Introduction

The case L M Homes Ltd & Anor v. Queen Court Freehold Company Ltd ([2020] EWCA Civ 371) addressed significant questions under the Leasehold Reform, Housing and Urban Development Act 1993 (“the 1993 Act”). The dispute involved qualifying tenants of Queen Court, a block of flats in London, asserting their right to acquire the freehold of the premises as well as certain leasehold interests, specifically concerning the airspace above the building, part of the basement, and the sub-soil underlying it. The primary legal questions centered on whether these areas fall within the definition of "common parts" and whether their acquisition was "reasonably necessary" for the proper management and maintenance of the premises.

Summary of the Judgment

The Upper Tribunal initially held that the qualifying tenants were entitled to acquire leasehold interests in the airspace, basement, and sub-soil of Queen Court. LM Homes Ltd and another appellant challenged this decision, arguing that these areas should not be considered "common parts" under the 1993 Act and that their acquisition was not reasonably necessary. However, upon appeal, the England and Wales Court of Appeal (Civil Division) affirmed the Lower Tribunal’s ruling. The Court concluded that both the airspace and sub-soil constitute "common parts" when they are integral to the management and maintenance of the building. Consequently, acquiring these leasehold interests was deemed reasonably necessary for the proper management of Queen Court.

Analysis

Precedents Cited

The judgment extensively referenced several key cases that shaped the court’s reasoning:

• Megarry & Wade: The Law of Real Property – Established that ownership of land includes airspace and sub-soil, subject to certain limitations.
• Bocardo SA v Star Energy UK Onshore Ltd [2010] UKSC 35 – Affirmed that land ownership extends to subjacent and superjacent spaces unless expressly excluded.
• Cadogan v Panagopoulos [2010] EWHC 422 (Ch) – Highlighted the functional approach to defining "common parts," emphasizing their use and benefit to residents.
• Dartmouth Court Blackheath Ltd v Berisworth Ltd [2008] EWHC 350 (Ch) – Supported the interpretation of "building" to include appurtenant areas necessary for its use.
• Westbrook Dolphin Square Ltd v Friends Life Ltd [2014] EWHC 2433 (Ch) – Reinforced the functional basis for identifying common parts within a building.

Legal Reasoning

The court employed a functional test to interpret "common parts" under the 1993 Act. It assessed whether the airspace, basement, and sub-soil were essential for the proper management and maintenance of Queen Court. The judgment emphasized that:

• Building Definition: "Building" encompasses not just the physical structure but also the airspace and sub-soil necessary for its operation.
• Common Parts: These areas are deemed "common parts" if they serve the benefit of all residents, regardless of exclusive use or control.
• Reasonably Necessary: Acquisition of these leasehold interests is necessary to ensure effective management, maintenance, and functionality of the premises.

The court rejected the appellants’ arguments that existing lease reservations provided sufficient rights, pointing out that the practicalities of managing and maintaining the building would be impeded without outright ownership of these common areas.

Impact

This judgment sets a significant precedent in leasehold enfranchisement cases. By recognizing airspace and sub-soil as integral "common parts," the Court of Appeal broadens the scope of what qualifying tenants can acquire under collective enfranchisement. Future cases involving similar premises may rely on this interpretation to argue for the inclusion of non-traditional common areas. Moreover, the decision reinforces the importance of functional analysis in property law, ensuring that legal definitions accommodate the practical needs of managing residential buildings.

Complex Concepts Simplified

Common Parts

Definition: Common parts refer to areas within a building that are available for use by all residents, such as lobbies, corridors, and service areas. They are essential for the building's operation and maintenance.

Functional Test

Explanation: A method used by courts to determine legal classifications based on the practical use and purpose of a property area, rather than solely on its title or ownership status.

Leasehold Enfranchisement

Definition: A statutory process that allows leaseholders to collectively purchase the freehold of their building and, in some cases, extend their leases.

Conclusion

The Court of Appeal's decision in L M Homes Ltd & Anor v. Queen Court Freehold Company Ltd significantly advances the interpretation of "common parts" within the framework of leasehold enfranchisement. By affirming that airspace and sub-soil are integral to the management and maintenance of a building, the judgment ensures that qualifying tenants have comprehensive rights to acquire essential components of their residential premises. This broad interpretation not only aligns with established legal principles but also provides clarity and assurance to tenants seeking to exercise their enfranchisement rights. The ruling underscores the judiciary's role in interpreting statutes in a manner that reflects practical realities and legislative intent, thereby fostering equitable outcomes in property law.