18 April 2013

Forsters acts for tenants in complex case relating to "serviced apartments" and qualification under the enfranchisement legislation

David Smith and Jonathan Dennis v Jafton Properties Ltd [2013]

The decision related to a block in Clerkenwell that was converted a number of years ago into loft style apartments. Two of the flats were let to Mr Smith and two to Mr Dennis. At the date of the claim the apartments were being sub-let to a company that used them as “serviced apartments” .

The Court of Appeal had already ruled in favour of the tenants that they were “Qualifying Tenants” in a decision given last year. The claim then went back to the County Court who had to decide whether the apartments were “flats” under the 1993 Act and whether the letting was commercial or residential.

The Judge held that the apartments were not constructed or adapted for use for the purposes of a dwelling and so were not “flats” for the purposes of the 1993 Act. The Judge decided that a multi-factorial approach was required. The decisive factor for him was that no formal longer term relationships had ever been created and that the booking system and general pattern of occupancy was more akin to that of an hotel.

He also held, for much the same reason, that the apartments were not occupied for residential purposes. This is because the serviced apartment provider provides places to stay similar to rooms and flats provided by hotels and aparthotels, and he felt that this sort of occupation was not “residential”. To be residential, he decided that occupation need not be as some kind of home, but must amount to more than simply staying there for a short time.

The test in this case was different from Hosebay since it concerned a different Act but it has moved, very much in line with Hosebay, towards a test of “use”. It also appears that the test applies around the time of the notice up to the date of the actual hearing rather than strictly at the date of the claim. There are obvious problems with a test that concerns how a property is being used. Clear evidence will be needed if a claim is challenged. If the flat is being sub-let at the date of the claim the tenant will have to be ready to provide some form of tenancy agreement with details of its duration. Even then, it is difficult to see how a landlord will be able to decide whether there is a sufficient degree of permanence for the “flat” to constitute a dwelling. At the end of the day, if a claim is successfully challenged, a tenant need only change the status of their sub-tenant in order to qualify.

This is obviously a landmark decision that will have wide ramifications for any individuals or companies that own "flats" which are sub-let to serviced apartment providers and who are considering enfranchisement.

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