Hosebay Ltd v Day and another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lloyd |
| Judgment Date | 01 July 2010 |
| Neutral Citation | [2010] EWCA Civ 748 |
| Court | Court of Appeal (Civil Division) |
| Date | 01 July 2010 |
| Docket Number | Case No: B5/2009/2524 CHY08491 CHY08074 |
[2010] EWCA Civ 748
IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CENTRAL LONDON CIVIL JUSTICE CENTRE
Before: MASTER OF THE ROLLS
Lord Justice Lloyd
and
Lord Justice Moore-Bick
His Honour Judge Dight
Her Honour Judge Hazel Marshall QC
Case No: B5/2009/2524
B5/2010/0555
CHY08491
CHY08074
Edwin Johnson QC (instructed by Pemberton Greenish) for the Appellants Hugo Benjamin Day and Lady Hilary Maureen Greenslade Day
Katharine Holland QC (instructed by Speechly Bircham LLP) for the Appellant Howard de Walden Estates
Anthony Radevsky (instructed by Boodle Hatfield and Wallace LLP) for the Respondents
Hearing dates: 14 June 2010
Approved Judgment
Lord Neuberger MR:
These two appeals concern the meaning and effect of section 2(1) of the Leasehold Reform Act 1967 (“the 1967 Act”). In particular, they require one to focus on the question of what constitutes a “house” for the purpose of that section.
The statutory background
Section 1 of the 1967 Act (“section 1”) enables certain tenants of houses under long leases to serve notice on their landlords to enfranchise – i.e. to acquire their freeholds from their landlords —“on fair terms” (or to acquire extended leases). As originally enacted, its application was limited to relatively low value houses, let on low rents, to tenants who, at the date of their notice, resided there, and had resided there for at least five of the preceding ten years, as their only or main residence.
Over the succeeding thirty-five years, the ambit of section 1 has been successively extended by statutory amendment, as is reflected by the rather bewildering appearance of section 1 in its current form, supplemented by sections 1A, 1AA and 1B. The value limitation was raised, and has now been removed altogether in the majority of cases. The low rent limitation was raised, and has now, in the majority of cases, been removed altogether. The residence requirement on the tenant was initially reduced, and has now, in the majority of cases, been removed altogether and replaced with a requirement of two years of ownership of the lease.
The consequence of this last amendment, effected by section 138 of the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”), is that, not only can an individual tenant enfranchise even if he or she has never lived in the house, but (a) a corporate tenant can enfranchise (which it could not have done previously, as a company cannot reside), and (b) a tenant who holds a number, even a large number, of houses on long leases can simultaneously enfranchise all of them – see (albeit in relation to a statute relating to collective enfranchisement of leases of flats) Howard de Walden Estates Ltd v Aggio [2009] 1 AC 39. The disadvantageous consequences for landlords of this amendment were apparently mitigated by a new subsection (1B) introduced into section 1 by the 2002 Act, which excluded a tenant who had the protection of Part II of the Landlord Tenant Act 1954 (“the 1954 Act”) from being able to enfranchise. However, as the facts of one of the instant cases show, that is in practice rarely of much value to landlords.
Section 1, and sections 1A, 1AA and 1B, are thus concerned with identifying the purpose and ambit of the 1967 Act, and most of the ensuing sections effectively expand on some of the terms in those sections, or set out the procedural aspects.
In particular for present purposes, section 2 is concerned with the definition of “house” (as only a tenant of a “house” can enfranchise under the 1967 Act) and of “house and premises” (as the enfranchisement right extends to “premises”, as defined, if let with the house). Unlike section 1, which has been significantly amended on eight occasions, section 2 is in precisely the same form as it was when first enacted.
Section 2(1) of the 1967 Act (“section 2(1)”) provides as follows:
“… 'house' includes any building designed or adapted for living in and reasonably so called, notwithstanding that the building is not structurally detached, or was or is not solely designed or adapted for living in, or is divided horizontally into flats or maisonettes: and—
a) where a building is divided horizontally, the flats or other units into which it is so divided are not separate 'houses' although the building as a whole may be: and
b) where a building is divided vertically the building as a whole is not a 'house' though any of the units into which it is divided may be.”
Section 3 explains what is meant by a “long tenancy”, and sections 4 and 4A are concerned with the meaning of “low rent”, in the circumstances when it still applies. Section 5 has “General provisions as to claims to enfranchisement or extension”, and it brings in Schedule 1, which contains the procedures for enfranchisement, and deals with the tenant's notice. Sections 6, 6A and 7 apply to cases where the tenancy is held on trust or the tenant has died. Section 8 contains the “Obligation to enfranchise” on a landlord on whom a notice is served, and section 9 deals with the “Purchase price and costs of enfranchisement …”. It is unnecessary to refer to any of the other thirty-two sections or the other six schedules of the 1967 Act for present purposes.
The facts relating to the two appeals
Day v Hosebay Ltd concerns three properties in a terrace of buildings, 29, 31, and 39 Rosary Gardens (“29”, “31”, and “39” respectively), which were originally constructed, and first occupied, as large houses, in South Kensington, London SW7. Each of “the three properties”, as I will refer to them, was let on a long lease, which described the demised premises as “the messuage or dwellinghouse”. 29 and 39 were each let by a lease granted in 1966 for some 55 years, and 31 by a lease granted in 1971 for some 60 years. The leases of 29 and 39 stipulated that the demised premises be used only “as 16 residential flatlets”, with a resident caretaker, and that the external appearance of the demised premises be that of “a private dwellinghouse”. The lease of 31 restricted its use to that of “a single family residence” or “a high class furnished property” for up to 20 occupiers, with a resident caretaker.
Hosebay Ltd (a company owned by a Mr and Mrs Morris) acquired all three leases (“the three leases”) in 1996, and remains the tenant under each of the three leases. It served notices on its landlords under section 8 of the 1967 Act to acquire the freeholds of the three properties. Its claim to be entitled to acquire the freeholds was challenged by the landlords, and the issue came before HH Judge Marshall QC.
The three properties are being used to provide what the judge described in the course of her full and clear judgment as “short term accommodation for tourists and other visitors to London”. The judge, who made a full inspection of 29, 31, and 39, said that each of the three properties has been “fully adapted to provide individual rooms for letting out”, with the exception of two rooms in 31, one of which is used for office and reception purposes, and the other of which is used for storage. The judge thought that the most apt description of the great majority of each of the other rooms was “room with self-catering facilities”. Each such room has between one and four beds, a similar number of dining chairs, a table, a television, a telephone, limited storage and clothes-hanging space, and no easy chairs. Each such room also has, in a confined space, a sink, cooking facilities and cupboards which had cooking and eating equipment, and it also has a small “wet room” with shower, basin and WC. Fresh bed linen and room cleaning, but no other services, are provided to those staying in the rooms.
There were two main issues before the judge. The first was whether 29, 31 and 39 was in each case a “house” within section 2(1). The second issue was whether Hosebay was excluded from enfranchising each of the three properties by section 1(1B).
On the first issue, the judge rejected the landlords' case that each of the three properties was not a “house”; that case was advanced on two grounds, namely that each of the three properties (i) was not “designed or adapted for living in” and (ii) was not a “house reasonably so called”, in the light of the use to which it was currently put. With the judge's permission, the landlords appeal on both points.
On the second issue, the judge concluded that Hosebay did not enjoy the protection of the 1954 Act, because, even though the three properties were being occupied for the purpose of a business (namely provision of short term serviced accommodation), Hosebay had lawfully sublet each of them to an associated company, Hindmill Ltd, and it was Hindmill that carried on the business. Hosebay therefore did not occupy the three properties, or any part of them, for the purpose of a business which it carried on, and, as the 1954 Act only applies to premises which are occupied by the tenant for the purpose of its business, it did not apply to the three leases. Although one might characterise the arrangement between Hosebay and Hindmill as rather artificial, the judge concluded that it was genuine, and therefore the landlords failed on the second main issue as well. The landlords (realistically in my view) do not appeal on that issue.
Lexgorge Ltd v Howard de Walden Estates Ltd concerns 48 Queen Anne Street, in Marylebone, London W1 (“the property”). It was originally built, in about 1760, as a house (comprising five floors, including a basement), in a terrace of substantial houses, and for many years it was occupied for that purpose. It was the subject of...
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