The Right to Enfranchise: Nothing Less than Substantially the Whole House Will Suffice

Field v Freehold Properties 250 Ltd [2020] EWHC 792 (Ch); [2020] 3 W.L.R. 233; [2020] L. & T.R. 15

A tenant does not fall within the enfranchisement regime of the Leasehold Reform Act 1967 unless he is the tenant of substantially the whole of a leasehold house.

Facts

The tenants of 11 properties each served a notice claiming the right to enfranchise their house under the Leasehold Reform Act 1967 (the 1967 Act). The properties were on the same development and were demised by leases in similar form. Importantly, the structural parts of the house (i.e. the roof, foundations and load-bearing walls) were excluded from the demised premises. The landlord, Freehold Properties 250 Ltd, served notices not admitting the claim.

At first instance, the landlord argued that the houses were not houses for the purposes of s.2(1) of the 1967 Act by reason of the exception in s.2(2) (i.e. a material part lies above or below a part of the structure not comprised in the house). The judge rejected this argument and declared that the tenants were entitled to enfranchise.

The High Court decision

On appeal, having instructed new counsel, the landlord argued a different point, namely, that the right to enfranchise in s.1(1) applied only to a tenant of the whole of a leasehold house and, accordingly, as the structural parts of the houses in the instant case were excluded from the demised premises, the tenants were tenants of part only of a house and did not have the right to enfranchise. The landlord accepted that, in each case, the built structure was a house for the purposes of s.2(1). The tenants argued that the defendant was arguing a new legal point that was not taken at first instance; that fell outside the scope of the permission to appeal given by the trial judge; and that involved resiling from a concession made at trial by the defendant. As to the substantive argument, the tenants submitted that the phrase “a tenant of a leasehold house” in s.1(1) included “a tenant of part of a leasehold house”. In the alternative, the tenants argued that the exclusion of the structural parts engaged the “avoidance” provisions in s.23(1) of the 1967 Act.

The High Court (Marcus Smith J) rejected the tenants’ procedural arguments. The question before the court at first instance was whether the claimants were entitled to enfranchise under Part I of the 1967Act. The defendant’s grounds of appeal articulated only this “new” point. The point was open to the defendant on the pleadings and the permission to appeal was in sufficiently wide terms to include the point. Moreover, the manner in which the defendant argued the law did not in any way amount to a concession. A concession on a point of law is not equivalent to a concession or admission on a point of fact or on a point that is pleaded. Further, a court should be very slow to conclude that a party can be bound by a concession on a point of law. That is because it is the duty of a court to determine the law, and the court cannot by an agreement between the parties be forced to determine a point of law by concession. If a court articulates a point of law, it should be after a substantive determination.

The appeal on the substantive point was allowed for the following reasons. First, a tenant does not fall within the enfranchisement regime of the 1967 Act unless he or she is the tenant of substantially the whole of a leasehold house. If a tenant qualifies for enfranchisement under the 1967 Act, then the statutory obligation to convey under s.8 is of the “house” and not of that part of the house that was demised. That being so, it would be curious if some legal interest less than an interest in substantially the whole of the leasehold house would suffice to qualify for enfranchisement. Parliament intended to enable a lease to be turned into a freehold, thereby extending indefinitely the “term of years” that is the defining characteristic of a lease. It did not intend to expand the physical extent of the demised premises, so that a lease of part of a house is converted to the freehold of the whole of it.

Second, the “avoidance” provision in s.23(1) of the 1967 Act is insufficiently wide to embrace a limitation on a tenant’s demise. A limited demise in no way affects a tenant’s rights under the 1967 Act. It is simply that the property interest acquired by the tenant is insufficient to give rise to a right under the 1967 Act. Section 23(1) causes provisions within its scope to be voided. It does not permit the court to insert new words or re-write the terms of the lease.

Jonathan Upton

Barrister, Tanfield Chambers, London (who acted for the successful landlord on appeal)