The end of airspace leases?

1 April, 2020
by: Cripps Pemberton Greenish

LM Homes Ltd and others v Queen Court Freehold Company Ltd [2020] EWCA Civ 371

 

The Court of Appeal (CA) upheld the decision of the Upper Tribunal (Lands Chamber) (UT) that the nominee purchaser (P) in a collective enfranchisement claim under the Leasehold Reform, Housing and Urban Development Act 1993 (LRHUDA 1993) was entitled to acquire leases of three areas as part of their claim. Separate leases of these areas (the basement, airspace and subsoil) had been granted to third parties by a previous landlord with a view to developing them into habitable accommodation. What mattered was how the parts of the property were used, not the title under which they were held, for the purposes of meeting the definition  of “common parts” in section 101(1) of the LRHUDA 1993.

 

Lewison LJ held in his leading judgement that as all the leases allowed wholesale development, the areas would cease to be common parts if they were developed and it was therefore reasonably necessary for P to acquire the leases, in accordance with sections 2(1)(b) and 2(3) of the LRHUDA 1993, so that it could properly manage these areas going forward. It was not sufficient that the leases reserved rights of access for emergency purposes or the proper performance of the lessor’s obligations.

 

The court’s broad interpretation of common parts in the context of collective enfranchisement claims under LRHUDA 1993 provides reassurance to tenants wishing to retain control over common parts for effective future management. For landlords, this means that the ability to ring-fence parts of their property for development may be limited where tenants are able to bring a collective enfranchisement claim. The decision may be particularly off-putting to future investors looking to capture development value in similar schemes.