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21st April 2020

High Court decides on leasehold case via video-link

A blow was struck to the owners of leasehold houses earlier this month in one of the first cases decided via video link-up.
Having originally won their case at the property tribunal, the leaseholders were not able to convince the High Court that they had the right to buy the freehold of their homes.

The matter rested on a particular provision of the Leasehold Reform Act 1967, which in principle introduced the right for the owners of leasehold houses to call for their landlord to sell the freehold to them in exchange for payment of a compensatory premium (known as ‘enfranchisement’). Although the legislation is now quite old, it remains very much in active use and does crop up in Cambridge circles, particularly given the large amount of land that has historically been in University/College ownership.

Although they won their case in the property tribunal, the High Court accepted the landlord’s appeal that not all the houses were in fact single dwellings and therefore the leaseholders were not entitled to acquire the freeholds under the Leasehold Reform Act 1967.

In giving judgement in Freehold Properties 250 Ltd v Field and others [2020] EWHC 792 (Ch), Mr Justice Marcus Smith considered whether the right in the 1967 Act to enfranchise a long leasehold house applied to a lease where only part of the house was demised, and the court found that it did not. Essentially, the tenant must have a lease of the whole house (and not own what is in effect a flat within a larger building by virtue of the landlord having retained say the roof or foundations).

Not only did the leaseholders lose but they were also ordered to pay the landlord’s costs (which were considerable) within 14 days.

The take-home for all property lawyers is that if you suspect the LRA67 may be relevant to a particular property or transaction then it must be checked at an early stage whether the lease is of the whole house and that no structural parts were excluded. If not then it must be assumed the right to enfranchise will not be available.

Although presumably not relevant to the decision made in the case, it seems topical to note that the judgement itself made reference to the fact “the appeal was conducted remotely over the internet … during the COVID-19 “coronavirus” pandemic”.

For more information on the items raised in this article please contact Simon Cooper by clicking here.
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