Leasehold enfranchisement - What is a house?  Forsters considers latest Court of Appeal decision

The Court of Appeal gave judgment yesterday in two conjoined appeals known as Day v Hosebay Limited and Ors. Both appeals concerned the question of what constitutes a "house" under the Leasehold Reform Act 1967 and whether it includes buildings used as commercial premises. 

In order to qualify as a "house" under Section 2 (1) of the 1967 Act, a property must satisfy two requirements.  Firstly, it must be designed or adapted for living in and, if it passes that test, it must reasonably be called a house.  The appeals arose as a result of the removal of the residence condition following the introduction of the Commonhold and Leasehold Reform Act 2002. Before this Act came into force any tenant making a claim for the freehold under the 1967 Act had to be residing in the property which meant that the question of whether the building qualified as a "house" was a fairly straight forward one.  Since its introduction claims are no longer been restricted to individual tenants . Corporate tenants can now seek to enfranchise provided that they are not occupying the property for the purpose of their business since the Act in its amended form still excludes leases that have the protection of the Landlord and Tenant Act 1954.

The case of Day v Hosebay Ltd concerned three houses in South Kensington which had been adapted as short term holiday accommodation for tourists. The lease in that case allowed use as 16 residential flatlets. The case of Lexgeorge Ltd v Howard De Walden concerned a town house in Marylebone which was sub-let as offices to a firm of solicitors. The lease in that case restricted the use to self contained flats or maisonettes on the upper two floors and professional offices on the ground and first floors. In both cases the judges at first instance decided that the property or properties in question did each constitute a "house".  The landlord in each case appealed.

Lord Neuberger who gave the leading judgment dismissed both appeals although he said that he did so with no particular enthusiam. The removal of the residence condition had, in his view, extended the 1967 Act further than the legislature had intended.  He felt that the Court of Appeal decision in Prospect Estates 2009 could be distinguished because it was limited to cases where the residential use under the lease was either entirely prohibited or entirely restricted. He also claimed he had difficulty agreeing with Prospect since it concentrated too heavily on the lease terms rather than the physical character and appearance of the building. He concluded by saying that if he was right on these appeals the 1967 Act can extend to buildings exclusively used for business purposes. 

02/07/10

Natasha Rees