James Driscoll examines what the latest case has to say about the perennial question: when is a building a “house”?
Later this year, it will be the 50th anniversary of the enactment of the Leasehold Reform Act 1967 (“the 1967 Act”). This ground-breaking legislation introduced a new right for a qualifying leaseholder of a house to buy the freehold (to “enfranchise”), and in some cases the right to extend the term of the current lease.
However, it applies only to a building that is a “house”. This term is defined by section 2(1) of the 1967 Act as “…any building designed or adapted for living in and reasonably so called, notwithstanding that the building is not structurally detached, or was or is not solely designed or adapted for living in, or is divided horizontally into flats or maisonettes…”
Although this has been described as a “deceptively simple definition”, disagreements over whether a particular building is a house have led to endless litigation. Some cases have gone as far as the House of Lords and the Supreme Court.
A hotly contested claim
In the latest decision – Grosvenor (Mayfair) Estate and another v Merix International Ventures Ltd [2017] EWCA Civ 190; [2017] PLSCS 81 – the Court of Appeal dealt with an enfranchisement claim for a property in Mayfair. It was originally constructed as a house but over the years was used for both commercial (office) and residential use. A substantial property which was originally built as a large house (with a mews annex), it is situated in the heart of prime central London. It had been empty and unused for 13 years when, in December 2003, the leaseholder (a BVI-registered company) gave notice claiming the freehold.
Grosvenor denied that the property was a “house” within the meaning of section 2 when the claim notice was given. Proceedings ensued in the Central London County Court. Judge Gerald, after inspecting the building and analysing the relevant authorities, found for the leaseholder – the building, which was constructed as a house, was a house “reasonably so-called”, which the leaseholder was entitled to acquire under the 1967 Act.
Commercial or residential?
It was agreed by the parties that the building was “designed or adapted for living in”. As a result, the main thrust of the submissions was whether it was a house “reasonably so-called” or not. According to the landlords, the property had been used predominantly for commercial use and any residential use was ancillary to the rest of the building. As the last use of the property was commercial, this should determine the issue of whether it was a house “reasonably so-called” when the claim notice was given.
According to the leaseholder, either the whole of the property was designed for living in, or alternatively it was a house in mixed adaptation which remained partly adapted for living and a house reasonably so-called.
The county court concluded that, while it still had some vestiges of office use, such as certain fittings and a reception room on one of the floors, it was nevertheless evident of a “residential character”. Judge Gerald added that the evidence of past office use did not detract from the “quite overwhelming residential character, identity and functionality of a still grand Mayfair townhouse” (cited at paragraph 27 of the Court of Appeal decision).
A number of leading authorities were cited and analysed in the county court and on appeal.
The decision that the trial judge found most relevant was that of the House of Lords in Boss Property Holdings Ltd v Grosvenor West End Properties [2008] UKHL 5; [2008] PLSCS 22. Curiously enough, that decision concerned a property in the same street as the property in Grosvenor v Merix. In Boss, it was decided that the phrase “designed or adapted for living in” in section 2 of the 1967 Act required a court to consider how the property was originally designed and whether, as a result of any later work, the original design had changed. In Boss the property was built as a house, it had not been occupied for a number of years and it had become internally dilapidated. But as it was originally designed for living in, it was a “house”.
The outcome on appeal
Other decisions considered by the Court of Appeal were those of the Supreme Court in Day and another v Hosebay Ltd; Howard de Walden Estates Ltd v Lexgorge Ltd [2012] UKSC 41; [2012] 3 EGLR 33. It appeared that the question was to be answered by looking at what the building was being used for at the date of the claim.
In Hosebay the landlord owned a number of terraced houses, each of which was used to let short-term to students. In Lexgorge the lease limited use for office and other commercial use. In both cases the court decided that, although the buildings were erected as houses, they could not, at the date of the claim, be considered houses. In a memorable phrase, Lord Carnwath said: “The Leasehold Reform Act is on its face a statute about houses, not commercial buildings.”
Dismissing the landlord’s appeal in Grosvenor v Merix, the Court of Appeal noted that the trial judge had considered all of the relevant authorities and that there was no basis for overturning his conclusion that, when the notice was given (applying the Boss decision, the property was a house reasonably so-called.
Key points
- Whether a building can be treated as a house or not has been endlessly litigated
- Can a building constructed as a house later change so that it is no longer a house?
- What is the position where the building is unoccupied?
James Driscoll is a solicitor and writer
