Day & Anor v Hosebay Ltd

For the purposes of section 2(1) of the Leasehold Reform Act 1967, whether premises were designed or adapted for living in is assessed objectively by reference to physical works. Furniture and furnishings do not constitute adaptation. Whether a building is a house reasonably so called depends mainly on its physical character and appearance, although permitted and actual use may be relevant. Residential use need not predominate. A building originally constructed as a residence may therefore remain a house after conversion into bedsits or offices, including where it was used wholly as offices at the relevant date.

Two appeals concerned the statutory meaning of a house under section 2(1) of the Leasehold Reform Act 1967. In the first, three former town houses were converted into rooms providing short-term accommodation. Her Honour Judge Hazel Marshall QC held that they remained houses. In the second, 48 Queen Anne Street, originally built as a town house, was used wholly as offices when the enfranchisement notice was served. His Honour Judge Dight also held that it remained a house.

The landlords appealed. The central issues were whether the properties were designed or adapted for living in and whether they were houses reasonably so called, having regard to their physical character, lease restrictions and actual use.

Disposition. Lord Neuberger MR delivered the leading judgment, with which Lord Justice Lloyd and Lord Justice Moore-Bick agreed. Both appeals were dismissed. In each case the tenant had the right to acquire the freehold.

1. Designed or adapted for living in. The expression in section 2(1) required an objective assessment of the most recent physical works of design or adaptation. The court focused on how the building had been altered, not on furniture or furnishings. Subjective intention about the proposed use would rarely matter. Actual or intended use could sometimes assist, but use at the date of the tenant’s notice was generally of little significance because it occurred after the works. This approach was consistent with Boss Holdings Ltd v Grosvenor West End Properties Ltd [2008] 1 WLR 289.
2. Alternative point. Lord Neuberger rejected the argument that a building originally designed for living in would remain within the phrase even after being adapted away from residential use. He treated this as an unnecessary point to decide, since the properties had in any event been adapted for living in.
3. House reasonably so called. The question depended essentially on the building’s external and internal physical character and appearance, considered with all relevant circumstances. A building could be a house even though it could also be described as something else and even though it had non-residential use. Permitted use under the lease and actual use were relevant factors, but neither was automatically decisive. The court relied on Lake v Bennett [1970] 1 QB 663 and the majority reasoning in Tandon v Trustees of Spurgeons Homes [1982] AC 755.
4. Prospect Estates. The court regarded Prospect Estates Ltd v Grosvenor Estates Belgravia [2009] 1 WLR 1313 as binding so far as its ratio was concerned, but expressed difficulty with an approach giving decisive weight to permitted use. Lord Neuberger suggested that the decision should be confined to cases where residential use was prohibited or restricted to a very small part and the actual use corresponded with that restriction.
5. Application. The three Rosary Gardens properties had been constructed as residences, retained the appearance of town houses, and had been fitted out as self-contained accommodation. Their short-term use did not outweigh those features or the residential user covenants. 48 Queen Anne Street retained its external town-house character, and the upper floors remained subject to residential use restrictions. Its office use, even if wholly commercial at the relevant date, did not prevent it being a house reasonably so called.
6. Statutory context. The removal of the residence requirement by the Commonhold and Leasehold Reform Act 2002 meant that the statute had to be interpreted as amended. The court was not entitled to restrict the statutory language by speculating about what Parliament might have intended had it foreseen the consequences.

• Court of Appeal (Civil Division) — In [2010] EWCA Civ 748, dismissed both appeals and held that the tenants were entitled to acquire the relevant freeholds.
• Central London Civil Justice Centre — Her Honour Judge Hazel Marshall QC held that the three Rosary Gardens properties were houses. His Honour Judge Dight held that 48 Queen Anne Street was a house reasonably so called.