The Leasehold Reform, Housing and Urban Development Act 1993 enables qualifying tenants of blocks of flats to acquire the freeholds of their buildings. Importantly, it also enables them to acquire any common parts or facilities if the acquisition of the landlord’s interest in those areas is reasonably necessary for their proper management or maintenance.
The issue in Panagopoulos v Earl Cadogan [2010] EWCA Civ 1259; [2010] PLSCS 290 was whether a caretaker’s flat in the basement of a property in Knightsbridge was included in the “common parts” of a building that the tenants were seeking to enfranchise. The High Court decided that it was because the company purchasing the building on behalf of the tenants would require the flat to comply with the landlord’s covenants so as to provide the services of a resident caretaker.
The Leasehold Reform, Housing and Urban Development Act 1993 enables qualifying tenants of blocks of flats to acquire the freeholds of their buildings. Importantly, it also enables them to acquire any common parts or facilities if the acquisition of the landlord’s interest in those areas is reasonably necessary for their proper management or maintenance. The issue in Panagopoulos v Earl Cadogan [2010] EWCA Civ 1259; [2010] PLSCS 290 was whether a caretaker’s flat in the basement of a property in Knightsbridge was included in the “common parts” of a building that the tenants were seeking to enfranchise. The High Court decided that it was because the company purchasing the building on behalf of the tenants would require the flat to comply with the landlord’s covenants so as to provide the services of a resident caretaker. The landlord appealed against the decision. It argued that the common parts or facilities of a building are areas or facilities to which the tenants have access. Consequently, a caretaker’s flat over which tenants have no rights, and to which they have no access, could not form part of the common parts. The Court of Appeal disagreed. It reminded the landlord that the court must construe the legislation fairly and with a view, if possible, to making it effective to confer on tenants the advantages that parliament must have intended them to enjoy. In addition, two of the tenants in the building had a specific legal right to require the new landlord to provide the services of a resident caretaker, and their property interests could not be ignored. This enabled the court to conclude that access is not a prerequisite for premises to qualify as “common parts”. It sufficed that the tenants shared the benefit of the caretaker’s flat by enjoying the services of the caretaker for whom it was provided. Was it reasonably necessary for the tenants to acquire the caretaker’s flat for its proper management or maintenance? The court ruled that it was because if the tenants were unable to acquire it, they would be unable to use it to accommodate a caretaker and the basement flat would not be maintained as a common part. The court declined to comment on suggestions made in the court below that the issue of whether an area falls within “common parts” depends on the way in which premises are used when tenants seek to enfranchise. Carnwarth LJ could see the force of this approach, but the court did not have to decide the point because two of the tenants in the building had specific legal rights to the services of a resident caretaker. However, if the High Court is correct, the legislation could also apply to areas that are used by tenants even though the landlord has not actually covenanted to make them available for such use (so that if, for example, the landlord has designated a room for use as a gym and has placed exercise machinery in it, the room might also be included within the common parts). The decision provides food for thought and the prospect of yet more litigation concerning the scope and effect of this complex legislation. Allyson Colby is a property law consultant
