Aldford House Freehold Ltd v Grosvenor (Mayfair) Estate & Anor

For the purposes of the definition of a flat in the Leasehold Reform, Housing and Urban Development Act 1993, a separate set of premises is identified chiefly by objective physical configuration and physical separation. Title, future intention and the purpose of temporary doors do not determine that question. The premises must also have reached a stage of construction or adaptation at which they are suitable for use as a dwelling. Areas still in construction and incapable of residential use are not flats, even if demised and intended to become residential. The test differs from the house definition in the Leasehold Reform Act 1967. A previously completed flat may remain a flat after being gutted or falling into disrepair if it has retained its identity. Written corporate resolutions and the indoor management rule may establish authority to give an initial notice.

The nominee purchaser served an initial notice under section 13 of the Leasehold Reform, Housing and Urban Development Act 1993 seeking collective enfranchisement of Aldford House. Four areas on the sixth and seventh floors had separate underleases and dividing walls, but remained structurally incomplete and incapable of residential use.

Fancourt J held that the areas were four flats, making 30 flats in the building, and that the initial notice was invalid: [2018] EWHC 3430 (Ch); [2019] 1 WLR 1489. The appeal concerned whether the areas were flats under section 101 and whether one corporate tenant had validly authorised the notice.

Appeal allowed. Lewison LJ gave the judgment, with which David Richards LJ and Rafferty LJ agreed.

1. Separate set of premises. The inquiry under section 101 of the Leasehold Reform, Housing and Urban Development Act 1993 concerns the objective physical configuration of the premises. It is not determined merely by title, future intention or the purpose for which separating doors were installed. Applying Cadogan v McGirk [1996] 4 All ER 643 and Majorstake Ltd v Curtis [2008] UKHL 10, the four areas were physically separate because of the dividing walls, locked doors, separate entrances and balcony screens. Their potential reversibility did not alter that conclusion.
2. Construction for use as a dwelling. A separate set of premises must have reached a stage of construction or adaptation at which it is suitable for use as a dwelling. The definition of a flat therefore differs from the wider house definition in section 2(1) of the Leasehold Reform Act 1967. Boss Holdings Ltd v Grosvenor West End Properties Ltd [2008] UKHL 5 concerned a property which had retained its identity as a house despite dilapidation. Hosebay Ltd v Day [2012] UKSC 41 required present identity to be assessed by current physical character. The former flats here had lost their identity after extensive works. The new areas were still in course of construction and incapable of residential use, so they were not flats. Uratemp Ventures Ltd v Collins [2001] UKHL 43 showed that cooking facilities are not essential, but did not assist on these facts.
3. Statutory counting provisions. The test in section 4(1)(a)(i) for determining whether Chapter 1 of Part 1 applies is distinct from the definition in section 101. Incomplete premises may be treated as residential parts for the former purpose, but are excluded when counting flats and qualifying tenants. The building therefore contained 26 flats, and the notice was not required to name the tenants of the four intended flats.
4. Authority to give the notice. A written directors’ resolution did not require a board meeting, so article 73 of Rokkibeach’s articles had no application. Adoption of the authorised-signatory list conferred actual authority. The category restriction for legal agreements concerned agreements binding Carnoustie or Morfontaine, not the authority given on behalf of Rokkibeach. Applying the indoor management rule in Mahoney v East Holyford Mining Co (1875) LR 7 HL 869, Rokkibeach was entitled to rely on the resolution. It validly authorised the notice, satisfying the requirement of thirteen qualifying participating tenants. Other issues on the Respondent’s Notice did not arise.

• Court of Appeal (Civil Division) allowed the appeal. It held that the sixth- and seventh-floor areas were not flats because they were still incapable of residential use, and that the notice was validly authorised: [2019] EWCA Civ 1848.
• High Court of Justice, Chancery Division held that the areas were four flats, making 30 flats in the building, and that the initial notice failed to comply with the statutory requirements: [2018] EWHC 3430 (Ch); [2019] 1 WLR 1489.