The decision in Holding & Management (Solitaire) Ltd v 1-16 Finland Street RTM Co Ltd [2007] PLSCS 214 creates new law. It has wide implications for residential leaseholders’ rights to manage and enfranchise blocks of flats, which are becoming increasingly important in the context of mixed-use developments.
The Commonhold and Leasehold Reform Act 2002 allows qualifying tenants of blocks of flats to assume responsibility for the management of their buildings, but landlords can contest the tenants’ claim if the premises do not meet certain statutory requirements. The legislation applies to premises that consist of a self-contained building, or part of a building. A building is self-contained if it is structurally detached. A part of a building is self-contained if it has, or can be provided with, separate services, and if it is vertically divided from the rest of the building and would be capable of independent redevelopment.
The property in dispute comprised a block of flats at the end of a long building, adjoining a town house in the same block. A roller shutter security door and two of the parking spaces in the basement service area were situated beneath the town house. The question arose as to whether: (i) the tenants were entitled to manage their flats and the parking area in the basement; or (ii) were the premises failed to satisfy the requirements laid down in the legislation because the basement was not vertically divided from the rest of the building in the same plane.
The tenants argued that the horizontal deviation was immaterial. They referred the leasehold valuation tribunal (LVT) to the Leasehold Reform Act 1967, which has been interpreted to allow minor deviations from the strict concept of vertical severance. The LVT upheld their claim.
The landlord appealed to the Lands Tribunal. The landlord accepted that minor discrepancies from the vertical might be permitted but argued that the configuration would be untidy, and was not permitted by the legislation. The Lands Tribunal agreed. The LVT had been wrong to rely upon decisions that related to the 1967 Act, which contained different provisions that were created for a different purpose.
The question was not whether the area outside a line drawn vertically through the building was minimal in the context of the notice, or very small in relation to the floor area as a whole, but whether the premises were vertically divided from the rest of the building. The premises were divided along a different vertical plane in the basement. Minor deviations from the vertical might be ignored, but the deviation was not minor. Consequently, the flats did not form a self-contained part of the building for the purposes of the right-to-manage legislation, and the tenants were not entitled to manage them.
The case is just as important in the context of claims for collective enfranchisement under the Leasehold Reform, Housing and Urban Development Act 1993, which includes a requirement for “vertical division” in exactly the same terms.
Allyson Colby is a property law consultant
