Use for “residential purposes” did not include use as a hotel

The word “hotel” is derived from the French language, where it was sometimes used to describe mansions, grand town houses and residences belonging to the nobility. But times have changed and, in modern parlance, the word is generally used to describe an establishment that provides accommodation, meals, and other services to travellers. In Snarecroft Ltd v Quantum Securities Ltd [2018] EWHC 2071 (Ch) (a decision made in February, but only just published on Bailii) a tenant wanted to convert the upper floors of a building in London and use them, together with an adjoining property, as a boutique hotel. But the tenant was bound by a covenant not to use the property “other than for residential purposes”. Was it possible to argue that buildings used as hotels are put to residential use? The tenant tried to persuade the court to distinguish between covenants restricting use to that of a “single private residence”, or even a “private residence”, and covenants requiring nothing more than use as a “residence”. It accepted that it would not have been permissible for it to convert the premises into a hotel had the form of residential user been more tightly controlled. But it argued that a covenant requiring nothing more than use for “residential purposes” should be interpreted more widely. The court reviewed a series of authorities dealing with different residential user covenants and noted a clear distinction between transient and longer-term use of premises. Even so, when interpreting a lease, the court must focus on the meaning of the relevant words used in their particular, fact-specific context. When the tenant’s lease was granted, the parties contemplated that the tenant would apply for planning permission to build two flats, which it did. Indeed, planning permission for that purpose was actually granted. And, flats let on weekly or monthly tenancies or licences can be used for residential purposes – perhaps even if they are subdivided into bedsitting rooms – but they would not be used for residential purposes if they were to be let as overnight accommodation. In the judge’s view, the phrase “residential purposes” had been inserted into the user covenant in this particular lease to distinguish between residential and business use and to convey the idea of a non-transient, longer-term use than that of a hotel. The judge described a hotel as very much a place of work for its staff. And, even if a hotel could be said to be used in part for residential purposes where the guests are sleeping, it is also being used at least in part as a place of business. Furthermore, the essence of a hotel is that it accommodates short-stay travellers. And, even if travellers return frequently, they do not necessarily occupy the same room and do not have any degree of permanence. The judge explained that he was not saying that the phrase “residential purposes” in the abstract could never apply to a hotel. However, in the context of this particular lease, the phrase “residential purposes” did not include use as a hotel.   Allyson Colby, property law consultant