10 October 2012

Landed Estates succeed in Supreme Court

Enfranchisement practitioners have been waiting with bated breath for the outcome of two appeals in the Supreme Court known collectively as “Hosebay”. The appeals, brought by two central London Landed Estates, were challenging a Court of Appeal decision where it had been decided that a property used wholly for commercial purposes could qualify as a “house” for the purposes of enfranchisement. In a decision that is sure to upset many tenants the Supreme Court unanimously allowed both appeals.

The appeals arose as a result of the removal of the residence test on enfranchisement claims in 2003. Before this, the question of whether a building was a “house” was a relatively straightforward one because the tenant had to live in the building. Since 2003 claims have been made in respect of buildings in a variety of uses. Lord Carnwath, who gave the leading judgment, said that parliament obviously did not intend to extend the scope of the legislation so that it gave tenants statutory rights in relation to buildings that were used purely for non-residential purposes.

The test of whether a building is a “house” under the 1967 Act contains two separate questions. Firstly whether the building is “designed or adapted for living in” and, secondly, whether the building is “a house reasonably so called”.

The Supreme Court felt that both parts of the test have to be read in the context of the house being a place to live rather than a piece of architecture or part of a street scene. The first element therefore concerned the identity or function of the building based on its physical characteristics and the second concerned the primary meaning of a “house” as a single residence.

On this basis the Justices of the Supreme Court concluded that the buildings in the Day v Hosebay appeal (which were houses that had been converted into flatlets for use as short term accommodation for students or visitors to London) could not reasonably be called houses. The fact that the buildings might look like houses or might be referred to as houses was not, in their view, sufficient to displace the fact that the use was entirely commercial. On the earlier con-joined appeal ofHoward de Walden v Lexgeorge that concerned a town house in Marylebone sub-let as offices to a firm of solicitors the Supreme Court only had to consider the second part of the test as it had been conceded in Lexgeorge that the building was designed or adapted for living in. Although in previous decisions there was reference to a residential maisonette on the top two floors of the building the judgment refers to the building as being wholly used for offices. In view of the fact that the building was in commercial use they decided that it could not be a “house reasonably so called".

It appears that for policy reasons the test has now moved away from the physical characteristics of the building and towards its actual use. The key problem with this is that it is the use of the building at the date of service of the notice that must be considered. It is not clear what the test should be where the use of part or all of the building is changed before the notice is served or if the building is empty. Whether a tenant can enfranchise could now depend on the restrictions contained in the lease and whether the tenant can put itself in a position where it will be able to enfranchise by vacating or altering the use of the building. It certainly seems that this judgment may not be the final word on “houses” that everyone had hoped for.


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