The Court of Appeal has dismissed a claim to enfranchise mixed-use premises, comprising a shop on the ground floor and a newly converted flat above
The Leasehold Reform Act 1967 enables long leaseholders to buy the freeholds of premises designed or adapted for living in, which can reasonably be called a “house”. The issue of whether premises can be described as a “house” has become increasingly contentious.
In Hosebay Ltd v Day [2012] UKSC 41, the Supreme Court ruled that the fact that a building might look like a house, and might even be referred to as a house for some purposes, did not displace the fact that its use was wholly commercial. What then is the position in respect of mixed-use premises?
The legislation defines houses to include buildings that are “not solely designed or adapted for living in”. The issue in Henley v Cohen [2013] EWCA Civ 480 was whether a two-storey building containing a shop on the ground floor, with a recently converted flat above, sublet to different tenants, could reasonably be called a house. If so, did the fact that the tenants had created the first floor flat in breach of covenant, with a view to enfranchisement, disqualify them from acquiring the freehold?
The landlord had refused the tenants’ application for permission to convert the small storeroom on the first floor (which was used by and accessible through the premises next door) into living accommodation. It did so in order to avoid the possibility of enfranchisement, but the tenants undertook the work anyway, before granting an assured shorthold tenancy of the flat and claiming the freehold.
The Court of Appeal agreed that the property was adapted for living in, but decided that it could not reasonably be called a house. There was no history of occupation as a whole or, indeed, of residential occupation at all. The building looked like a shop in a shopping parade and the ground and first floors were completely independent of each other. Indeed, the only way of obtaining access to the flat was by an external metal staircase at the rear of the building and, from there, over a flat roof above the shop.
The tenants relied on Tandon v Trustees of Spurgeons Homes [1982] AC 755 and tried to persuade the court that the premises fell within the scope of the legislation. They also denied that they were in breach of covenant or, alternatively, argued that the statute did not require tenants to comply with their leasehold covenants in order to enfranchise.
Their Lordships rejected the tenants’ arguments. They distinguished Tandon on the ground that the living accommodation in that case was physically connected with the shop below and ruled that the use of the first floor, upon which the tenant placed such emphasis, should be viewed in context by reference to the use that had been made of it under the lease during the past 70 years.
The court accepted that the alterations were unlawful and also agreed that the tenants would not have been entitled to take advantage of their breach of covenant in order to enfranchise. It would, as a general rule, be unacceptable, if tenants were to be entitled to enfranchise by deliberately doing something wrongful, as between themselves and the freeholder, in order to acquire the right to do so.
Allyson Colby is a property law consultant
