Q&A: Separate blocks, common parts and enfranchisement

Miriam Seitler and Lauren Fraser answer queries relating to leaseholders seeking to acquire the freehold.

Question

I am the freeholder of three adjoining residential blocks with an underground car park running beneath. I have received a claim from a number of the residential leaseholders to acquire the freehold of the blocks under the Leasehold, Reform, Housing and Urban Development Act 1993. Do the blocks count as separate buildings or as one? And can the leaseholders include the car park in their claim?

Answer

Multi-block complex developments may be considered a single building under the 1993 Act provided that they comprise a self-contained building. Therefore, if the blocks and the car park are not structurally detached from one another they may form part of one single claim. While expert structural engineering evidence will be relevant in deciding whether a building is structurally detached, it is not determinative and a court may take into account other factors, such as the design and function of the building.

Explanation

Under the 1993 Act, participating tenants are entitled to acquire premises which consist of a self-contained building or part of a building. Section 3(2) provides that a building is a self-contained building if it is structurally detached.

The question of whether a building is structurally detached is a mixed one of fact and law. In Consensus Business Group (Ground Rents) Ltd v Palgrave Gardens Freehold Co Ltd [2020] EWHC 920 (Ch); [2020] EGLR 22, it was held that the question of structural detachment was not only one for structural engineers or dependent solely on the existence or otherwise of structural interdependence or load-bearing connection.

The court held it was also entitled to take into account the design and function of the building, for example the fact that the development in this case had been designed to be constructed as a single unit. While there were gaps between each of the blocks from the ground floor up, these had been specifically designed to allow movement between the buildings. Further, an underground car park served all of the blocks so that the buildings were not intended to function independently. The court also followed LM Homes Ltd and others v Queen Court Freehold Co Ltd [2020] EWCA Civ 371; [2020] EGLR 18 by stating that the area of a building is not limited to the built structure above ground level, but may include basement areas and the sub-soil beneath the property including, in this case, the car park.

Question

I am the long leasehold owner of a flat in a purpose-built block of flats and am interested in acquiring the freehold of the block, together with other long leasehold owners. The freehold owner has recently granted leases (to a related company) of other parts of the block for the purposes of development: a lease of the basement area, a lease of the sub-soil beneath the block and a lease of the airspace above. Can the leases of those three areas be acquired in our collective enfranchisement claim?

Answer

Yes. All three areas are common parts of the relevant premises, acquisition of which is reasonably necessary for the proper management or maintenance of these parts. In assessing whether a part of the building is a “common part”, what matters is how the area is used, not the title under which it is held. If these leases were not acquired in the claim, the areas would be developed and no longer be usable as common parts.

Explanation

A claim to acquire the freehold of a block of flats can include leases of any common parts of the relevant premises the acquisition of which is reasonably necessary for the proper management or maintenance of those common parts: section 2(3) of the 1993 Act.

Common parts are defined in section 101 of the Act as including the structure and exterior of that building or part and any common facilities within it.

In LM Homes, the Court of Appeal applied traditional common law principles to ascertain the extent of “the building”: this would ordinarily extend to the airspace above and sub-soil below.

A functional test is then applied: a common part will be a part that either may be used by or serve the benefit of the residents in common, as opposed to those parts of the building that are for the exclusive benefit of only one or a limited number of the residents or for none at all.

Common parts would extend to not only the physical plant and machinery in the relevant areas, but also the spaces in which they were housed.

Therefore, where the leases in question allow wholesale development, such that following development the demised property will no longer be common parts at all, acquisition would be necessary to ensure the areas demised by the leases were retained for use as common parts.

A version of this article was originally published in the July edition of Estates Gazette. For more information please contact Lauren Fraser or your usual Charles Russell Speechlys contact.