What is a “house” is a matter of law and not a matter of particular physical characteristics
This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.
Summary
Jewelcraft Ltd v Pressland [29 October 2015] is an important Court of Appeal decision on what is a “house” for the purposes of enfranchisement under the Leasehold Reform Act 1967 ("Act"). The decision applied the reasoning of the House of Lords in Tandon and the Supreme Court in Hosebay. Shops with accommodation above are, as a matter of law, reasonably to be described as houses, provided that a material part of the building is designed or adapted for and used for residential purposes on the relevant date. Subject to certain exceptions such as where the residential conversion is not genuine or substantial, distinction should not be drawn between similar types of building solely on the basis of their external appearance or their internal layout.
Facts
The premises comprised a ground floor purpose-built shop with residential accommodation on the floor above. As originally built, the ground floor shop was not self-contained and could be accessed via an internal staircase leading to the first floor or from a kitchen and scullery located at the rear of the ground floor.
In about 1970 the internal layout of the premises was changed. The internal staircase disappeared and access to what then became a self-contained first floor flat was provided by a new external staircase located in the back yard.
A notice to enfranchise was served in 2010. At first instance, it was held that the premises did not constitute a house within section 2(1) so that the tenant was not entitled to enfranchise. The tenant appealed on the basis of an error of law and that the decision did not accord with the decisions of the House of Lords in Tandon v Trustees of Spurgeon Homes [1982] and the Supreme Court in Hosebay Ltd v Day and Lexgorge v Howard de Walden Estate [2012].
Law
Section 2(1) of the Act states that:
"(1) "house" includes 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; and—
(a) where a building is divided horizontally, the flats or other units into which it is so divided are not separate "houses", though the building as a whole may be; and
(b) where a building is divided vertically the building as a whole is not a "house" though any of the units into which it is divided may be."
Analysis
The Act was passed to confer on the tenants of houses held on a long lease the right to acquire the freehold or an extended lease. The use of part of the building as a shop or for other commercial purposes is not a bar in itself to the property being a "house" within section 2(1). Since there is no longer a residence requirement, the right to enfranchise extends to the tenants of buildings which qualify as houses even though not resided in by the tenant and, therefore, potentially at least to houses used exclusively for commercial purposes.
It was not Parliament's intention to exclude the right of enfranchisement in the case of buildings which were designed or adapted in part ("not solely") for non-residential use or which (if wholly residential in character) were internally sub-divided into flats. This brings within the Act’s scope various premises which do not obviously conform to the every-day description and understanding of a house.
The interpretation and application of the “reasonably so called” condition highlighted in bold in the definition above will often be the critical limiting factor in determining whether the Act applies. The condition requires some kind of objective evaluation by the court and key to this is the identification of the criteria on which this exercise should be based.
Decision
The Court allowed the tenant’s appeal. The Court did not accept that the removal of the internal staircase and the construction of an external means of access to the first floor flat had the effect of taking the building outside the scope of what can reasonably be called a house. If a purpose-built shop with ancillary accommodation falls within the definition of a house for the policy reasons identified in the Tandon case, the Court could not see how that position can be materially changed by the works to the staircase. The flat remained accessible by means of a staircase situated within the let area.
The endorsement of the Tandon decision by the Supreme Court in Hosebay as one turning on user means that claims to enfranchise buildings comprising shops with accommodation above should not be dismissed for non-compliance with the reasonably so called condition in section 2(1), either because the building is, as a matter of ordinary speech, best described as a shop, or because the accommodation is not linked internally to the remainder of the building.
Tandon establishes that shops with accommodation above are, as a matter of law, reasonably to be described as houses provided that a material part of the building is designed or adapted for and used for residential purposes on the relevant date (i.e. the date of the notice to enfranchise). County Court judges will be adept at dismissing cases where the conversion of part to residential user is not genuine or substantial, or where the premises are not of the type which, as a matter of policy, Parliament intended to fall within the Act. A block of offices with a caretaker's flat would be such a case. However, apart from those cases, there ought to be no warrant from now on for distinguishing between similar types of building solely on the basis of their external appearance or their internal layout.
