Are roof space leases now compromised by enfranchisement rights?

When we think of collective enfranchisement, we generally see it in simple black and white terms.  The tenants are going to acquire the freehold of their building from their landlord.  In many cases this is exactly how the process operates.  However, occasionally there are cases before the Courts which drill down into the real detail of the legislation and what the tenants or the landlord is really entitied to acquire or retain.

Once such case of interest has recently been decided in the Upper Tribunal (Lands Chamber), Hemphurst Ltd v Durrels House Ltd [2011] UKUT 6 (LC) LRA/27/2009.

In this case the landlord had demised itself the roof space above a block of leasehold flats on a long lease with the intention of developing the roofspace into additional units at some point in the future.  Such a practice is not uncommon, particularly in built up urban areas.  However, this is rarely popular with tenants as the building works and associated disruption can be very unpleasant.

The tenants pursued a collective enfranchisement claim which included the acquisition of part of the leasehold interest in the roof that the landlord had granted itself.  The landlord resisted this claim on the basis that the tenants were obliged to acquire the entire lease it had demised and consequently had to pay a premium for all of it.  The Leasehold Valuation Tribunal agreed with the landlord at first instance but this decision was overturned by the Upper Tribunal (Lands Chamber) who allowed the tenants to acquire only those parts of the roof lease as it required.  The tenants were not seeking to prevent the development.

The real issue for me arising out of this case is whether in other cases this principal could be extended to compromise proposed roof space development.  While compensation is payable under an enfranchisement claim if the sale of the freehold devalues other property owned by the landlord, it is not clear that a landlord would be compensated for the lost leasehold development opportunity.


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