Collective enfranchisement: extent of common parts

A recent case has decided that a basement, sub-soil and airspace were common parts for the purposes of a claim under the Leasehold Reform, Housing and Urban Development Act 1993.

Background

This 1993 Act governs a statutory process by which tenants of a building, or part of a building, can join together to buy the freehold of it. This is known as collective enfranchisement. The process involves acquiring all leases covering the relevant premises, including leases over any common parts where those parts reasonably need to be acquired in order to manage or maintain them properly.

The process operates by the tenants serving notice on their freeholder the premium they propose to pay, the extent of the property to be purchased and any other terms. The freeholder is then required to serve a counter notice either accepting or disputing the right to buy.

If the right is disputed, the tenants need to apply to court for a declaration as to their entitlement. This is what happened in L M Homes Ltd and others v Queen Court Freehold Co Ltd.

Facts

The case concerned a block of forty-five flats across eight floors and a basement which occupied around one third of the building’s total footprint. Each flat was subject to its own lease and there were separate leases over each of the basement, the roof and airspace, and the subsoil at basement level under the rest of the building. The basement contained tanks, boilers and switchboards that served the whole building.

The tenants of the flats served notice on the freeholder exercising their right to buy the freehold. The freeholder admitted their claim to the leases over the flats but disputed their right to acquire the leases of the airspace, basement, basement staircase and subsoil, because it wanted to retain these areas for redevelopment.

The First-Tier Tribunal held that these areas were common parts and were necessary for the proper management and maintenance of the building and so the tenants had the right to acquire them as part of their overall claim. The freeholder appealed to the Upper Tribunal.

Decision

The Upper Tribunal found that:

• The whole of the basement was a common part. The equipment within it was not confined to one part but was spread around and so access to the whole basement was necessary to maintain and service that equipment. The common parts were not to be regarded as being limited to the service installations themselves and the fact that the tenants themselves previously had no rights of access to the basement or to the equipment was irrelevant; they were for shared use and benefit. The freeholder’s proposed development of the basement would significantly interfere with the maintenance and upkeep of the communal heating and electrical supply and so these areas needed to be acquired.
• The sub-soil would not ordinarily be considered to be part of the building. However, subsoil was within the extended meaning given to “common parts” in section 101 of the 1993 Act by previous caselaw. And this was consistent with the freeholder’s covenant to “keep the whole of the grassed planted and landscaped area (if any) of the Reserved Property mown and planted in good and tidy condition”. The freeholder’s intention to develop the subsoil would mean it would cease to be a common part, make it liable to be excavated and render compliance with this covenant impossible.
• Also, in accordance with previous caselaw, the airspace was also found to be part of the exterior of the building and therefore fell within the common parts. The airspace provided access to the roof which was needed to effect repairs and maintenance to the building. It might also be needed for facilities serving the building. If the freeholder were to develop the airspace as it intended, convenient access to the roof would become impossible. This made it reasonably necessary for the proper management of the building that the airspace be acquired.

On the basis that all of the disputed areas were found to be common parts, the tribunal held that the tenants had the right to acquire them and the freeholder’s appeal was dismissed.

Comment

This case recognises the practical need for tenants, exercising their right to collective enfranchisement, to have control over common parts for the proper future management of their building.

It may also serve as a warning to landlords and investors to consider the implications of attempting to retain parts of a building for their own development by granting separate leases in order to avoid those parts being acquired in a collective enfranchisement claim.

L.M. Homes Ltd (2) J.T. Emore and F.E. Emore (3) Dalvir Kaur v Queen Court Freehold Company Limited [2018] UKUT 367 (LC)

https://www.bailii.org/uk/cases/UKUT/LC/2018/367.html