Grosvenor Estates Ltd v Prospect Estates Ltd

Whether a mixed-use building is a house “reasonably so called” for leasehold enfranchisement is a question of law determined from all the relevant circumstances. A building designed for residential occupation does not cease to be a house merely because part is used for another purpose. It may also reasonably bear another description.

Original design and residential appearance are not conclusive. The court must also weigh the building’s actual use, the proportions devoted to each use and any lease restrictions. Prescribed and preponderant office use may mean that a building can no longer reasonably be called a house, despite its residential origins and the continued ancillary use of a small part as accommodation.

The tenant claimed the statutory right under Part I of the Leasehold Reform Act 1967 to acquire the freehold of 132 Ebury Street. The Victorian terraced building had originally been designed as a house and retained its residential appearance. At the relevant date, however, 88.5% of its floor area was used as offices and only the fourth floor was residential accommodation ancillary to that office use.

The Central London County Court held that the building remained a house “reasonably so called” under section 2(1). The landlord appealed. The central issue was whether the judge had given proper weight to the building’s actual and contractually permitted uses when applying the statutory definition.

1. Appeal allowed. The building was not a house “reasonably so called” within section 2(1) of the Leasehold Reform Act 1967. Although designed for living in, its prescribed and preponderant office use made it impossible reasonably to call it a house at the relevant date.

2. Whether a building is a house reasonably so called is a question of law. The expression limits the statutory definition by excluding buildings which might be treated as houses under other legislation but do not reasonably bear that description for the purposes of the 1967 Act. Mixed-use buildings occupy a spectrum. A building does not cease to be a house merely because part is no longer used for living in, and it may reasonably be called both a house and something else.

3. The principles derived from Tandon v Trustees of Spurgeon Homes [1982] AC 755 must not be treated as if they were statutory language. Every case requires consideration of all relevant circumstances. Relevant matters include original design, structural adaptation, appearance, actual use, the relative proportions of different uses and restrictions imposed by the lease.

4. The county court judge placed excessive weight on the building’s original residential design and substantially unchanged appearance. He gave insufficient weight to the lease, under which 88.5% of the floor area could lawfully be used only as offices. The sole residential flat was restricted to occupation by a director, partner, officer or senior employee connected with the office occupier and was therefore ancillary to the office use.

5. The abolition of the residence requirement by section 138 of the Commonhold and Leasehold Reform Act 2002 enlarged the scope and altered the original policy of the enfranchisement legislation. It did not alter the construction of section 2(1), whose definition of a house remained unchanged.

Goldring and Smith LJJ agreed. Smith LJ emphasised that the building’s longstanding predominant office use, the restrictions upon residential use and the ancillary character of the fourth-floor flat compelled the conclusion that it was an office building and could not reasonably be called a house.

1. Court of Appeal (Civil Division): The landlord’s appeal was allowed. The court held that the building was not a house reasonably so called under section 2(1) of the Leasehold Reform Act 1967.
2. Central London County Court: HHJ Dight held that the building was a house reasonably so called and ruled in favour of the tenant’s claim to acquire the freehold. The judge granted the landlord permission to appeal.