Development potential and common parts: the view from the Court of Appeal
The Court of Appeal has delivered judgment in the case of LM Homes Limited v. Queen Court Freehold Co Limited [2020] EWCA Civ 371 finding that development leases of the airspace, basement and subsoil of a building were common parts of a building which the lessees were entitled to acquire in a collective enfranchisement under the Leasehold Reform, Housing and Urban Development Act 1993 (“the 1993 Act”).
The Court of Appeal in reaching the same decision as the Upper Tribunal (Lands Chamber) had below, determined that the key date for assessing whether any particular area forms part of the common parts of the building (as defined by the 1993 Act) is the date on which the lessees serve an Initial Notice to commence the collective enfranchisement process.
It may be that going forward there will be a reduction in the number of development leases of common parts being granted given the likelihood of those leases being acquired by the lessees exercising the right to collectively enfranchise a property. However, there is always the possibility of an appeal to the Supreme Court and in the meantime freeholders and landlords will no doubt seek legal and valuation advice as to the steps to be taken to protect the value of any development potential.
49.Mr Denehan stressed that part of the definition of "common parts" which referred to "common facilities within" the building. Neither the airspace nor the sub-soil is within the envelope of the built structure. But, for the reasons I have given, in my judgment both are within the meaning of "building" as used in section 3. It would, in those circumstances, be natural to regard them either as part of the building itself or as part of the "exterior of the building" for the purposes of section 101 (1). Since the definition in section 101 (1) is an inclusive rather than an exclusive definition, I consider that both those areas fall within the definition of "common parts".
