Tenants win enfranchisement appeal over freehold of flats

A group of tenants have won their appeal to exercise the right of collective enfranchisement and acquire the freehold of their flats.

The properties were owned by Grosvenor (Mayfair) Estate and held on a long lease by K Group Holdings Inc (2019).

The issue arose after Aldford House Freehold Ltd, the nominee purchaser for 17 lessees, served an initial notice claiming to exercise the right of collective enfranchisement on the basis that there were 26 flats in the building.

At the time, the sixth and seventh floors, which had originally contained one flat on each floor, had been completely stripped out and were undergoing works to create two flats on each floor.

The judge held that those areas were "flats" within the definition in the Leasehold Reform, Housing and Urban Development Act 1993, as they amounted to "a separate set of premises ... which is constructed or adapted for use for the purposes of a dwelling".

He therefore concluded that there were 30 flats in the building, and that the initial notice was invalid as it had failed to name the lessees of the sixth and seventh floors as required by the Act.

The Court of Appeal has overturned that decision. It held that a separate set of premises was not a flat unless it had reached a stage of construction to be suitable for use for the purposes of a dwelling.

If a flat was in the course of construction, it had not yet been "constructed" for any purpose. To be constructed "for use" as a dwelling it had to be in a state in which it was suitable for use as a dwelling.

On the judge's findings, the intended flats on the sixth and seventh floors had not yet reached that stage. Accordingly, they were not flats.

At the relevant date the building contained 26 flats rather than 30, and the initial notice had not therefore been required to name the lessees of what would become the remaining four flats.

Please contact us if you would like more information about the issues raised in this article or any aspect of commercial property law.

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