Leasehold enfranchisement of town house offices?

In Day & Anor v Hosebay Ltd [2010] EWCA Civ 748 (an appeal conjoined with Howard de Walden Estates Ltd v Lexgorge Ltd) Lord Neuberger MR has disagreed with earlier comment he himself made regarding what constitutes a “house” for enfranchisement purposes under the Leasehold Reform Act 1967, but has kept the door open for individual and corporate enfranchisements claims in relation to buildings such as town houses, now used for office purposes, but not sufficiently adapted away from residential design.

In Boss Holdings Ltd v Grosvenor West End Properties & Ors [2008] UKHL 5, when analysing the definition of a “house” in section 2(1) LRA 1967 ('house” includes any building designed or adapted for living in and reasonably so called) Neuberger had intimated that a building could qualify for enfranchisement as a house if either it had originally been designed for living in, or had subsequently been adapted for living in – the concepts of design and adaptation being wholly separate. Reining himself back in, Neuberger says “I must confess to having started, in Boss Holdings [2008] 1 WLR 289, paragraph 26, what I now think is a hare by suggesting an over-literalist approach to the language used by the legislature.”

His view now is that a building originally designed for living in, but which is adapted for some other purpose, is not "designed or adapted for living in" (unless it is subsequently re-adapted for living in). A building may well have been originally designed for living in (as were many large properties in the West End of London, and in the older parts of many provincial city centres), but subsequent works may have resulted in the building being “adapted away” from residential use. A claimant could not rely on the original design if that had been the case.

However, applying his views to the facts, in Hosebay, the properties in question had first been designed for living in, and any later works had not adapted them away from residential use. The properties were used for short-term residential accommodation for visitors to London. The houses were designed or adapted for living in, and reasonably so called. In Lexgorge, the property was designed and initially used as a town house residence for a single family. It maintained the same physical appearance externally as at the date of the notice, although works had been done so that the ground and first floors could be used as offices. Indeed, the property was used wholly as offices at the date of the notice, even though covenants restricted two upper floors to residential use. The property was, it was accepted, "designed or adapted for living in", because no work had been done to the upper two floors to take away the fact that they were designed for living in, and had not been adapted away from that design. The only ground for challenging that the property was a "house ... reasonably so called" was the fact that the whole of it was used for office purposes, and none of it for residential purposes. However, Neuberger stated (distinguishing the case of Grosvenor Estates Ltd v Prospect Estates Ltd [2008] EWCA Civ 1281 which, he said, applied only where both the permitted use and the actual use of the building excluded residential use or limited it to a very small proportion of the building) that “the fact that the property was used wholly for office purposes does not mean that it was, as the landlord, through Miss Holland QC, contended, not a “house ... reasonably so called"”. He said “One could, it seems to me, quite naturally describe a building built as a town house, which had subsequently been internally converted into offices, as a "house used as offices": hence it would "reasonably [be] called" a house, even though it was not used for residential purposes, and even if it was not permitted to be so used.”