The Leasehold Reform Act 1967 entitles long leaseholders to buy the freeholds of premises designed or adapted for living in that can reasonably be described as a “house”. The issue of whether premises constitute a “house” has frequently exercised the courts.
In Hosebay Ltd v Day [2010] EWCA Civ 748; [2010] PLSCS 181, the tenant wanted to acquire the freehold of properties that were constructed and first occupied as houses, but which were subsequently converted into self–catering rooms to provide short–term accommodation for visitors to London.
In Lexgorge Ltd v Howard de Walden Estates Ltd, which was heard at the same time, the tenant sought to enfranchise property that had also been built and first occupied as a house. The building was subsequently let under a lease that restricted the user to flats or maisonettes on the upper two floors, professional offices on the ground and first floors and storage in the basement. None the less, the tenant was using the entire property as offices, in contravention of its lease, when it launched its claim to acquire the freehold.
The Court of Appeal upheld both tenants’ claims. It ruled that the properties could reasonably be described as “houses”. Externally, each building looked like a house. The Hosebay buildings were adapted for living in and had not changed significantly internally or externally since they were built. The lower floors of the Lexgorge building had undergone some alterations so that they could be used as offices. However, the upper floors were still designed for living in and the only ground for claiming that the property was not a “house” was the fact that the building was used exclusively for business purposes when the tenant served its notice to acquire the freehold.
The landlords relied on Prospect Estates Ltd v Grosvenor Estates Belgravia [2008] EWCA Civ 1281; [2009] 1 EGLR 47; [2009] 02 EG 86. There, a differently constituted Court of Appeal held that premises used primarily as offices in accordance with a restrictive user clause in a tenant’s lease could not reasonably be described as a house. Lord Neuberger MR doubted the decision. He suggested that: (i) the court must focus on the physical appearance and character of a building; (ii) the use made of a building does not mean that it is not designed or adapted for living in; (iii) few people would refer to the terms of the occupier’s lease when describing what type of building they are looking at. It seems, therefore, that Prospect applies only where the tenant’s lease prohibits residential use or restricts it to a very small area and the actual use accords with the lease.
Picking up on a point that he left undecided in Boss Holdings Ltd v Grosvenor West End Properties Ltd [2008] UKHL 5; [2008] 1 EGLR 5; [2008] 15 EG 174, Lord Neuberger also considered whether premises can qualify as a house if they were originally designed as such, but have subsequently been adapted for another use (because “designed” and “adapted” are alternative requirements). Landlords will be relieved that Lord Neuberger has ruled this out, but will be dismayed to find that the legislation is none the less sufficiently wide to encompass buildings used exclusively for business purposes.
Allyson Colby is a property law consultant
