27 May, 2015
by: Cripps Pemberton Greenish

In the context of collective enfranchisement claims made under the Leasehold Reform, Housing and Urban Development Act 1993 (“the 1993 Act”), the extent to which the tenants may acquire the caretaker’s flat within their building has been the subject of developing case law over recent years. A question to be clarified was whether the definition of common parts could include a caretaker’s flat.

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The 1993 Act entitles the tenants to acquire the freehold of the whole of the building which contains their flats. This will include the common parts which are available for shared used or benefit. The landlord may request 999 year leasebacks of certain units. Mandatory leasebacks are to be made in respect of secure tenancies and lettings by housing associations. Generally the most commonly granted non–mandatory leasebacks are of premises which are not let to qualifying tenants at the date of the claim. These will include flats let on short term tenancies, lettings of commercial units or flats which are in hand to the freeholder. But what about a caretaker’s flat?

Common parts
It was held by the Court of Appeal in the case of Earl Cadogan v Panagopoulos [2010] EWCA Civ 1259 that a flat which accommodates a caretaker who services the building at the date of the claim can be treated as a common part. Whilst the common benefit was primarily in the services of the caretaker as an individual rather than in the use of the flat itself, section 101(1) of the 1993 Act defines common parts as including any common facilities within them. The provision of a resident caretaker with a flat for that caretaker’s use was regarded as a facility within that definition.

Obligation to provide resident caretaker
In Panagopoulos some of the leases contained an obligation on the part of the landlord to provide a resident caretaker in the building and so the nominee purchaser acquiring the freehold interest needed to acquire the caretaker’s flat in order to fulfil the obligations under those leases. However although the case did not turn on the point, the judgment considered that it was not necessary for there to be a legal obligation to provide a resident caretaker in order for the flat to be regarded as a common facility within the definition of the 1993 Act.

Use test rather than obligation
In the recent case of Merie Bin Mahfouz Company (UK) Ltd v Barrie House (Freehold) Ltd [2014] UKUT 390 (LC) a decision of the Upper Tribunal confirms this view. The landlord claimed a leaseback of the caretaker’s flat which was occupied by the caretaker at the date of the claim. Following Panagopoulos it was deemed to be a common part. In this case there was no obligation on the part of the landlord to any of the tenants to provide a resident caretaker. However the Upper Tribunal rejected any attempt to limit the natural definition of common parts by requiring there to be an obligation on the part of the landlord to provide a resident caretaker. The Tribunal made it clear that it is not a prerequisite of a common part that the landlord is legally committed to providing or retaining it.

Thus the test of whether the caretaker’s flat is a common part is based on actual use rather than on the obligation of the landlord in relation to it. The court favours a generous understanding of the concept of common parts and accepts that a caretaker’s flat is a common part which is necessary for the tenants to acquire for the proper management and maintenance of the building.

The judgments support the principle that the 1993 Act was passed for the benefit of tenants to acquire the whole of the building which contains their flats including the common parts and that it is the duty of the courts to confer on tenants those advantages which Parliament intended them to enjoy.

The landlord in Barrie House is seeking leave to appeal the decision to the Court of Appeal on two grounds. The first is that the test of what makes a caretaker’s flat a common part should be based on legal obligation rather than actual use. The second is that the correct date for determining the landlord’s entitlement to a leaseback is the date of the acquisition of the freehold rather than the date of the claim. If successful, this latter point would allow a landlord (assuming it was able to do so) to put the caretaker’s flat to some other use, not for the benefit of the tenants and so beyond reach but eligible for a leaseback. As always, watch this space….