Prospect Estates Ltd v Grosvenor Estates Ltd
Mummery, Smith and Goldring LJJ
Leasehold Reform Act 1967 – Acquisition of freehold of house – Respondent lessee bringing enfranchisement claim against appellant landlord – Building originally designed as house – Majority in use as offices as required by terms of lease – Section 2(1) of 1967 Act – Whether building a house “reasonably so called” – Appeal dismissed
The respondent brought a claim, under Part I of the Leasehold Reform Act 1967, to acquire the freehold of a property that it held on a long lease from the appellant landlord. The property consisted of a terraced house built in 1850, comprising a basement and two upper levels to which a third and fourth floor were later added. No other major structural works had been carried out and the property continued to resemble a house, with the majority of the internal walls and many original features retained. However, since 1958 the greater part of the property had been used as offices with only the fourth floor retained for residential accommodation. That use was reflected in the terms of the lease, which required most of the property to be used as business or professional offices and the fourth floor to be used as a residential flat for the occupation of a director, partner, officer or senior employee of the lessee. The lease also prohibited any external indications of the use of the building as offices and provided that the windows should be furnished like those of a dwelling-house.
An issue arose as to whether the property was a house “reasonably so called” within section 2(1) of the Act, so as to qualify for the right to enfranchise. Holding that it was, the judge regarded the overwhelmingly significant factor to be that the property had been designed as a house and its structure and appearance had remained largely unchanged. In the light of that, he found that, notwithstanding the current use as prescribed by the lease, the circumstances were such that a reasonable person would call the building a house.
Leasehold Reform Act 1967 – Acquisition of freehold of house – Respondent lessee bringing enfranchisement claim against appellant landlord – Building originally designed as house – Majority in use as offices as required by terms of lease – Section 2(1) of 1967 Act – Whether building a house “reasonably so called” – Appeal dismissedThe respondent brought a claim, under Part I of the Leasehold Reform Act 1967, to acquire the freehold of a property that it held on a long lease from the appellant landlord. The property consisted of a terraced house built in 1850, comprising a basement and two upper levels to which a third and fourth floor were later added. No other major structural works had been carried out and the property continued to resemble a house, with the majority of the internal walls and many original features retained. However, since 1958 the greater part of the property had been used as offices with only the fourth floor retained for residential accommodation. That use was reflected in the terms of the lease, which required most of the property to be used as business or professional offices and the fourth floor to be used as a residential flat for the occupation of a director, partner, officer or senior employee of the lessee. The lease also prohibited any external indications of the use of the building as offices and provided that the windows should be furnished like those of a dwelling-house.An issue arose as to whether the property was a house “reasonably so called” within section 2(1) of the Act, so as to qualify for the right to enfranchise. Holding that it was, the judge regarded the overwhelmingly significant factor to be that the property had been designed as a house and its structure and appearance had remained largely unchanged. In the light of that, he found that, notwithstanding the current use as prescribed by the lease, the circumstances were such that a reasonable person would call the building a house.On appeal, the appellant submitted that the property could not be a house “reasonably so called” in circumstances where, at the critical date, the only living accommodation was on the fourth floor and its occupation was linked to the business occupation of the remainder. It contended that the judge had erred in placing too much emphasis upon the original design of the building and the fact that it had remained unchanged.Held: The appeal was allowed. The reference to a house “reasonably so called” in section 2(1) was a limitation or qualification with the purpose of excluding certain buildings, such as purpose-built hotels or blocks of flats or office blocks with a penthouse suite, that might be regarded as houses under other legislation, At the other end of the scale, a building that was designed for residential use did not cease to be a house merely because a part of it was no longer used for living in. In between, there could be varying degrees of mixed use, which, depending upon the particular circumstances of the case, might or might not result in a building being a house reasonably so called. The concept of a house reasonably so called had a degree of flexibility since, within the limits of reasonableness, different minds could reach conclusions that were not obviously wrong. However, that approach should not be taken too far. The judge in the instant case had not taken full account of all the relevant circumstances and had given too much weight to the original design and the unchanged appearance of the building, both internal and external. The prescribed and predominant office use of the building in compliance with the lease was a peculiar and exceptional circumstance of the case. If due weight were to be given to the prescriptive terms of the lease, the actual uses of the building and the relative proportions of the mixed use at the relevant date, the only possible conclusion was that it was no longer reasonable to call the building a house within the 1967 Act: Tandon v Trustees of Spurgeons Homes [1982] 2 EGLR 73; (1982) 263 EG 349 and Lake v Bennett (1969) 213 EG 633 considered.Anthony Radevsky (instructed by Boodle Hatfield) appeared for the appellant; Stan Gallagher (instructed by Radcliffes) appeared for the respondent.Sally Dobson, barrister
