Prospect Estates Ltd v Grosvenor Estate Belgravia
| Jurisdiction | England & Wales |
| Judge | Lord Justice Mummery,Lord Justice Goldring,Lady Justice Smith |
| Judgment Date | 21 November 2008 |
| Neutral Citation | [2008] EWCA Civ 1281 |
| Court | Court of Appeal (Civil Division) |
| Date | 21 November 2008 |
| Docket Number | Case No: B2/2008/0715 |
[2008] EWCA Civ 1281
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CENTRAL LONDON COUNTY COURT
HHJ DIGHT
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Mummery
Lady Justice Smith and
Lord Justice Goldring
Case No: B2/2008/0715
CHY07534
Mr Anthony Radevsky (instructed by Messrs Boodle Hatfield) for the Appellant
Mr Stan Gallagher (instructed by Radcliffes) for the Respondent
Hearing date : 8 th October 2008
The issue
This appeal is about the statutory right of a tenant of a long lease to acquire the freehold. The tenant succeeded in the Central London County Court. The issue in this court is whether the judge was wrong in holding that the property known as 132 Ebury Street, London SW1 (the Building) was, at the relevant date (3 January 2007), a house “reasonably so called” within the meaning of section 2(1) of the Leasehold Reform Act 1967, as amended (the 1967 Act). If his decision was wrong, the tenant, Prospect Estates Limited (Prospect), in which is vested an unexpired term under a 42 year lease granted by the landlord on 29 December 1972 (the Lease) and expiring on 29 September 2013, is not entitled to acquire the freehold of the Building by virtue of Part I of the 1967 Act. The judge granted the landlord permission to appeal against his ruling in favour of leasehold enfranchisement.
Section 2(1) (meaning of “house”) provides that
“For purposes of this Part of this Act, “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 wholly designed or adapted for living in, or is divided horizontally into flats or maisonettes …”
The judge referred to the relevant statutory provisions and cited the leading authorities on their interpretation: Lake v. Bennett [1970] 1 QB 663 at 760H; Tandon v. Trustees of Spurgeon Homes [1982] AC 755 at 764G and 766H-767D; Malekshad v. Howard de Walden Estates Ltd [2003] 1 AC 1013 at paragraph 51; Boss Holdings Ltd v. Grosvenor West End Properties Ltd [2008] 1 WLR 289 at paragraph 26.
The undisputed written evidence about the design, construction, history and use of the Building and the terms of the Lease is carefully summarised by the judge in his excellent judgment. There was no oral evidence. The Building was originally designed as a house for living in when it was built in about 1850. Apart from the addition of a third and fourth floor no major structural works to the Building have been carried out since it was built. It still looks like a house. The essential dispute is whether, as at the date when Prospect served notice of its claim to the freehold of the Building on 3 January 2007 and when 88.5% of the Building was used as offices, it was still a house in the statutory sense of a “building designed or adapted for living in and reasonably so called.”
In consequence of amendments to the 1967 Act there is no longer a requirement on the facts of this case for the tenant to be occupying the Building as a sole or main residence. The residence test in section 1(1) of the 1967 Act was abolished by section 138 of the Commonhold and Leasehold Reform Act 2002, subject to certain exceptions inapplicable to this case. The abolition of the residence test marks, to a significant extent, a change in the legislative policy and the scope of the enfranchisement legislation. The construction of section 2(1) is, however, unaffected by subsequent amendments to other provisions of the 1967 Act, as no amendments were made to the definition of a house: Boss Holdings at paragraph 23 per Lord Neuberger.
Background and judgment below
The Building is a flat fronted terraced early Victorian building. It consisted of a basement and two upper storeys, to which third and fourth storeys were later added, together with other additions and extensions. Since 1965 the fourth storey (11.5% of the Building's floor space) has been used as residential accommodation. It is not separated by a door either at the top or bottom of the staircase. Since about 1958 the remainder of the Building has been used as office space (88.5% of the Building's floor space) by a number of different sub-tenants under short term commercial sub-leases. The Building has retained the majority of the main internal walls and many, if not all, of the original basic and decorative features.
The terms of the Lease (clause 2(x)) limit the use of the fourth floor to a self contained private residential flat in the occupation of a director, partner, officer, or senior employee of the company, organisation or firm of the person in occupation of the remainder of the demised premises. The remaining floors can only be used as business or professional offices. Clause 2(xi) prohibits any indication of the use of the Building and provides that the windows shall be furnished like those of a private dwelling house. To a passer-by the Building still looks like a house.
The judge had the advantage of a view of both the outside and the inside of the Building. He concluded that
“9. Viewed from the outside, the Building appears to be of the same type as the houses in the remainder of the terrace. Viewed from the inside the overwhelming impression that I was left with was that this was a house in its essential character.
……..
27. In my judgment the overwhelmingly significant factor in determining whether or not the Building is “a house …reasonably so called”….is that the Building was designed for living in and that its structure and appearance have (largely) remained unchanged. ….The terms of the current lease require the tenant to maintain the appearance of a private dwelling house while limiting the residential user to the top floor of the Building. I bear those terms in mind, but in my judgment they do not alter the fact that the Building itself resembles a house even though the majority of it may not be used as such. The use of one out of 5 floors of the Building, albeit 11.5% of the floor space, is, in any event, a substantial proportion in my judgment. Further I accept the evidence of Ms Scanlon as to her use of the top floor flat and I find that there was, at the date of the tenant's notice, substantial residential user of the Building. Taking those various factors together I am of the view that, notwithstanding the office user of the majority of the Building, its essential character is that of a house. I accept that some people might say that the Building could reasonably be called an office block, but that is not the test. As Lord Roskill said [ Tandon at 766H -767G cited below] the circumstances would have to be such “nobody could reasonably call the building a house” for a judge to hold that it was not a house. In my judgment the Building could reasonably be called a “house” within the meaning of section 2(1) of the 1967 Act and the circumstances are not such that nobody could reasonably call the Building a house.”
Landlord's submissions
Mr Radevsky for the landlord contended that the judge erred in law in holding that the Building was a house “reasonably so called.” He accepted the judge's finding that there were insufficient works of adaptation to the Building to conclude that it had ceased to be designed for living as at 3 January 2007 when Prospect served its tenant's notice. But, he submitted, the Building could not be “a house reasonably so called” at that critical date, as the only living accommodation was on the 4 th floor and even the occupation of that was linked to the occupation of remainder of the Building, which, in compliance with the covenants in the Lease, was and could only be used for offices. Under the terms of the Lease only 11.5 % of the Building could be lawfully used for living in.
As for the decided cases Mr Radevsky distinguished Lake v. Bennett, a case of a building constructed in 1869 as a house on three floors with a basement. The ground floor was later used as a shoe repairing shop and then as a betting shop with living accommodation still used for dwelling purposes in the rest of the building. The Court of Appeal reversed the decision of the county court judge and held that the building was “a house reasonably so called” within section 2(1). The living accommodation appears, on one view, to have been 75% of the floor area of the building. Only one floor was occupied as a shop. The dominant use of the building was for living in. It was...
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