Day and another v Hosebay Limited

A building is a “house” under section 2(1) of the Leasehold Reform Act 1967 only if it is both designed or adapted for living in and reasonably called a house. The first requirement concerns the building’s present identity or function, judged from its current physical character. The second is directed to its use as a place of residence.

Historic design and domestic appearance do not outweigh a settled, wholly commercial use. A building used entirely as offices or as a self-catering hotel is therefore not a house reasonably so called, even if it was originally built as a house and retains the appearance of one.

These conjoined appeals concerned buildings originally constructed as houses but used wholly for commercial purposes when notices of enfranchisement were served under the Leasehold Reform Act 1967. Hosebay Limited operated three properties as a self-catering hotel. Lexgorge Limited occupied another property as offices.

The trial judges and the Court of Appeal, in [2010] EWCA Civ 748; [2010] 1 WLR 2317, held that the buildings were houses within section 2(1). The central issue was whether buildings retaining domestic design or appearance could be “houses reasonably so called” when their use at the relevant date was wholly commercial. Hosebay also raised whether its properties were then “designed or adapted for living in”.

1. Both appeals allowed unanimously. Lord Carnwath delivered the judgment, with which Lord Phillips, Lord Walker, Lord Mance, Lord Clarke, Lord Wilson and Lord Sumption agreed. Neither building was a “house” within section 2 of the Leasehold Reform Act 1967 at the relevant date.

2. Section 2(1) contains two complementary and overlapping requirements, both of which must be satisfied. The building must be “designed or adapted for living in” and must be a “house reasonably so called”. The first requirement concerns the building’s identity or function as revealed by its physical characteristics. The second connects the definition with a house’s primary meaning as a single residence. Both must be understood within legislation concerned with houses as places in which people live.

3. The first requirement principally concerns the building’s present identity or function, judged from its current physical character. Historic design does not control where later adaptation and settled use have superseded it. “Adapted” means made suitable and does not require any particular degree of structural alteration. The decision in Boss Holdings Ltd v Grosvenor West End Properties Ltd [2008] UKHL 5 remained correct where disused residential premises had not been put to another use, but its reasoning did not extend to premises whose residential use had been wholly replaced by a non-residential use.

4. Whether a building is reasonably called a house cannot be determined principally by its architectural appearance. Tandon v Trustees of Spurgeons Homes [1982] AC 755 concerned substantial mixed residential and commercial use. Its broad propositions could not be applied generally to buildings in wholly commercial use. Prospect Estates Ltd v Grosvenor Estate Belgravia [2008] EWCA Civ 1281; [2009] 1 WLR 1313 was rightly decided: use may be determinative, and its ratio was not confined to cases where the lease prohibited or severely restricted residential occupation.

5. The Hosebay properties were wholly used as a self-catering hotel. Their townhouse appearance and internal facilities did not make them houses reasonably so called. The court therefore did not need finally to determine the first requirement, although “living in” connoted something more settled than “staying in”.

6. The Lexgorge property was wholly used as offices. Its original domestic design, retained appearance and description as a house for architectural purposes were beside the point. It was not a house reasonably so called.

1. United Kingdom Supreme Court: Allowed both appeals unanimously and held that neither building was a house within section 2 of the Leasehold Reform Act 1967.

2. Court of Appeal: In [2010] EWCA Civ 748; [2010] 1 WLR 2317, upheld the conclusions that the Hosebay and Lexgorge properties were houses reasonably so called. It also agreed that the Hosebay properties were adapted for living in.

3. County Court: Judge Marshall QC held that the three Hosebay properties were adapted for living in and were houses reasonably so called. Judge Dight held that the Lexgorge property was a house reasonably so called. Neutral or report citations were not stated.