1 November 2019

Forsters Property Litigation Team succeed in the Court of Appeal

What is a Flat?

The Court of Appeal have today given judgment in an appeal concerning a block of residential flats in Park Lane. The Judgment, given by Lord Justice Lewison clarifies the definition of a "flat" within Section 101 of the 1993 Act. A separate set of premises will only qualify as a "flat" if at some stage in its history it has reached a stage of construction to be suitable for use for the purposes of a dwelling. Where premises has lost its original identity due to redevelopment, it will only re-qualify as a "flat" if it has reached a stage of construction which renders it suitable for use for the purposes of a dwelling.

The appeal concerned a collective enfranchisement claim relating to a large block of flats on Park Lane. One of the requirements of a successful claim is that the notice must be given by a number of qualifying tenants that is not less than half of the flats in the building. The head landlord disputed the claim on a number of grounds.

The issues raised included:

  1. Whether three offshore tenants had properly authorised their solicitor to sign the Section 13 Notice
  2. Whether three of the leaseholders were disqualified because they held their flats under two leases with two different landlords (a situation created by the landlord)
  3. Whether premises on the sixth and seventh floors that had been constructed to the stage of being uninhabitable shells were "flats" within the meaning of Section 101
  4. In his High Court Judgment Mr Justice Fancourt had ruled that the Initial Notice was invalid. He accepted that one of the off-shore leaseholders had not given proper authority. He also accepted that three of the participating tenants were disqualified. On the issue of the "flats" he held that the shell premises on the 6th and 7ths floors were "flats". The outcome of his judgment was that there were 30 rather than 26 flats in the building. Since the number of participating tenants had been reduced to 13 (less than 50% of the total number of qualifying tenants), the claim failed.

    The leaseholders were given leave to appeal on the issue of the definition of a "Flat" under Section 101. The head landlord cross appealed seeking to overturn the Judge's decision in relation to the authority given by one of the off-shore leaseholders.

    The main issue turned on the state of the sixth and seventh floors and whether these areas constituted "flats" within the meaning of Section 101. The leases of these two floors had been acquired by a company related to the head lessor and permissions had been obtained for their alteration and extension. Before 2008 there was a single flat on each of the 6th and 7th floors. Construction work commenced in 2008 and completed in 2013 leaving the new premises as a structural shell. In December 2014 the head landlord became aware that the leaseholders were planning to collectively enfranchise and they carried out further work to separate the two intended flats on each floor with large flat panel doors designed to allow the passage of building materials. During this time the existing under leases were surrendered and four new leases were granted, two on each floor. At the relevant date the structural works had been completed with raised floorboards and suspended ceilings but there were no internal walls, pipes, cables or other fit out items in place. The units were therefore uninhabitable shells but had been demised under separate long leases to be used for residential purposes.

    "Flat" is defined by Section 101(1) of the Act as meaning a separate set of premises (whether or not on the same floor) which forms part of a building and which is constructed or adapted for use for the purposes of a dwelling. "Dwelling" means any building or part of a building occupied or intended to be occupied as a separate dwelling. Lord Justice Lewison who gave the leading judgment considered each question separately. On the issue of whether there were separate premises he said it was a physical test and since each area was separated by a dividing wall containing panel doors that were kept locked this amounted to two separate premises on each floor. On the issue of a dwelling, he referred to Mr Justice Fancourt's finding that the two original flats on the sixth and seventh floors had lost their residential identity due to the alterations. The four new units were therefore new premises in the course of construction and the test was whether these new premises were suitable for use for the purposes of a dwelling. As Mr Justice Fancourt had also found at first instance that the physical condition of the units precluded their use for residential purposes, Lord Justice Lewison found the units were not "flats". A separate set of premises will consequently only qualify as a "flat" if at some stage in its history it has reached a stage of construction to be suitable for use for the purposes of a dwelling.

    It followed from these conclusions that at the relevant date the building contained 26 flats rather than 30 flats. The final outcome of the case therefore depended on whether one of the off-shore leaseholders had given proper authority, the subject of K Group's cross appeal. The Court of Appeal dismissed the landlord's cross appeal. Since the initial notice had been authorised by 13 qualifying tenants, i.e. at least 50%, the Court of Appeal held it was validly served.

Our Insights

"The team at Forsters are second to none in the quality of the advice and the expert drafting of agreements and contracts. Forsters has a true team, they understand that to succeed all must contribute at the highest level and like all great teams they have their star performers."
The Legal 500 UK, 2022