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Lawbite: All or nothing – enfranchising a “leasehold house”

  • United Kingdom
  • Litigation and dispute management
  • Real estate
  • Real estate litigation - LawBite

07-05-2020

Freehold Properties 250 Ltd v Field [2020] EWHC 792 (Ch)

The tenants of terraced and semi-detached houses on an estate, demised under a long lease that excluded certain structural parts had no right to acquire the freehold title as they were not "a tenant of a leasehold house".

Pursuant to section 1(1) of the Leasehold Reform Act 1967 (“the Act”), a qualifying tenant "of a leasehold house" may be able to buy the freehold or take a new lease for an additional 50 years.

The long leasehold owners of eleven properties sought to acquire the freehold title to their properties from the landlord pursuant to the Act. The landlord rejected their claim and the matter came before the court. 

The tenants argued that a tenant of a “leasehold house” included a tenant of “part” of a leasehold house. They also argued that the exclusion of the structural parts of the properties from the demise infringed the anti-avoidance provision in section 23(1) of the Act.

Although the tenants were successful at first instance, on appeal, the High Court decided in favour of the landlord.

The Court held that in order to acquire the freehold under the Act, the tenants had to be tenants of “substantially the whole of the leasehold house”. The tenants did not satisfy this requirement as the leases excluded from their demise the structural parts of the properties, such as load bearing walls, the roof and foundations. The Court also held that the anti-avoidance provision in section 23(1) of the Act was not wide enough to cover limiting the extent of a tenant’s demise.

Key points

  • this decision clarifies that, in the context of the Act, the term "leasehold house" means the whole of a leasehold house
  • buyers of long leasehold interests in houses should be advised that, unless the whole house is demised to them, they may be unable to exercise enfranchisement rights under the Act
  • landlords who restrict the demise of a leasehold house to circumvent the Act should be advised that this could have an impact on the value of the property
  • the position may change as the Law Commission is proposing a reform of enfranchisement