Case Study

Residential Enfranchisement – The Gift That Keeps on Giving (or taking – depending on the judgment!)

14th December 2018

Residential Enfranchisement – The Gift That Keeps on Giving (or taking – depending on the judgment!)

It has been another busy year for the judiciary with regard to residential enfranchisement – where tenants are seeking to acquire their freeholds or to extend their lease beyond 90 years from landlords. And some of the controversial decisions that have taken place over the year, have fuelled the case for law reform.

Case 1: a tenant sought to acquire the freehold interest in three London townhouses as permitted to do so under the LRHUDA 1993. The freeholder could not prevent the transfer of the houses, but an issue arose as to whether the tenant also had the right to continue to use a garden with the houses. As a tenant, they only had had a revocable licence to use the space in common with others, however remarkably the court decided that the tenant should have an irrevocable right to use the garden indefinitely. This is perhaps a salutary lesson for landlords and freeholders who may licence residential tenants to use gardens or perhaps parking spaces.

Case 2: a landlord appealed a decision that it had unreasonably refused consent to its tenant applying for planning permission for a change of use of two floors. The background was that the tenant was keen to convert the first and second floors of a building to create residential flats and therefore enhance the prospects of acquiring the freehold to the whole building. The property was part of a block where the lease permitted mixed use but the tenant needed to apply to the landlord for consent before they submitted any planning application. The landlord refused to grant permission because it recognised that such a change of use would enhance the tenant’s right to acquire the freehold and that it would undermine the management of its wider estate. The landlord sought to argue that the reason the tenant had to seek consent, was to give the landlord some control and to protect it from damage to its reversionary interest. However the court held that the need for the tenant to obtain consent was not designed to enable the landlord to limit a permitted use of the building, and that by refusing consent the landlord had sought to achieve a collateral purpose of imposing a restriction on use that was not there.

Case 3: the tenants appealed a decision that the long lease of their maisonette did not extend to the subsoil beneath it. The maisonette in question was part of a house which had been divided into two separate residential units in 1992. The tenants owned the ground floor and cellar under a lease which they had extended relying on their right to a lease extension for 90 years under the LRHUDA 1993. They wanted to create a habitable room out of the cellar and needed to dig down into the subsoil to create more headspace. They obtained planning permission but the freeholder would not allow the works to start so the tenant sought a declaration from the court that the subsoil was part of their demise. The Court decided that on its proper construction, a long lease of a maisonette did not demise the subsoil to the tenants. The tenant’s appeal was dismissed.

As is apparent from these case extracts, the law in this area is complex and ever changing. Specialist advice should always be sought by either landlords or tenants to avoid unintended consequences.

For more information on the issues raised in this article contact Nyree Applegarth

 

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