L M Homes Ltd & Anor v Queen Court Freehold Company Ltd

In collective enfranchisement, the ordinary incidents of a freehold building generally include the airspace above and the sub-soil beneath it. The statutory word “building” may extend beyond the physical structure where context requires. “Common parts” is an inclusive, functional concept: title does not determine status, and it can include service installations and the areas housing them, as well as airspace and sub-soil. Acquisition of a leasehold interest is reasonably necessary where proposed development would remove the area’s common function or make management and maintenance materially more difficult, notwithstanding reserved access rights. Existing rights may suffice where the common part will remain physically unchanged.

Qualifying tenants of Queen Court sought collective enfranchisement and acquisition of three long leasehold interests: airspace above the building, part of its basement, and sub-soil beneath it. The interests were held by the appellants.

The First-tier Tribunal and the Upper Tribunal held that all three areas were within the statutory premises and common parts, and that acquisition of the leases was reasonably necessary. The appeal was brought from the Upper Tribunal’s decision at [2018] UKUT 367 (LC). The central issues were the meaning of “building” and “common parts” under the 1993 Act, and whether reserved rights of access made acquisition unnecessary.

1. Appeal dismissed. The Court of Appeal upheld the Upper Tribunal’s conclusion that the qualifying tenants were entitled to acquire the freehold and the three leasehold interests under Part 1 of the Leasehold Reform, Housing and Urban Development Act 1993.
2. The ordinary rules of land law applied. A conveyance of a freehold building ordinarily carries the airspace above and the sub-soil beneath it. The 1993 Act contained no clear indication that those principles were displaced. Section 1(6), including its reference to underlying minerals and support, reinforced that conclusion. The statutory word “building” could bear a contextual meaning wider than the built structure. In this statutory context it included the relevant airspace and sub-soil.
3. Whether an area was a “common part” under section 101(1) depended on function and use, rather than title. The whole basement, including the spaces housing plant and service installations serving the building, was within the common parts. The airspace and sub-soil were also common parts, either as part of the building or as part of its exterior. A separate lease did not remove an area from the statutory definition.
4. Under section 2(3), the question was whether acquiring the lease was reasonably necessary for the proper management or maintenance of the common parts as such. Reserved rights could be sufficient where a common part would remain physically unchanged. They did not resolve the case where development rights would convert common parts into private residential accommodation or otherwise remove their common function. The qualifying tenants were entitled to insist that the common parts remain available for proper management.
5. The basement findings were supported by the tribunal’s site visit. What a tribunal perceives on a view is evidence, and the Court of Appeal would not interfere with those factual findings. The proposed basement development would materially obstruct maintenance of the communal heating and electrical systems. Excavation of the sub-soil would remove amenity areas and require lightwells. Development of the airspace would obstruct convenient roof access and leave the freeholder responsible for a new roof structure over which it had no design control.
6. The reserved rights would also make maintenance more complex and expensive because their exercise could cause damage, disturbance, compensation claims and loss of use. The Court did not decide whether the leases’ development rights contained further defects; that issue was left for another day.

• Court of Appeal (Civil Division) — appeal dismissed.
• Upper Tribunal (Lands Chamber) — decision at [2018] UKUT 367 (LC), affirming the First-tier Tribunal and holding that the qualifying tenants were entitled to acquire the three leasehold interests.
• First-tier Tribunal — held that the disputed areas were within the statutory premises and common parts and that acquisition was reasonably necessary.