The Leasehold Reform Act 1967 enables tenants to buy freeholds of premises designed or adapted for living in, which can reasonably be described as a “house”. An issue that has tantalised lawyers is whether premises will qualify if they were designed as a house, but have subsequently been adapted for another use. In Boss Holdings Ltd v Grosvenor West End Properties Ltd [2008] UKHL 5; [2008] 1 EGLR 51; [2008] 15 EG 174, Lord Neuberger intimated that premises might still qualify in such circumstances because “designed” and “adapted” are alternative requirements.
The county court has dared to disagree: Hosebay Ltd v Day [2009] PLSCS 318. The case concerned houses that were converted into self-catering rooms to provide short-term accommodation for tourists and visitors to London. The landlord argued that the alterations disqualified the properties from the right to enfranchise and that tourists and visitors “stayed” in the units as opposed to “living in” them.
The Leasehold Reform Act 1967 enables tenants to buy freeholds of premises designed or adapted for living in, which can reasonably be described as a “house”. An issue that has tantalised lawyers is whether premises will qualify if they were designed as a house, but have subsequently been adapted for another use. In Boss Holdings Ltd v Grosvenor West End Properties Ltd [2008] UKHL 5; [2008] 1 EGLR 51; [2008] 15 EG 174, Lord Neuberger intimated that premises might still qualify in such circumstances because “designed” and “adapted” are alternative requirements.
The county court has dared to disagree: Hosebay Ltd v Day [2009] PLSCS 318. The case concerned houses that were converted into self-catering rooms to provide short-term accommodation for tourists and visitors to London. The landlord argued that the alterations disqualified the properties from the right to enfranchise and that tourists and visitors “stayed” in the units as opposed to “living in” them.
HH Judge Hazel Marshall QC accepted that buildings might cease to qualify as houses following changes in their physical character. However, she also accepted the tenant’s argument that – with different furniture and equipment – the premises could sensibly be used for “living in”. Consequently, she concluded that, despite the alterations and use to which they were being put, the premises were, either by their origin as a large Victorian house or by their current adaptation, “designed or adapted for living in”.
Could the premises reasonably be described as a house? The landlord relied on Prospect Estates Ltd v Grosvenor Estate Belgravia [2008] EWCA Civ 1281; [2009] 1 EGLR 47; [2009] 02 EG 86. In that case, the Court of Appeal decided that the premises were used principally as offices and could not reasonably be described as a house.
The judge distinguished Prospect on the ground that the lease in that case specifically required the tenant to use the premises as offices. Hosebay’s lease authorised a variety of residential uses. The court should not attach too much importance to a particular characteristic. The point must be decided by reference to all the relevant circumstances, which included the physical appearance of the building, its character and the lawful use under the tenant’s lease.
The judge dealt with another important point. The legislation had not been enacted for the benefit of speculators and investors. Consequently, the right to enfranchise used to be subject to a residence requirement. The Commonhold and Leasehold Reform Act 2002 substituted an ownership requirement instead, but retained a residence test for business tenants. Consequently, business tenants must show that they have occupied the entirety or part of the house as their only or main residence for a qualifying period.
The tenant was a company. Consequently, it was unable to occupy premises as a residence. None the less, it successfully exploited a loophole in the legislation by granting a sublease to a clone company and transferring its business to its sub-tenant. Consequently, the tenant was not carrying on a business and was therefore able to enfranchise, even though the judge believed that parliament had intended to allow businessmen to expropriate the freeholds of buildings only where they reside in them.
Allyson Colby is a property law consultant
