A new question: When is a flat not a flat?
2nd December 2019
By Nicola Muir
Having struggled with ‘what is a house?’, the Court of Appeal has turned its attention to ‘what is a flat?’
The Leasehold Reform, Housing and Urban Development Act 1993 (the 1993 Act) confers rights on the owner of a flat to either extend their lease or, together with their fellow flat owners, acquire the freehold of the building.
But what is a flat? Having struggled for many years with the thorny issue of “what is a house?” under the Leasehold Reform Act 1967, the Court of Appeal has recently turned its attention to what amounts to “a flat” for the purposes of the 1993 Act. However, the physical configuration of the premises is not the only issue which might hinder the right to enfranchise.
What does the legislation say?
A flat is defined by section 101 of the 1993 Act as a separate set of premises (whether or not on the same floor) (a) which forms part of a building, and (b) which is constructed or adapted for use for the purposes of a dwelling, and (c) either the whole or a material part of which lies above or below some other part of the building. A “dwelling” means any building or part of a building occupied or intended to be occupied as a separate dwelling. For the purposes of a new lease claim, the definition of “flat” is extended to include any garage, outhouse, garden, yard and appurtenances belonging to, or usually enjoyed with, the flat and let to the tenant with the flat on the date the notice of claim is served (section 62(2)). There are therefore two key questions to be addressed. First, is the area let a “separate set of premises”? And, second, was that area constructed or adapted for the purposes of a dwelling? We are concerned here with what the demise is actually used for, rather than what it should be used for under the terms of the lease.
Separate set of premises
Although the definition of a flat expressly provides that the premises need not be on the same floor, it is a question of fact and degree as to whether two separate units can be treated as a single flat. In Cadogan v McGirk  2 EGLR 75 the Court of Appeal held that a flat on the second floor and a storeroom on the sixth floor were not part of the same “separate set of premises”. More recently in Merie Bin Mahfouz (UK) Ltd v Barrie House (Freehold) Ltd  UKUT 390;  EGLR 22, the Upper Tribunal (Lands Chamber) (the UT) had to consider whether a lease to a telecoms operator of a vault in a basement with some space on the roof for a linked antenna was a single “unit” of which the landlord of the block was entitled to a leaseback, on the ground that it was a “separate set of premises let…on a business lease”. Despite the physical separation of the parts of the demise, the UT held that, both functionally and physically, they operated as a single unit. The constituent parts of the premises were let and operated as one. In Aldford House Freehold Ltd v Grosvenor (Mayfair) Estate and others  EWCA Civ 1848; 2019] PLSCS 209, the “flats” in issue were in the midst of construction. Dividing walls between the new flats had been built but the units were otherwise a shell. At the relevant date there were two pairs of large doors between the would-be flats to facilitate access by builders. Lewison LJ accepted that the physical separation between the areas was enough for each area to amount to a “separate set of premises”. The fact that the separation was potentially reversible with a little effort did not change this. This finding was not crucial to the outcome, but I wonder if a flat with large unlocked doors opening into another unit is “separate” from its neighbour.
Constructed or adapted for the purposes of a dwelling?
It was on this issue that the landlord in Aldford House came unstuck. It argued that the newly constructed units were flats and that the initial notice in respect of the collective enfranchisement claim was invalid because it failed to give details of those flats as required by section 13 (3)(e) of the 1993 Act. The Court of Appeal disagreed with the court below and held that, if a separate set of premises needs to have been constructed “for use” as a dwelling, it follows that it must be in a state in which it is suitable for such use. A separate set of premises is, therefore, not a flat unless at some stage in its history it has reached a state of construction to be suitable for use for the purposes of a dwelling. Even if a unit could be used for living in, it will not necessarily qualify as a flat for the purposes of the 1993 Act.
Section 5(2) expressly provides that a tenant will not be a qualifying tenant of a flat where the lease is a business lease to which Part II of the Landlord and Tenant Act 1954 applies. A flat let with the shop below may be a dwelling but its tenant will not be a qualifying tenant if it is let on a business lease. It has also been held that the word “dwelling” connotes an element of permanence. It is not the same as “staying in”. In Smith v Jafton Properties Ltd  2 EGLR 104 the premises consisted of self-contained flats that were used by members of the international business community visiting London. Although they looked like flats and could be used as such, in reality they were usually occupied for no more than a month. Judge Hand QC, sitting in the County Court, said that consideration had to be given to not just to the physical characteristics of the unit but also its intended and actual use. He found that the general pattern of occupancy was more akin to a hotel and that the flats had not therefore been constructed or adapted for the purposes of a dwelling. With the current fashion for redevelopment and Airbnb lettings, it seems likely these issues will arise again.
This article was published in the Estates Gazette on 30th November 2019