Many readers will be familiar with the special architectural character of Hampstead Garden Suburb, the plan and design of which drew on the experience of those involved with establishing the first garden city at Letchworth.  With garden cities again in the headlines, a case involving the Hampstead Garden Suburb Trust (“the Trust”) is of interest.

When the Suburb was first developed, the new homes were sold on long leases.  These contained covenants allowing the Suburb’s freeholder to control alterations and so preserve the external appearance of the houses and maintain the special quality of the overall look and feel of the Suburb with its gardens and open spaces.

The Leasehold Reform Act 1967 gave long leaseholders the right to buy their freeholds, that is to enfranchise.  On doing so, they become subject to a Scheme of Management (“the Scheme”) which was made for the purpose of “ensuring the maintenance and preservation of the character and amenities of the Hampsted Garden Suburb”.  Amongst its provisions are those for regulating the use, appearance and maintenance of enfranchised property.  So, in essence, leasehold and freehold owners are subject to the same restrictions with the wider benefits they bring.

Whilst many owners have exercised their right to enfranchise, there are still some houses owned leasehold.  The recent case of Shebelle Enterprises Limited vs. The Hampstead Garden Suburb Trust Limited has highlighted a potential conflict which the Trust finds itself facing when dealing with matters concerning a freehold house which is next to a leasehold one.  The case has looked at the obligations of the Trust acting lawfully in its duties under the Scheme in tandem with its responsibility as a landlord bound by a covenant to a leaseholder for quiet enjoyment.

The dispute between Shebelle Enterprises and the Trust arose because the owners of a freehold property, who wished to undertake substantial building works, required the Trust’s consent under the Scheme.  As leaseholders, Shebelle Enterprises were concerned that the proposed works would have a detrimental affect on their property and sought an injunction against the Trust granting its consent to the works, unless and until there was evidence to properly satisfy them that no such damage would be caused.  Shebelle Enterprises argued that the Trust granting consent to the works under the Scheme would breach the Trust’s covenant to them for quiet enjoyment.

The case has reached the Court of Appeal, where the following points were key to the judgment, given in favour of the Trust:

  • the Trust has a public function, albeit it is not a public body and its function is limited in geographic effect, and that function is exercised for the public good – to maintain and preserve the character and amenities of the Suburb;
  • in exercising its duties and obligations, the Trust had acted in a proper way and in good faith, and finding that it should give the freeholder the consent requested it was not, in doing so, in breach of its covenant for quiet enjoyment to its leaseholder tenant;
  • in looking at the apparent conflict and the fact that the Scheme arose in time many years after the covenant for quiet enjoyment was first given, it was decided that the proper interpretation of the covenant required the court to look at what reasonable parties to the lease should be taken to have intended by the words of the covenant, which was that it could not be applied to prevent or fetter the proper and bona fide exercise by the Trust of its powers under the Scheme.

As part of an effective estate management strategy, many landowners and developers put arrangements in place which give them effective control over householders, to ensure that the special character of a newly developed place can be protected for the long-term benefit of all its residents.  Some householders feel that their freedom to do with their houses as they will, as outright freeholders, is curtailed.  But in many instances there will be a premium added to their house’s value because of the special way in which the wider area is maintained and that may bring with it some reasonable restrictions and protections for the wider public good.