Archive for the 'Leasehold and shared ownership' Category

New duty advice scheme at the London LVT

Published by Francis Davey on 09/09/2010 in Leasehold and shared ownership and Uncategorized. 1 Comment

Yesterday the Leasehold Advisory Service (LEASE) announced in a press release that it would be operating a morning duty advice scheme at the London offices of the LVT from 21 September 2010. This news follows hot foot on the announcement that from 16 September 2010, LEASE’s phone advice line will open half an hour earlier (at 9:30am) and will open late (until 8pm) on Mondays.

One hopes this is all because the money saved from withdrawing funding for advice on commonhold is being put to good use. On the whole a more positive story then, though advising on leasehold disputes as a duty will be fairly challenging.

A broken engagement

Published by Francis Davey on 07/09/2010 in Leasehold and shared ownership and Uncategorized. 1 Comment Tags: , , .

Dibble v Pfluger [2010] EWCA Civ 1005 concerns an appeal in a joint property case, largely decided on its facts. It has one interesting point of note for anyone who practices in this field: the couples were engaged to be married for much of the period of their relationship.

The claim was for an order for sale of a house (“Alinora”) in which the couple were living. As Lord Justice Ward put it “It cannot be easy for them.” That sale should have caused no difficulty as Alinora was held on an express trust with beneficial interests in common in equal shares. The defendant did not resist the sale in principle, but counter-claimed on the basis that he had a beneficial interest in a home owned by the claimant in Poland. Thus he asked either that an order for sale be made of the Polish property or that the claimant compensate him for his interest in it (claimed as a half share).

No-one seems to have worried that this second property was located in Poland and so no-one considered whether Polish or English law should apply for any determination of the size of the defendant’s share or whether in fact Polish law on fractional co-ownership (which I understand would be the Polish equivalent of beneficial tenancy in common under a trust for land) would operate the same way as the English principles in Stack v Dowden.

The appeal was allowed on the basis that the Recorder had failed to make a number of findings of fact. For example, concerning a payment by the defendant of £15,000 for work to be done on the Polish property, said by the claimant to have been a loan, the Recorder said:

“13. … It may have been a loan to him. Whatever the status of this payment in terms of the issues which I have to decide, it seems to be common ground that it was intended to be used, and was in fact used, to facilitate the erection of a roof to the Polish building which it was necessary to complete during the summer months.”

Well, was it a loan or not? If not, what effect did it have on any interest the defendant might have had in the Polish property? Neither of these questions were answered by the Recorder. For this, and similar failures, the Court of Appeal felt that the case should be remitted to a different judge for proper findings to have been made.

The interesting point in the case (apart from the Polish dimension) is that the couples were, for most of their cohabitation, engaged. Strangely no-one seems to have considered that this might be relevant until the case reached the Court of Appeal. Lord Justice Ward pointed out that section 2 of the Law of Property (Miscellaneous Provisions) Act 1970 applied:

“2. Property of engaged couples

(1) Where an agreement to marry is terminated, any rule of law relating to the rights of husbands and wives in relation to property in which either or both has or have a beneficial interest, including any such rule as explained by section 37 of the Matrimonial Proceedings and Property Act 1970, shall apply, in relation to any property in which either or both of the parties to the agreement had a beneficial interest while the agreement was in force, as it applies in relation to property in which a husband or wife has a beneficial interest.”

Section 37 of the Matrimonial Proceedings and Property Act 1970 being:

“37. Contributions by spouse in money or money’s worth to the improvement of property

It is hereby declared that where a husband or wife contributes in money or money’s worth to the improvement of real or personal property in which or in the proceeds of sale of which either or both of them has or have a beneficial interest, the husband or wife so contributing shall, if the contribution is of a substantial nature and subject to any agreement between them to the contrary express or implied, be treated as having then acquired by virtue of his or her contribution a share or an enlarged share, as the case may be, in that beneficial interest of such an extent as may have been then agreed or, in default of such agreement, as may seem in all the circumstances just to any court before which the question of the existence or extent of the beneficial interest of the husband or wife arises (whether in proceedings between them or in any other proceedings).”

In other words, where couples have been engaged, there is a statutory basis for enquiring into their respective contributions to the improvement of property, quite apart from any considerations that might arise under a Stack v Dowden analysis.

Whether s.2 would have made any difference in this case I do not know, but I thought it was worth drawing our readers’ attention to the provision. In my experience it is not as widely known as it should be.

Unhappiness in the (e)state of Belgravia

Published by Francis Davey on 07/09/2010 in Leasehold and shared ownership and Uncategorized. 0 Comments

Donath v Trustees of the Second Duke of Westminster Will Trust [PDF] is a first instance decision of the LVT. We do not normally reports such things but it concerns an application to vary an old-style estate management scheme. So rarely does one see estate management schemes litigated in practice that I felt we ought to give it a mention.

Unlike most other civilised legal systems, English law does not have any simple mechanism for requiring the owners of land to contribute to the costs of managing or maintaining other land from which they benefit. There are archaic exceptions, such as the easement of fencing, and various legally imaginative solutions which have never been properly tested and as such are unused, for example by creating freehold covenants from the enlargement of very long leaseholds — as proposed by Professor Edward Burn. Attempts to change this, whether by the Law Commission, or by pressing for an extension of the rule in Halsall v Brizell [1957] Ch 169 that the one who takes the benefit must also take the burden have failed.

English lawyers have instead resorted, as they usually do, to bricolage: co-opting the leasehold estate as a means of imposing financial obligations. We are so used to this situation I suspect we fail to realise quite how ridiculous it is, but I remember the horror expressed by an American colleague that we were using time-limited (and as it happens highly precarious) forms of ownership as a way of managing apartment blocks, simply because we had nothing better to offer.

Thus when well meaning governments created the right for the leaseholder of a house to purchase their freehold, a problem was created for large landlords who had, hitherto, been able to manage large estates using leasehold covenants. With their former leaseholders now freeholders it would be difficult to impose any general obligations on them, or for the landlord to retain any significant rights over the freehold land in order to continue to manage “their” estate.

The solution was section 19 of the Leasehold Reform Act 1967, which allowed the creation of what we have come to know as an “estate management scheme”. Such a scheme could provide for a landlord to be given powers of management and to retain rights against the freehold houses, the owners of which were (or might in the future) exercising their right to buy the freehold. In order to create a scheme one needed a ministerial certificate and the approval of the High Court, which meant that very few were made. I suspect that the introduction of section 19 was motivated with a very small number of large estate owners in mind (I’d be interested in readers’ comments on this point – or what experience they have with such schemes).

Section 19(6) required that such a scheme should make provision for its variation or amendment, or by enabling such variation to be done with the approval of the High Court. The LVT has replaced the High Court in all such schemes as a result of s.75 of the Leasehold Reform, Housing and Urban Development Act 1993 (which also introduced new style estate management schemes that are rather easier to create).

Grosvenor Belgravia Estate Management Scheme was just such a scheme, adopted in 1974 for the benefit of the 2nd Duke of Westminster Will Trust. Mr Donath’s complaint was that the trustees had failed to prevent (or remedy) breaches of the scheme by residents, so that some properties were in need of repair and others had been converted into offices (which, one presumes, was contrary to one of the provisions of the scheme).

Mr Donath made an application to the LVT under 19 for the scheme to be varied so as to impose an obligation on the “landlord” to “use their best endeavours to maintain established standards in the area”. This to be done by informing property owners of any breaches of the scheme and using their powers under the scheme to enforce the relevant standards.

The respondent trustees position was that the LVT did not have jurisdiction to do so. Section 19, they said, envisaged a scheme being made entirely for the benefit of the landlord or former landlord and did not contain provisions for imposing obligations on the landlord. The LVT agreed and refused jurisdiction. An alternative argument of the trustees, that only the landlord had standing to bring a claim under section 19, was left open.

I think this must be the right conclusion – s.19 is clearly intended for the primary benefit of the landlord or former landlord. More generally I wonder how many schemes of this type exist and how well they are (or are not) enforced.

Service charges due and payable?

Published by NL on 05/09/2010 in FLW case note, Housing law - All and Leasehold and shared ownership. 0 Comments Tags: , , , , .

Staunton v Kaye & Anor [2010] UKUT 270 (LC)

This is a rather confused matter from the Upper Tribunal (Lands) sitting in Manchester. It is made all the more confused by a transcript which muddles parties and at one point suggests the LVT was in error in remitting the matter to itself.

At issue was the payability of a demand for £1,227.47. The questions were variously whether it was a service charge, whether the s.20 Landlord and Tenant Act 1985 notification procedure had been complied with, or could be dispensed with, and particularly whether the demand complied with s.47 Landlord and Tenant Act 1987 (and, on appeal, also s.48 L&T 1987 and s.21B of the Landlord and Tenant Act 1985).

Mr Staunton, the appellant, is the leaseholder of a flat in Barracks Square, Macclesfield, unsurprisingly a former barracks. Kaye and Taylor, the respondents, owned the freehold of the flat and, together with a Mr & Ms Dykstra, the freehold of the former parade ground around which properties were set.

The brief outline of events was:

Beneath the parade ground is a sewer, to which the drains of 28 of the properties are connected, 15 of them via a further length of sewer serving only those 15 properties. The respondents told the LVT that in 2005 and 2006 a company called Genie Developments that owned buildings on the northern side of the square had commissioned surveys from Jet Rod Drainforce and Dyno Rod Drain Services. The surveys showed considerable tree root incursion into the sewers and suggested that rehabilitation was urgent. Genie Developments called several meetings of residents, encouraging the formation of a management company to raise funds and carry out the works that were needed, but they lost interest, and in November 2006 an informal committee called the Barracks Square Renovation Committee was formed by residents. Having obtained estimates from two companies for the remedial works the committee initially decided to accept the higher quotation on the basis that the specification was better. They divided the amount relating to the part of the sewer serving the 15 properties equally between those properties, and the rest they divided equally between the 28 properties. The total attributable to the subject property on this basis was £1,227.47. In the event the contract was let to another company that carried out the work in November 2007 and charged less. The amount attributable to the subject property on this basis was £999.32.

A demand for the sum of £1,222.47 was sent to the appellant on 21 January 2008. It did not state the name of the landlord. It included the note: “Payee details: Barracks Square Renovation Committee”.

Mr S refused to pay as he had seen no problems with the drains and thought the works were to increase the value of another area of the barracks for developers. A claim was brought for £1,222,47 in the County Court in the name ‘Barracks Square Renovation Committee’. Eventually in that claim Kaye and Taylor were substituted as claimants. Mr S defended on grounds that the demand was invalid as a demand for a service charge as it did not give the name and address of the landlord, contra s.47 L&T 1987 and the s.20 L&T 1985 consultation requirements had not been met.

The County Court transferred the case to the LVT for determination of whether the service charge was payable; and if so whether it was reasonable; and whether the s.20 requirements and been met, or if not whether a dispensation under s.20za(1) should be made.

The LVT found that there was no provision in the lease to allow for the creation of a fund by service charge for repairs to the common parts. Although the lease contained a provision for the tenant to contribute to the costs of repairing the sewer, there as no corresponding obligation for the landlord to repair or keep in repair the sewer.

The ‘Barracks Square Committee’, which issued the demand and brought proceedings was not the landlord. Nor were Kaye and Taylor. The landlords were Kaye, Taylor and the Dykstras, jointly. There was no evidence that the costs claimed had been incurred by the landlords.

In the circumstances, there was no need to decide the s.47 issue, nor the s.20 consultation point, although had it been necessary, the LVT would have granted a dispensation and would have found a reasonable charge was £999.32.

Given that the tenant used the drain, there was an equitable obligation to pay. There was also the clear clause in the lease, but this was for the County Court to decide.

Mr S appealed to the Upper Tribunal (Lands Chamber) and permission was given on 3 grounds: whether the respondents are the appellant’s landlords; whether the service charge claimed is in respect of a relevant cost; and whether the amount due is made not payable by sections 47 and 48 of the 1987 Act and section 153 of Commonhold and Leasehold Reform Act 2002.

Held:
It was clear that the respondents were the landlords. They held the freehold title from which Mr S’s lease was demised. The LVT was in error in saying that Kaye, Taylor & the Dykstras were the landlord jointly.

The charge was a service charge:

The lease includes the following tenant’s covenant in clause 2:

“(ix) At all times hereafter to contribute and pay a proportionate part of the expense of maintaining repairing or renewing a) the gutters pipes and other things for conveying rain water from the demised premises b) the gas and water pipes drains conduits and electric wires and other gas water and electric installations in under or upon the upper flat or the reserved property or any part thereof enjoyed or used by the Lessee in common with the Lessor or other the owners and occupiers of the upper flat of the other reserved property …”

Under clause 2(iii) “the reserved property” includes “so much of the Barracks Square as is coloured brown” on the plan annexed to the lease and other land over which there are rights of way. The land coloured brown is the old parade ground.

The landlord’s covenants in clause 3 include the following:

“4) Not to cause or permit obstruction of any drain or pipe used in common with the Lessee for the passage of water or soil in connection with the reserved property.

5) Not to do or permit or suffer to be done in or upon the reserved property anything which may be or become a nuisance annoyance or cause damage or inconvenience to the Lessee or neighbouring owners or occupiers …

9) To pay a proportionate part of the expense of maintaining and repairing so much of the Barracks Square as is shown coloured brown on Plan Number 1 annexed…”

On the s.47. s.48 and s.21(B) point, the Court’s reference to the LVT had not included the s.47 point, however this did not preclude the LVT from considering the point. While on a referred case the LVT could go no wider than the pleaded cases, it was not limited to the expressly referred issues. The LVT had found that the claimants had provided no evidence that section 47 had been complied with. It also found the same in relation to section 48 and found that the relevant summary required by section 21B had not been provided.

However, it was clear that by the time of the LVT hearing, indeed by the County Court hearing, the landlords had provided their names and address. Mr S could be under no doubt that:

the claim was being pursued by the respondents and he had received correspondence from them as landlords. Since, therefore, the information had been furnished, under section 47(2) the amount demanded was no longer to be treated as not due.

LVT’s decision set aside
Dispensation under s.20ZA given for the reasons given as hypothetical by the LVT
Service charge payable by Mr S in respect of the works
Service charge limited to £999.32

Comment
With all due respect, I think this decision illustrates a few difficulties in the transfer of cases between County Court and the LVT/Upper Tribunal. While the LVT and Upper Tribunal focus on the s.47 issue in terms of whether the charge could be said to be due and payable at the time of their hearings – the LVT finding no, but the Upper Tribunal finding that notice of landlord’s name and address had been given by ‘at least the time of the county court hearing’ – this doesn’t deal with the issue facing the County Court, which surely has to be whether the demand was payable at the date the claim was issued. On the apparent evidence, and in view of the claim being issued in the name of the ‘Barrack Square Renovation Committee, this would not appear to be the case.

There was also no apparent evidence that the s.21(B) requirements had been met.

“21B Notice to accompany demands for service charges
(1) A demand for the payment of a service charge must be accompanied by a summary of the rights and obligations of tenants of dwellings in relation to service charges.
(2) The Secretary of State may make regulations prescribing requirements as to the form and content of such summaries of rights and obligations.
(3) A tenant may withhold payment of a service charge which has been demanded from him if subsection (1) is not complied with in relation to the demand.
(4) Where a tenant withholds a service charge under this section, any provisions of the lease relating to non-payment or late payment of service charges do not have effect in relation to the period for which he so withholds it.”

However, it may be that there was evidence that suitable details had been provided.

I’m also not sure that the issue of the landlord is quite so clear cut. While Kaye and Taylor were certainly the landlords of Mr S’s flat, the affected drain was in the freehold held by Kaye, Taylor and the Dykstras. While this area was covered by ‘the area coloured brown’ in the plan to the lease, it is not clear, without more, how the costs of the drainage works were incurred by Kaye & Taylor as landlords of Mr S’s property, given the separation of the freehold interests since the grant of Mr S’s lease. But again, they may have been further evidence on this not referred to in the transcript.

Fee hike for appeals from the LVT

Published by Francis Davey on 01/09/2010 in Leasehold and shared ownership and Uncategorized. 0 Comments

The ministry of justice has just published its response [PDF] to its consultation on fees for the Lands Tribunal — now of course the Upper Tribunal (Lands Chamber).

This is bad news if you are an appellant. The fee for seeking permission to appeal from the Lands Tribunal (i.e. if it was not given by the LVT) goes up from £40 to £200; the fee for lodging the appeal from £50 to £250 and while the hearing fee remains at 2% of the amount determined by the tribunal, the minimum and maximum fees rise from £100-£5,000 to £250-£15,000.

The reason given for this huge rise is that the the tribunals service aims to recover 50% of its costs from fees. That was achieved in 1996 when fees were last set, but the percentage contribution of fees has fallen to only 20%.

Nevertheless the rise amounts to a 400% rise in fees (albeit a smaller rise in applicable thresholds) over a period when inflation amounted to less than 50%. In real terms it is now much more expensive to bring a claim in the LVT than it was back in 1996.

It is really disappointing to see LVT users so badly served by this. Successive governments have created a regime of leasehold law of mind-numbing complexity and given most (but not all) of it to statutory tribunals which are often unable to deal with a dispute in the way a court would — for example because of lack of jurisdiction or case management powers — but expect individuals who may have little or no available cash to make use of the system without even a statutory power to make a proper award of costs (and thus permit a reasonable CFA regime).

RPT appeal fees also go up.

An ugly metaphor

Published by NL on 16/08/2010 in Housing law - All, Leasehold and shared ownership and Various (non-housing). 17 Comments Tags: , .

Strata TowerThis is the Strata Tower, less than proud winner of Building Design’s 2010 Carbuncle Cup, awarded to the ugliest new building in the country for its ‘odour of boy musk’, ‘grim stridency’ and for auditioning for a ‘James Bond title sequence in the Elephant and Castle’. (I must note that the nomination was from the Georgian Group, who surely had a hard time focussing their bile on only one contemporary building without pilasters, so congratulations to them for picking a contemporary building that for once actually is ugly.)

The Strata is a thoroughly unavoidable part of my working day and, as a flagship development for the ‘regeneration’ of the Elephant and Castle area, something of a metaphor (or more properly metonym) for what is to come. For non-London readers, the Elephant is a fairly poor, massively multi ethnic part of Southwark in Sarf Lunnon, with huge social housing estates like the Heygate – now largely decanted for re-development. For some very different accounts of the Elephant and of the Schiaparelli pink Stalinist Palace of a shopping centre see here, here and here (and I think this latter chap really doesn’t get the life of the Elephant now, filtered as it is through the loss of his youth).

The Strata consists of 408 apartments (studio, 1, 2 and 3 bed) of which 98 are ‘social housing’ – meaning available for shared ownership ‘lease’ via a housing association. The rest are market price, meaning, for instance, a rental of £355 per week for a 1 bed on the 34 floor. Oh yes, there are 43 storeys.

Which is where we come to the metaphor. A condition of the development was the ‘social housing’ proportion of 25% ‘by habitable room’. But this should not necessarily be seen as a mixed neighbourhood development in the sky. Social housing occupies the bottom 10 floors of the tower and a separate 4 floor adjunct. And, should the City people that Strata aims to entice, with its city views and short commute in Zone 1, be put off by sharing their tower with ‘social housing’ types – no problem. The first 10 floors have an entirely separate lift to that for the top 33 floors! The posh lift doesn’t stop till floor 11, while the plebs’ lift goes no higher than 10. Separate access means no uncomfortable mixing. All at the same postcode, but the vertical segregation re-invents, perfects and inverts the boulevard building’s vertical class banding of Haussmann’s Paris, but this time with class based lifts. At least the staircase remained a vaguely communal space in those intensely stratified spaces of 19th century Paris. So there we are, an upright metaphor for the model of redevelopment.

All but four of the private flats have apparently been sold, according to the Strata website. Rent away, City types – it is only a short trip through the two mile’s worth of subways to the tube stations. If you can stand the poor people, there is some excellent curried goat and Columbian coffee, nibbles and dancing available in and around the shopping centre, while it lasts.

Sorry for the lack of housing law – silly season – but as a sop, I have heard that the shared ownership leases in the Strata are on the basis of no rent component – so avoiding the Midland Heart issue and actually being leases rather than assured tenancies. There had to be some law in there somewhere.

Alas poor Commonhold…

Published by J on 16/08/2010 in Housing law - All and Leasehold and shared ownership. 1 Comment Tags: , .

Commonhold was introduced by the Commonhold and Leasehold Reform Act 2002 and, in essence, is a new way (i.e. not freehold or leasehold) for flat owners to collectively hold the building containing their flats. It’s not proved very popular, with only c.20 developments across England and Wales. By s.62, CLRA 2002, the government is empowered to give financial support to people or organisations with a view to promoting commonhold. In practice, it has done this by funding LEASE (leasehold advisory service).

That funding has just been stopped.

What is a service charge?

Published by Francis Davey on 26/07/2010 in Leasehold and shared ownership and Uncategorized. 1 Comment

In two joined appeals to the Lands Chamber of the Upper Tribunal brought by Southern Housing Group Ltd and Family Housing Association (Wales) Ltd ([2010] UKUT 237 (LC) – not yet available via the tribunal’s website or on bailii), the tribunal considered whether, on construction of the relevant leases, a payment was a service charge within the meaning of s18 of the Landlord and Tenant Act 1985. In both cases the LVT had held that the charge was a service charge (in favour of the tenant).

As readers will know, if a charge is a s18 service charge, then numerous provisions intended to protect tenants will bite, including the requirement that any such charge is reasonable (in s19 of the Act) but s18 does not cover all charges that are payable by a tenant to a landlord, it provides:

(1) In the following provisions of this Act “service charge” means an amount payable by a tenant of a dwelling as part of or in addition to the rent—
(a) which is payable, directly or indirectly, for services, repairs, maintenance or insurance or the landlord’s costs of management, and
(b) the whole or part of which varies or may vary according to the relevant costs.

In the Welsh case clause 1.1 of the tenant’s lease stated:

You agree to pay the following charges to the Association weekly in advance at the commencement and throughout the period of the tenancy subject to 1.2 below.

There then followed a table of charges, one entry of which was headed “Service Charges” against a value of £8.27. Clause 1.6 allowed the landlord to vary the service charge once every six months by giving 4 weeks written notice to the tenant.

So far then the charge appears to be one that is set by the landlord, rather than varying with costs incurred by the landlord.

In Home Group Ltd v Lewis (LRX/176/2006) the Lands Tribunal had considered a lease where the tenant’s payment for service charges could be varied in this way. In practice the level of charges was set based on the actual costs incurred, subject to consultation with the tenants, but there was no requirement in the lease that it should be set in that way.
Judge Huskinson held that such a charge was not a “service charge” within the meaning of s18. Home Group Ltd was followed by the Lands Tribunal in Chand v Calmore Area Housing Ltd (LRX/170/2007).

The landlords’ appeals were made on the ground, relying on those earlier authorities, that the charges did not vary with the relevant costs and so were not service charges.

Unfortunately for the landlord in the Welsh case, its lease also stated (at clause 1.8) that:

The Association will seek to recover through Service Charges only its actual expenditure incurred in providing services, equipment and furniture plus an administration fee. Where services are provided to a number of premises the Association may apportion the charge.

That was, in the Upper Tribunal’s view, fatal to the landlord’s case. Clause 1.8 limits what the landlord may recover as a service charge. S.18(1)(b) only requires that a service charge “may” vary with the relevant costs so the fact that the landlord need not increase the service charge if there were an increase in costs is irrelevant since it might do so. Home Group and Chand were quite different cases because in those cases the lease did not contain any particular provision as to how the rent or service charge would be calculated.

Southern Housing’s case was, if anything, worse since, in addition to a detailed explanation of how the service charge might be calculated (relative to costs incurred) the lease stated:

Our service charges are subject to the provisions of the Landlord and Tenant Act 1985 (as amended from time to time)…

Followed by some more detail about consultation and tenant’s rights. Moral: if you don’t want legislative provisions to apply to your lease – don’t say they do.

I cannot say I am entirely surprised about the outcome of the case, but it is interesting in that it emphasizes the importance of the word “may” in s18(1)(b).

You know it when you see it

Published by J on 04/07/2010 in FLW case note, Housing law - All and Leasehold and shared ownership. 0 Comments Tags: , .

What is a house? Rather like the well-known elephant test, this point consistently comes before the higher courts – and many other great thinkers – and, in Day v Hosebay Ltd; Howard De Walden Estates Ltd v Lexgorge Ltd [2010] EWCA Civ 748, the Court of Appeal had another go.

The Leasehold Reform Act 1967 entitles leaseholders of a house to enfranchise their building. As originally enacted, there was a residence requirement but the Commonhold and Leasehold Reform Act 2002 did away with this, replacing it with a requirement that the lease has been owned by the tenant for at least two years.

In order to qualify for enfranchisement, the house has to come within the definition in s.2, 1967 Act and includes “any building designed or adapted for living in” that can “reasonably” be called a house. In Tanden v Trustees of Spurgeon Homes [1982] AC 755, it had been said that this was not an exacting test; unless no reasonable person could call the property a house, then it probably was; the key indicia were likely to be the internal and external appearance. In Boss Holdings Ltd v Grosvenor West End Properties Ltd [2008] 1 WLR 289 (discussed by us here), the original purpose of the design or adaptation was also stressed. Against that, in Prospect Estates Ltd v Grosvener Estates Ltd [2008] EWCA Civ 1281 (discussed by us here) focused on actual and permitted use (lease only allowed c.11.5% of the property to be used for residential purposes). As we noted when Prospect Estates was handed down, it didn’t fit easily with Tanden and Boss Holdings.

Back to the facts: in Hosebay, the respondent was the leaseholder of three properties each of which had originally been designed as houses, but which had been adapted so as to provide self-contained accommodation for, inter alia, tourists and visitors to London (suitable for students on 3 year degree courses, according to one Lord Justice. In Lexgorge, the property had originally been built as a house but now at least half was used as office space. In each case, the county court judge held that the properties were houses within the meaning of s.2.

The appeals were dismissed. In both cases, the properties had clearly originally been designed for living in and had not subsequently been adapted away from that purpose. The current use – or intended use – was less important than the objective assessment of the original design or adaptations in question. It was, however, possible to adapt away from being a house, a point left open by Boss. The more subjective approach taken in Prospect Estates (i.e. looking at what the lease provides for and what is currently happening) was confined to a very narrow category of cases where the lease prohibited – in whole or overwhelming majority – the use of the property for residential purposes and where the actual use accorded with that prohibition.

The Court had no real enthusiasm for this result, which meant that two corporate entities could enfranchise properties that were largely used for commercial purposes. The 1967 Act had been about protecting and empowering residential occupiers and tenants, not enabling commercial parties to acquire property from each other. Parliament almost certainly did not intend such a result but, unless the 1967 Act is further amended, such a result is possible.

Size doesn’t matter

Published by J on 04/06/2010 in FLW case note, Housing law - All and Leasehold and shared ownership. 0 Comments Tags: .

Craftrule Ltd v 41-60 Albert Palace Mansions (Freehold) Ltd [2010] EWHC 1230 (Ch) is the first higher court decision on the meaning of “self-contained part of a building” in the Leasehold Reform, Housing and Urban Development Act 1993.

Qualifying long leaseholders of flats are, in general terms, entitled to collectively enfranchise (i.e. force the landlord to sell) the building containing their flats. However, not all buildings can be enfranchised. The building has to be either self contained (s.3, 1993 Act) – basically, vertically detached – or a self-contained part of a building (s.3(2), 1993 Act). That requires the self-contained part to be capable of vertical division and the services (water, electricity etc) to be provided – or capable of being provided – separately from the remainder of the building.

The main building in the present case was a mansion block containing 160 flats. It was then divided into eight sub-blocks of 20, each of which had its own path to the street. In turn, the blocks of 20 further divided into groups of 10 flats, each of which had their own front door and, to all intents and purposes, were completely separate developments; they were capable of vertical severance and had most of their services provided independently. This is, I realise, not the most beautiful prose – perhaps it’s easier to look at Google Streetview, here.

The leaseholders of one of the blocks of 20 formed the respondent company and sought to enfranchise their block of 20. The landlord argued that they could not do so, essentially on the basis that each unit of 10 was capable of being enfranchised and that it was the units of 10, not 20, that were the “self-contained part of the building.”

Both the county court judge (HHJ Madge) and the High Court Judge (Henderson J) rejected this argument; there was nothing in the 1993 Act that prevented enfranchisement merely because a smaller (or larger) unit could also be enfranchised. If the block of 20 met the statutory criteria, then that was sufficient.