When faced with a collective enfranchisement claim by its leaseholders pursuant to the Leasehold Reform, Housing and Urban Development Act 1993, a freeholder is entitled to be granted a lease back of certain units in the premises provided specified criteria are met, such as a unit used for commercial purposes or a flat not let to a qualifying tenant.

The Upper Tribunal’s recent decision in the case of Merie Bin Mahfouz Company (UK) Ltd v Barrie House (Freehold) Ltd dealt principally with whether a freeholder was entitled to claim leasebacks of units within a building which did not actually exist at the date when the leaseholders’ formal notice commencing the claim was served, and which included common parts.

THE CASE

The freeholder was seeking leasebacks of three units known as flat 1A, the basement office and the porter’s flat.

The freeholder did not start construction works for flat 1A until after service of the leaseholders’ notice and the works were not completed until after service of the freeholder’s counter notice. The unit’s construction incorporated the building common parts over which flat tenants had access rights. Works to construct the basement office, which was also created within part of the common parts of the building, started even later, after service of the freeholder’s counter notice.

The Upper Tribunal, upheld the LVT’s earlier decision that a freeholder is not entitled to a leaseback of a unit which was or was included within common parts at the commencement of the claim. It also agreed with the LVT that for there to be a valid claim for a leaseback a unit must actually exist so that a leasehold interest can properly be created in when the leaseholders’ notice is served.

As both units were formed within the building common parts and so did not exist at the commencement of the claim, the Upper Tribunal agreed with the earlier decision of the LVT and rejected the freeholder’s claim for a leaseback of those units.

That just left the porter’s flat and here the Upper Tribunal held that a porter’s flat was a common part and therefore could not be comprised in a leaseback .

CONCLUSION

This decision has helped clarify a freeholder’s entitlement to claim a leaseback and that the courts will not grant a freeholder a leaseback of a unit which it has created out of the common parts between the commencement and completion of the leaseholders’ claim. For tenants contemplating a collective enfranchisement claim, it is clear that their rights to acquire the freehold of the building containing their flats includes the common parts.