A monumental decision for tenants and a major blow for landlords

Tenants entitled to acquire leases of airspace, basement and subsoil under collective enfranchisement claim.

The Upper Tribunal (Lands Chamber) case of LM Homes Ltd and Others V Queen Court Freehold Company Ltd [2018] UKUT 367 (LC) is a monumental decision for tenants and a major blow for landlords, both looking to protect their asset.

The Upper Tribunal held that the airspace, basement and subsoil below a block of flats all constituted common parts of which the nominee purchaser, elected to acquire the freehold interest, was entitled to acquire as part of a collective enfranchisement claim under the Leasehold, Reform, Housing and Urban Development Act 1993 (the “1993 Act”)

The landlord had attempted to hive out/ring fence the airspace, basement and subsoil from the freehold interest by granting development leases to third parties for a premium, with the sole intention of development, subject to planning.  The idea was that if the tenants made a collective enfranchisement claim to acquire the freehold interest of the building and appurtenant property then they would not be entitled to acquire the leasehold interest of the airspace, basement and subsoil.

The tenants, as part of their claim, included the acquisition of these leasehold interests, claiming that they were required to gain access to these areas for the continued maintenance of the building and therefore constituted common parts, acquirable under sections 2(1)(b) and 2(3) of the 1993 Act.

The Upper Tribunal upheld the First Tier Tribunals’ decision that the nominee purchaser has the right to acquire any lease whose demise includes common parts of the relevant premises, when the acquisition of such interest is reasonably necessary for the proper management or maintenance of those common parts.

Whilst this decision is welcome news to tenants, there are many landlords who have granted airspace/basement leases with the sole intention of protecting the potential future development of such areas if in the event the tenants of that block were to collectively enfranchise.  All may not be lost however, as at Tolhurst Fisher our specialist enfranchisement team has a scheme which may assist those landlords that wish to continue to protect their airspace, basement or subsoil.  Please contact either Robert Plant or Alex Rubin to discuss this further.

Author: Robert Plant