This was the main issue in a recent decision of the Upper Tribunal (UT) in 4-6 Trinity Square Freehold Limited v The Corporation of the Trinity House of Deptford Strond [2016] UKHT 484
In many enfranchisement claims the property the participating leaseholders will acquire is a straightforward matter. They will take over ownership of the building containing their flats and its common parts. In some cases, though, there will be other interests that they may want to acquire: communal gardens and garages are two common examples. The legislation (Part I of the Leasehold Reform, Housing and Urban Development Act 1993) provides for two categories of other property that may be acquired: appurtenant property which is demised under a lease, or property which the leaseholders have the right to use in common with other occupiers.
Where the claim includes the latter, the landlord can , instead of transferring the freehold, grant “such permanent rights as will ensure that thereafter the occupier of the flat referred to in that provision has as nearly as may be the same rights as those enjoyed in relation to that property on the relevant date by the qualifying tenant under the terms of his lease” (section 1(4)(a) of the Act). In other words, the leaseholders will acquire continuing rights as opposed to the freehold of the additional property.
In the Trinity Square case enfranchising leaseholders claimed a garden which under their leases they had a licence to use. However, this licence was expressed to be revocable by the Corporation at any time. Was the Corporation offering permanent rights if the licence was to remain revocable?
Ordinarily such a disagreement would be resolved by an application to the First-tier Tribunal (Property Chamber). In this case, however, there was a previous decision of the UT which would have bound the FTT. As this was a decision the Corporation considered was wrongly decided, the application for a determination was transferred to the UT. In Fluss v QueensbridgeTerrace Residents Limited [2011] UKHT 285 the UT decided that revocable rights could not satisfy section 1(4) of the Act as they did not confer “permanent rights”. Later in Snowball Assets v Huntsmore House (Freehold) Limited [2015] UKHT the UT was urged to reconsider the position it had taken but it declined to do so.
In these proceedings the leaseholders argued that the earlier decisions had been correctly decided. They also argued that the existing power of the Corporation to issue regulations over the use of the garden should not be continued. In response, the Corporation contended that the most important feature of the garden use rights was their revocable quality and to convert them into irrevocable rights would fundamentally change them.
Although the UT did not find the correct interpretation of section 1(4) straightforward (as it seems to require the grant of permanent rights comparable to existing rights), in the end it concluded that the offer of revocable rights was not enough. The Corporation will have to offer irrevocable rights to use the garden (without the right to make regulations for its use post-enfranchisement) if it is to avoid transferring the freehold to this property (as well as the freehold of the block) to the leaseholders.
Professor James Driscoll is a solicitor and a writer