Little shop of horrors for landlords: enfranchisement of shop succeeds

Disappointing news for landlords of mixed use properties. In Jewelcraft Ltd v Pressland [2015] EWCA Civ 1111 the Court of Appeal ruled on an enfranchisement claim relating to a mixed use building and found in the tenant's favour.  The tenant argued it was entitled to the freehold. The Court decided that the tenant's claim was not invalid simply because the property was best described as a "shop" rather than a "house".

Should landlords be concerned?  Maybe so.  The building was a classic mixed use property, comprising a shop with residential accommodation above.   It formed part of a 1920s parade of shops and was let on a 99 year lease.  The ground floor was a self-contained shop and the upper floor was residential accommodation, accessed by external stairs.

In the County Court, the tenant had fallen at the first hurdle. The Court rejected the claim, considering that the property did not constitute a house within s2(1) Leasehold Reform Act 1967.

However, the Court of Appeal looked to higher authority. Applying decisions of the House of Lords (Tandon v Trustees of Spurgeon Homes [1982] AC 755) and the Supreme Court (Day v Hosebay Ltd [2012] UKSC 41) the Court ruled that the s2(1) definition of a house did not exclude buildings that were designed or adapted in part for residential use. 

Even a building best described in ordinary language as a "shop" could be a "house" for enfranchisement purposes.

Is it all bad news for landlords?  Maybe not. Tenants must satisfy other conditions before they can acquire the freehold.  Particularly noteworthy is the residency test which trips up many corporate tenants where their lease enjoys protection as a business lease under the Landlord and Tenant Act 1954 as well as enfranchisement rights.

However, Jewelcraft Ltd v Pressland is a salutary warning that mixed use landlords can become embroiled in enfranchisement claims even where they simply own a shop.

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