by Speechly Bircham LLP) appeared for the appellant in the second appeal; Anthony Radevsky (instructed by Boodle Hatfield and Wallace LLP) appeared for the respondents.Eileen O’Grady, barrister