Jeremy Hudson and Robert Duddridge answer questions on the Leasehold Reform Act 1967 and its treatment of mixed-use premises
Question: Can mixed-use qualify for enfranchisement?
I am a long leaseholder of a building comprising a ground-floor shop with a flat above. There has never been any interconnection between the two parts. Would the building qualify for freehold enfranchisement under the Leasehold Reform Act 1967 (“the 1967 Act”)?
Answer
In the light of the recent Court of Appeal decision in Jewelcraft Ltd v Pressland [2015] EWCA Civ 1111; [2015] PLSCS 300, it seems likely that the building would qualify for enfranchisement. The fact that there has never been any connection between the two parts may not be sufficient to take the premises out of protection.
Explanation
To qualify for enfranchisement the premises must comprise a “house”, defined as “any building designed or adapted for living in and reasonably so called, notwithstanding that the building… was or is not solely designed or adapted for living in”. It follows that mixed-use premises are included within the definition. The premises should “reasonably” be called a house: a critical limiting factor in determining whether the 1967 Act applies.
The leading authority on mixed-use premises is Tandon v Trustees of Spurgeon Homes [1982] AC 755; [1982] 2 EGLR 73. This concerned a purpose-built shop with living accommodation above, linked by an internal staircase. The House of Lords decided that the premises did qualify for enfranchisement. It held that if a building was designed or adapted for occupation as a residence, only “exceptional circumstances” would prevent the premises from qualifying.
The decision in Tandon was criticised, but not overruled, by the Supreme Court in Day v Hosebay Ltd [2012] UKSC 41; [2012] 3 EGLR 33. In that case Lord Carnwath concluded that it was the use of a building at the relevant date, rather than its external and internal physical character, which should be determinative. A house used entirely as offices would not qualify.
The status of mixed-use premises was recently considered in Jewelcraft, which concerned a shop with residential accommodation on the floor above, and no interconnection between the two. When built the shop was not self-contained and the flat could be accessed via an internal staircase. Applying Tandon and Day, the Court of Appeal concluded that the premises were a house reasonably so-called despite looking like a shop and the lack of internal access between the two floors.
Would the decision have been any different if there had never been any connection between the two floors? The answer is probably not, given the courts’ disregard of internal layout on the relevant date, which is the date the claim is made.
Question: A good reason to refuse consent
I am the freeholder of a two-storey building let out on a long lease. The building consists of a ground-floor shop and a first-floor office with a separate entrance. The long leaseholder wishes to convert the first floor into a self-contained flat. Under the lease, he requires my consent, which is not to be unreasonably withheld. Would he be able to enfranchise the property following conversion? Is this a reason to withhold consent?
Answer
After Jewelcraft, it is possible the building would qualify for enfranchisement following such a conversion, with your consent. The risk of enfranchisement is likely to be a good reason to refuse consent. If the leaseholder carries out the conversion without your consent, that may prevent him from enfranchising.
Explanation
In Henley v Cohen [2013] EWCA Civ 480; [2013] PLSCS 91 the long leaseholder had converted the first floor of a shop building from a store into a residential flat. The Court of Appeal upheld the trial judge’s decision that the building could not reasonably be called a house because:
- the first floor had been used for non-residential purposes for 70 years prior to the conversion;
- the flat had never been used together with the shop; and
- there was no direct means of access from the shop to the flat.
However, in the later case of Jewelcraft, the Court of Appeal doubted whether this part of Henley had been correctly decided. As the date of the notice to enfranchise is the relevant date for deciding whether the building qualifies under the 1967 Act, it should be the use on the date of the notice that counts. Further, in Jewelcraft the Court of Appeal considered that the Tandon case had decided as a matter of law that a shop with accommodation above was a house provided that a material part of the building was designed or adapted for residential purposes.
If the courts prefer the approach in Jewelcraft to Henley then it is likely that your leaseholder will be able to enfranchise following conversion of the first floor to a residential flat. But it would be reasonable for you to refuse consent on this basis: see Bickel v Duke of Westminster [1977] QB 517; [1977] 1 EGLR 27.
In Henley, the Court of Appeal also upheld the trial judge’s decision that the leaseholder could not enfranchise in any event because he had carried out the conversion without the freeholder’s consent, which was required, and could not rely on his own unauthorised actions to acquire a right to enfranchise. Jewelcraft did not doubt this part of the decision. If your leaseholder proceeds to convert the first floor without your consent, then it is likely that he will not be able to rely on the conversion to found a claim to enfranchisement.
Jeremy Hudson is a partner in the property litigation team at Charles Russell Speechlys LLP and Robert Duddridge is a barrister at Enterprise Chambers
Questions on any topic can be e-mailed to egq&a@enterprisechambers.com and egq&a@crsblaw.com
