14 December 2012 by

When is a house a House?

The recent Supreme Court decision in Hosebay v Day considered the qualification of property as a ‘House’ under the Leasehold Reform Act 1967 (the “1967 Act”) which enables certain tenants to purchase the freehold of their leasehold house.

The test under the 1967 Act (in addition to other requirements) for a property to qualify as a House involves two elements:

  1. It must be designed or adapted for living in; and
  2. It must be a House “reasonably so called”.

The decision dealt with two cases – one involving a large end of terrace property with five floors, used entirely for offices; and the other being three terraced properties used as ‘a self catering hotel’.

The tenants’ right to enfranchise the properties was being contested by the landlords on the basis that these properties, as at the time of the claims, were not ‘Houses’ under the 1967 Act.

The decision focused on the second element of the test; whether the properties were Houses ‘reasonably so called’.  The Supreme Court Judges refocused the previous approaches of the Court to concentrate on the actual use of the properties, as opposed to the external appearance and internal conversions.

The Supreme Court, in contrast to both the High Court and Court of Appeal decisions before it, concluded that the properties could not be considered ‘Houses’ under the 1967 Act.  This decision was based on the fact that both properties were being wholly used for commercial purposes.

Although this decision does provide some concrete guidance that a property used entirely for commercial purposes at the date of the tenant’s claim cannot be enfranchised by the tenant, uncertainty remains where there is mixed use premises. The raft of cases preceding Hosebay provide some guidance on these questions but are to some extent confined by their own facts.

Hopefully future cases will eventually provide more definitive guidance on borderline claims but for now the question of what is a ‘House’ remains unclear.

If you are a landlord or a tenant dealing with, or thinking about, the sale or purchase of a freehold or the extension of a lease and you require assistance or information, please contact William Bethune on 020 7288 4743 or williambethune@boltburdon.co.uk.

23 November 2012 by Vincent Billings

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