When is a house not a house? When it’s an office.

25 October, 2012

To great excitement in the world of leasehold enfranchisement, the Supreme Court has released its verdict on the definition of a house in the cases of Day and another v Hosebay Limited and Howard de Walden Estates Limited v Lexgorge Limited .

The tenants in both cases held long leases of terraced buildings in London which had originally been built and designed as houses, but which had both come to be entirely used for commercial purposes. By making use of the removal in 2002 of the requirement that tenants had to be resident in order to purchase the freehold of their buildings under the Leasehold Reform Act 1967, both tenants served notice on their landlord under the 1967 Act. The Court of Appeal held (with some reluctance) that the claims should succeed, whilst acknowledging that this flew in the face of the original intention behind the 1967 Act.

The Supreme Court, no doubt much to the relief of landlords, held that the buildings were not houses “reasonably so called”, and that the use of a property, rather than its appearance, should be the major factor when deciding whether or not this definition was met.

The judgement is likely to help preserve the great landed estates, but it does leave behind some intriguing issues. First, the court did not have to decide whether the buildings were “designed or adapted for living in” (the other aspect of the “house” definition), so this remains open for argument. Secondly, the decision did not give any guidance as to what proportion of commercial use in a mixed use building would exclude the right to enfranchise, or how the court would assess a building which was not being used at all but which was last used for commercial purposes.

Whilst landlords will be happier now that the Supreme Court has tightened this test, there are still opportunities for tenants so it seems unlikely that we have seen the last of this issue.