Malekshad (Respondent) v Howard de Walden Estates Limited

Under section 2 of the Leasehold Reform Act 1967, whether premises may reasonably be called a house does not override the structural rules governing horizontally and vertically divided buildings. A vertically divided building is not a single house, although each vertical unit may qualify separately.

For section 2(2), an overhanging or underlying part is material by reference to its relationship with the house to be enfranchised. The assessment concerns the house’s physical structure and the substantial or important extent of the overlap. It does not turn on the particular tenant’s use or on possible prejudice to adjoining premises. If the part is immaterial, section 2(5) may protect the landlord by permitting its exclusion from the enfranchisement.

The respondent held 76 Harley Street and 27 Weymouth Mews under one lease and occupied a flat in 76 Harley Street as his residence. The properties had become separate residential units standing mainly side by side, although part of the basement of 76 Harley Street lay beneath and supported 27 Weymouth Mews.

The County Court rejected claims to enfranchise either both properties or 76 Harley Street alone. The Court of Appeal, in [2001] EWCA Civ 761, declared that both properties could be enfranchised as one house. The freeholder appealed.

The House considered whether the combined premises were a house under section 2(1) of the Leasehold Reform Act 1967 and, if not, whether the basement overlap was a material part which excluded 76 Harley Street from enfranchisement under section 2(2).

1. Appeal allowed unanimously; final relief determined by a majority. The declaration that both properties could be enfranchised was set aside. Lord Nicholls, Lord Hope, Lord Millett and Lord Scott held that the respondent was entitled to enfranchise 76 Harley Street alone. Lord Hobhouse would have restored the County Court’s dismissal of both claims.

2. On section 2(1) of the Leasehold Reform Act 1967, all five Law Lords concluded that the combined premises were divided vertically and therefore could not constitute one house. Per Lord Hope and Lord Millett, the requirement that a building may reasonably be called a house is a limitation governing user and appellation. It cannot restore premises excluded by the subsequent structural rules. Each vertical unit may qualify as a house, but the vertically divided building as a whole cannot.

3. On section 2(2), the majority held that the phrase “of which a material part” refers to a material part of the house sought to be enfranchised. Per Lord Nicholls, materiality requires a broad, common-sense assessment of whether the overlap causes the house as a whole substantially or importantly to overhang or underlie the attached structure. Per Lord Hope, the issue concerns the physical structure of the house, rather than its use or enjoyment by a particular tenant. Lord Millett treated “material” as requiring a substantial degree of overlay. Lord Scott similarly assessed the part’s importance by its relationship with the house as a whole.

4. The majority rejected the test in Duke of Westminster v Birrane [1995] QB 262, which made materiality depend on whether enfranchisement was likely to prejudice enjoyment of the house or another part of the structure. It also disapproved the formulation in the Court of Appeal decision in Parsons v Trustees of Henry Smith’s Charity [1973] 1 WLR 845, linking materiality to the tenant’s use or enjoyment. Lord Hobhouse dissented on this issue and preferred the Birrane test.

5. The basement overlap represented only a small part of 76 Harley Street and did not make that house underlie the mews property to a substantial or important extent. Section 2(2) therefore did not exclude the house. Any need to preserve support for the adjoining premises could be addressed under section 2(5), by excluding the relevant basement part following notice and the statutory balancing exercise.

6. The case was remitted to the County Court to address necessary amendments, any counter-notice, and whether the underlying basement part should be included in or excluded from the property enfranchised.

1. House of Lords: Allowed the freeholder’s appeal, set aside the declaration that both properties were one enfranchisable house, declared by a 4–1 majority that 76 Harley Street alone could be enfranchised, and remitted the case to the County Court.

2. Court of Appeal: In [2001] EWCA Civ 761, allowed the tenant’s appeal and declared that 76 Harley Street and 27 Weymouth Mews together constituted a house capable of enfranchisement.

3. County Court: HH Judge Ryland rejected both the claim to enfranchise the combined premises and the alternative claim concerning 76 Harley Street alone.