In its decision allowing the landlord's appeals from the "reluctant "decisions of the Court of Appeal that buildings which were originally houses but had subsequently been adapted wholly to other uses could be enfranchised under the Leasehold Reform Act 1967, the Court has firmly rejected the notion of "once a house, always a house", no matter what the use of the property at the time of the claim.
"The judgement is striking for its clarity - there is no doubt or hesitation in it as it resists, both on policy and legal grounds, the notion that buildings having the current physical character of offices or other business premises can still be houses in law so as to enable the tenant to buy the freehold," explains John Stephenson.
The Court's unanimous judgement, delivered by Lord Carnwath and supported without addition or qualification by the other six members of the panel, including the outgoing Supreme Court President Lord Phillips, overturned a Court of Appeal led by the then Master of the Rolls Lord Neuberger, who has, subsequently to the Hosebay hearing in the Supreme Court, become its President.
The decision involved two cases, Day v Hosebay, where the houses in Rosary Gardens SW7 had been converted into self-contained flatlets being let for very short periods, what the judge in the lower court called a 'self-catering hotel', and Howard de Walden v Lexgorge, where the building in Queen Anne Street had again started life as a dwelling house, but had over the years been converted to use as offices.
"The judgement does not criticise the judgements in earlier landmark cases on the issue, such as those in Lake, Tandon, Boss Holdings and Prospect Estates, but derives most help from the judgment of Lord Denning in a 1965 slum clearance case known as Ashridge. Denning's definition of a house in that case as 'a building which is constructed or adapted for use as, or for the purposes of, a dwelling', words close to the definition of a house in the 1967 Act, and followed by Denning himself in the Lake case, were approved in the Hosebay/Lexgorge case as the proper basis of assessment of the building's nature. Lawyers addressing this issue must now consider the present identity or function of the building, by reference to its current physical character, whether derived from original design or subsequent adaptation," said John Stephenson.
The consequences of the Hosebay/Lexgorge judgement in short are that landlords on several of the main London estates, notably in Mayfair and in the Harley Street districts, will be breathing a huge sigh of relief, as a finding for the tenants would have rendered many of those very valuable converted offices and consulting rooms liable to the loss of the freehold to the tenants under the 1967 Act.
For professionals, the first question to ask when assessing whether a building qualifies for a claim to be made for the freehold will be, not what the building looks like, not its use when its was built, or even when the lease was granted, but rather to what extent the building now functions, or is adapted to function, as a dwelling.
"Can such a simple word as 'house' ever have been subject to such judicial scrutiny? The line has now been finally and decisively drawn."