Elitestone Ltd v. Morris and Another

The House of Lords considered whether a two-bedroom timber bungalow resting on concrete blocks was a chattel or had become part of the freehold. The court applied the orthodox tests of degree of annexation and the object or purpose of annexation derived from Holland v. Hodgson, with emphasis that in the case of a dwelling-house common-sense and the genus of the structure are important. The Lords held that the bungalow, although not firmly fixed by mechanical means, could not be moved intact and was intended to be a long-term feature of the realty; accordingly it had acceded to the land and formed part of the freehold. The court rejected reliance on the parties' subjective intentions or on prior commercial arrangements to alter the legal character of the structure, and treated Melluish v. B.M.I. (No. 3) Ltd. as authority that contractual terms cannot prevent accession.

Background and parties: Elitestone Limited (freehold owner) sought possession of 27 occupied plots at Holt's Field. Mr Morris occupied a bungalow on Lot 6 and claimed he was a protected tenant under the Rent Act 1977 because the bungalow formed part of his tenancy. The plaintiffs challenged that the bungalow was a chattel and not part of the land.

Procedural history: Proceedings began in Swansea County Court; the assistant recorder found the bungalow formed part of the realty. The Court of Appeal reversed, holding the bungalow to be a chattel. The matter came before the House of Lords on appeal.

Relief sought: The appellants sought to overturn the Court of Appeal and restore the assistant recorder's order that the bungalow formed part of the freehold; the respondent sought a declaration that he was a protected tenant in respect of the bungalow.

Issues framed:

• Whether the bungalow was a chattel or part and parcel of the land (realty).
• Whether any estoppel by convention or agreement could prevent a chattel becoming part of the freehold.

Court's reasoning: The House of Lords analysed the problem by reference to two principal factors: degree of annexation and the object or purpose of annexation (the Holland v. Hodgson tests). The court emphasised that in relation to dwelling-houses the genus of the structure (an ordinary dwelling-house) and the practical impossibility of removal except by demolition are powerful indicators of accession. The Lords rejected reliance on subjective intention, commercial arrangements between occupiers and freeholder, or periodic licence payments to determine the legal character of the structure. The decision in Melluish was applied to confirm that private agreements cannot prevent a chattel becoming part of the freehold once it has acceded by annexation. The Court of Appeal's comparisons with demountable structures (for example greenhouses or sheds) were distinguished on the agreed factual finding that the bungalow could not be removed intact.

Wider implications: The House noted that each case turns on its facts but confirmed that ordinary dwelling-houses which cannot be removed save by destruction will generally accede to the land and be treated as realty.

Appeal allowed. The House of Lords held that the bungalow had acceded to the land and formed part of the realty because, despite resting by its own weight on concrete blocks, it could not be removed intact and was objectively intended to serve as a permanent residence; contractual arrangements or assumptions between the parties could not alter that legal character.

County Court (Swansea) – trial before Assistant Recorder Bidder (assistant recorder found bungalow formed part of the realty); Court of Appeal – reversed (reported as unreported, Court of Appeal (Civil Division) Transcript No. 1025 of 1995, 28 July 1995); House of Lords – appeal allowed, [1997] UKHL 15.