Leasehold enfranchisement: Qualifying properties under enfranchisement where structural parts are not demised (Freehold Properties 250 Ltd v Field and others – 2020)

If a leasehold demise of a house does not include its structural parts, can the property still qualify under the enfranchisement regime?

The background

Freehold Properties 250 Ltd v Field and others [2020] concerned an enfranchisement claim brought under the Leasehold Reform Act 1967 by long-leaseholders of a series of properties, both purpose-built terraces or semi-detached, owned by the freeholder. Lease demises excluded structural parts including load bearing walls, roofs and foundations.

The freeholder contested the application, arguing that the wording contained in the Act ‘tenant of a leasehold house’ should be interpreted as meaning ‘tenant of the whole of the leasehold house’; as the structural parts of properties were not demised to leaseholders, they could not qualify. At first instance, the Court found that these leases did fall within the Act and therefore the leaseholders’ application could succeed.

The decision

The High Court allowed the freeholders’ appeal, finding that the leaseholders did not qualify for enfranchisement as they were not leaseholders of ‘substantially the whole’ of the leasehold house.

The Court considered that the leaseholders held a limited demise. By allowing an application for enfranchisement to succeed, a more extensive demise of property would be transferred to the leaseholders than they currently held. This was not the intention of the statute, which enabled long leaseholders to turn leases into freehold demises and thereby extend their ‘term of years’ indefinitely rather than extend their physical demise. The Court found in favour of the freeholder’s construction of the ‘tenant of a leasehold house’ wording.

Advice and action

Important clarification on the interpretation of enfranchisement wording under the Act, this case provides clear guidance that enfranchisement should only be awarded where the effect will be to turn an existing leasehold title into a freehold title extending only the ‘term of years’ indefinitely from which the leaseholder benefits.

Where an application will have the effect of granting additional physical structures and parts of a property, thereby extending the leaseholders’ demise, this is not the intention of statute and such applications should be refused.