The recent landmark decision of the Supreme Court in Howard de Walden Estates Limited v. Lexgorge Limited 1 has ended years of uncertainty about what “a house” is, in the context of leasehold enfranchisement. The Court decided that premises which were designed as a house but which at the time of the claim were used wholly as offices, were not “a house reasonably so called”. Speechly Bircham represented the successful landlord.
Under the Leasehold Reform Act 1967, tenants under long leases of houses are entitled to compulsorily acquire the freehold, for a premium. A “house” is defined as premises designed or adapted for living in, and reasonably called a house. Until 2002, in order to qualify, a tenant had to have occupied the property as his only or main residence for three years. In 2002 Parliament abolished the residency test, allowing tenants of second homes and also corporate tenants to enfranchise.
Ever since, the enfranchisement world has been in turmoil as tenants tried to enfranchise premises which were once houses but which had switched to commercial use. The Courts reluctantly accepted most of these claims, taking the view that an unintended consequence of repealing the residency test was that commercial premises could be enfranchised.
In the Lexgorge case, premises built in the 18th century as a house, had for many years been used as offices. The Supreme Court at the same time heard an appeal (Day v. Hosebay) relating to three properties which were originally houses but which had been converted into a self-catering hotel. In both cases, the Court of Appeal had concluded that these were houses within the meaning of the Act. The Supreme Court disagreed, concluding that the Act “is a statute about houses, not commercial buildings …about houses as places to live in, not about houses as pieces of architecture...” In their view, none of the buildings involved in these appeals could reasonably be called a house.
We now know that wholly or predominantly commercial premises are not “a house”. However, it is disappointing that the Supreme Court have passed up the opportunity to lay down a definitive test as to what is or is not a house within the scope of the 1967 Act, so that there will inevitably be borderline cases troubling the courts in future years.