L M Homes Ltd v Queen Court Freehold Company Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lewison,Lord Justice Leggatt,Lord Justice Lindblom |
| Judgment Date | 13 March 2020 |
| Neutral Citation | [2020] EWCA Civ 371 |
| Docket Number | Case No: C3/2019/0394 |
| Court | Court of Appeal (Civil Division) |
| Date | 13 March 2020 |
[2020] EWCA Civ 371
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL (LANDS CHAMBER)
Mr Martin Rodger QC Deputy Chamber President
LRA/16/2018
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Lewison
Lord Justice Lindblom
and
Lord Justice Leggatt
Case No: C3/2019/0394
Mr Edward Denehan (instructed by Wallace LLP) for the 1 st and 3 rd Appellants (instructed by Peppers LLP) for the 2nd Appellants
Mr Philip Rainey QC & Mr Carl Fain (instructed by Cripps Pemberton Greenish) for the Respondent
Hearing date: 5 th March 2020
Approved Judgment
Introduction
Part 1 Chapter 1 of the Leasehold Reform, Housing and Urban Development Act 1993 (“the 1993 Act”) gives qualifying tenants of flats contained in premises to which that Chapter applies the right to have the freehold of those premises acquired on their behalf. Qualifying tenants of Queen Court, Queen Square, London WC1 (“Queen Court”) have claimed to exercise that right. The issues raised by these appeals concern the question whether the qualifying tenants are also entitled to acquire certain leasehold interests in or connected with Queen Court. More specifically the areas in dispute are:
i) The airspace above Queen Court;
ii) Part of the basement of Queen Court; and
iii) Sub-soil underlying Queen Court.
The Upper Tribunal (Martin Rodger QC, Deputy President), affirming the decision of the First Tier Tribunal, held that the qualifying tenants were entitled to acquire the leasehold interests in all three areas. His decision is at [2018] UKUT 367 (LC).
The facts
I can take the relevant facts from the careful decision of the Upper Tribunal.
Queen Court is a purpose-built block of flats comprising 45 flats on ground and seven upper floors (the top floor is a relatively recent addition to the original structure). The main entrance to the building is on Queen Square in Bloomsbury, with a second entrance at the opposite end of the building on Guilford Street. At the northern end of the building it has a frontage to Guilford Street from which external steps lead down to a basement containing the water tanks, boilers, oil tanks and electrical switchboards which serve the whole building. A second entrance to the basement is available by a set of steps leading from a small external courtyard on the west side of the building which is assessible only from the ground floor hallway. The basement boiler room occupies about a third of the building's total footprint and there is no basement under the remainder.
The whole building was the subject of a headlease granted in 2015 for a term of 99 years by West End & District Properties Ltd to Regal Estates Ltd.
On 3 December 2015 West End & District Properties Ltd granted Regal Estates Ltd a lease of the “roof area and air space up to a height of 7 metres above the surface of the roof” of the building for a term of 999 years. The demise excluded “any part of the building lying below the surface of the roof”. The lease conferred full rights to develop the air space in accordance with any planning permission which the lessee might obtain. It reserved to the lessor rights of access over the air space to the extent that they were necessary either for emergency purposes or for the proper performance of the lessor's obligations to the owners or occupiers of any of the flats in Queen Court. Exercise of that right is conditional on the lessor making good and reinstating any damage caused; and compensating the lessee both for such damage and for loss of use. The lease contains no covenant against the making of alterations, whether structural or otherwise. The reversioner thus has no control over what development is carried out (provided that it complies with planning legislation). That lease is now owned by LM Homes Ltd.
On 7 October 2015 West End & District Properties Ltd granted a lease of about two thirds of the basement to Regal Estates Ltd. The basement is a relatively open area with two large rooms and a corridor running the width of the building at one end. The lease envisages further sub-division and the area demised is therefore represented by red lines on the lease plan rather than by any existing physical feature. Planning permission has been granted for the conversion of the area into a one-bedroom flat. The lease excludes the area for the time being occupied by two boilers, two hot water tanks and a number of electricity meters but includes areas occupied by an oil storage tank, a gas meter, a water pump and other service installations. Those installations are not confined to one part of the basement, but are arranged around the perimeter of the rooms, with various substantial pipes and conduits rising up the walls and across the ceiling. The basement lease also includes the staircase leading down from Guilford Street, but not the staircase from the internal courtyard. It, too, confers full rights for the lessee to develop the demised part of the basement in compliance with any planning permission which might be obtained, including the right to alter or remove any structural part of the building and full rights of access to and from the remainder of the building to facilitate such development. Rights of access are reserved to the landlord for emergency purposes or for the proper performance of its obligations to other lessees in similar terms to the reservation in the airspace lease. It contains a covenant against alterations without the lessor's consent; but that covenant does not apply to the carrying out of works in accordance with the planning permission. That lease is now owned by Mr and Mrs Emore.
On the same day, West End & District Propeties Ltd granted a second lease, again to Regal Estates Ltd, of what were referred to in the lease as “basement areas” and noted in the register of title as being “at basement level”, but which at the date of grant comprised the sub-soil beneath the whole of Queen Court (including the sub-soil underlying the external courtyard on the western side of the building, and two small gravelled areas on the eastern side) with the exception of the existing basement. Once again the term was 999 years. The sub-soil supports Queen Court. Like the other two leases, this lease also included full rights to develop the demised premises in compliance with planning permission, similar reservations of rights of access; and contains no covenant against alterations. That lease is now owned by Mrs Kaur.
The areas comprised in all three leases are within the footprint of the built structure of Queen Court, except that the sub-soil lease also underlies the two small gravelled areas on the eastern side of the block and the external courtyard on the western side which, we were told, houses the dustbins.
The statutory framework
Section 1 (1) of the 1993 Act entitles “qualifying tenants of flats contained in premises to which this Chapter applies” to have the freehold of “those premises” acquired on their behalf. Section 1 (2) provides that the qualifying tenants are also entitled to have acquired the freehold of any property which is “not comprised in the relevant premises” but to which section 1 (3) applies. That subsection applies to any property if at the relevant date:
“either—
(a) it is appurtenant property which is demised by the lease held by a qualifying tenant of a flat contained in the relevant premises; or
(b) it is property which any such tenant is entitled under the terms of the lease of his flat to use in common with the occupiers of other premises (whether those premises are contained in the relevant premises or not).”
But section 1 (6) provides:
“Any right or obligation under this Chapter to acquire any interest in property shall not extend to underlying minerals in which that interest subsists if—
(a) the owner of the interest requires the minerals to be excepted, and
(b) proper provision is made for the support of the property as it is enjoyed on the relevant date.”
Section 3 of the Act provides, so far as relevant:
“(1) Subject to section 4, this Chapter applies to any premises if—
(a) they consist of a self-contained building or part of a building …;
(b) they contain two or more flats held by qualifying tenants; and …
(2) For the purposes of this section a building is a self-contained building if it is structurally detached…”
In addition to the freehold the qualifying tenants are also entitled to acquire certain leasehold interests. These are described in section 2 (3) as:
“… the interest of the tenant under any lease … under which the demised premises consist of or include—
(a) any common parts of the relevant premises, …
where the acquisition of that interest is reasonably necessary for the proper management or maintenance of those common parts, … on behalf of the tenants by whom the right to collective enfranchisement is exercised.”
Section 4 of the Act contains certain exclusions from the right to enfranchise. Section 4 (1) excludes premises where the internal floor area of premises which are neither residential nor common parts exceeds 25 per cent of the premises taken as a whole. Section 4 (5) excludes premises if the freehold of the premises includes track of an operational railway. For this purpose “track” includes tunnels.
Common parts are defined by section 101 (1) as follows:
“common parts”, in relation to any building or part of a building, includes the structure and exterior of that building or part and any common facilities within it”
The question is whether all or any of the areas demised by the three leases fall within this definition; and, if they do, whether it is reasonably necessary to acquire the leases...
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