The most recent case of Jewelcraft Ltd v Pressland  has confirmed that a shop with accommodation above does not fall outside the definition of a house because it is described as a shop.
What amounts to a house for a tenant’s right of enfranchisement is defined in section 2(1) of the Leasehold Reform Act 1967. This section provides that a house ‘includes any building designed or adapted for living in and reasonably so called, notwithstanding that the building is not structurally detached, or was or is not solely designed or adapted for living in’.
In this case, Jewelcraft, the claimant was the tenant of a building comprising a ground floor purpose built shop with residential accommodation on the first floor above. Originally the shop was not self-contained and could be accessed via an internal staircase leading to the flat above or from the flat’s kitchen and scullery at the rear of the ground floor. In the 1970’s the ground floor kitchen and scullery were incorporated into the shop and the internal staircase was replaced by an external staircase.
This building was also part of a parade of similar shops built in the 1920’s with a 99 year lease running from 1921. The building had been sublet from 1978 on successive under leases to a newsagent with the accommodation above for occupation by its employee(s) under a service occupancy agreement.
The tenant’s claim to enfranchise under the Act was rejected by the county court on the premise that the building did not constitute a house under section 2(1) of the Act. The judge stated that the building was not a house because it did not look like a house and was part of a parade of shops with residential accommodation above.
The Court of Appeal, however, disagreed with this approach as it was inconsistent with higher authority (Tandon v Trustees of Spurgeons Homes  and Day v Hosebay Ltd ). Under section 2(1) of the Act, the definition of a house indicated clearly that it was not Parliament’s intention to exclude the right of enfranchisement for buildings that were designed or adapted in part for non-residential use.
The decision in Tandon established that shops with residential accommodation above were to be described as houses under section 2(1) of the Act provided that a material part of the building was designed or adapted for and used for residential purposes.
The decision in Hosebay, when applied by the Court of Appeal, stated that claims to enfranchise buildings comprising shops with residential accommodation above should not be dismissed as not being houses simply because the building was, as a matter of ordinary language, described as a shop or because the accommodation was not linked internally to the rest of the building.
On a practical point, Jewelcraft demonstrates that corporate tenants can take advantage of their enfranchisement rights to acquire the freehold of their premises which is partly used for business.
If you are a leaseholder in a similar situation or if you are a leaseholder seeking a lease extension then please do not hesitate to contact Robert Plant or Alex Rubin.