Head lessees can be 'qualifying tenants' regardless of other property

The owners of big property empires, such as the Earl of Cadogan, have been defeated in their bid to block further erosion of their portfolios by head lessees obtaining new leases under the Leasehold Reform, Housing and Urban Development Act 1993.

Delivering the leading judgment in two related appeals to the House of Lords, Lord Neuberger said that a lessee could be a 'qualifying tenant' for the purposes of Chapter II of Part 1 of the 1993 Act regardless of the nature or extent of the other property included in the lease.

In Earl Cadogan v 26 Cadogan Square Limited [2008] UKHL 44, the company making the claim was head lessee of a six storey building, the lower three floors used as offices, the upper three consisting of a maisonette.

In Howard de Walden Estates v Aggio, a trust was head lessee of five storeys of a building, which had been converted into self-contained residential flats.

Both head leases included common parts of the property, such as entrance halls, landings and stairs, and parking places.

Natasha Rees, partner at private client and property specialists Forsters, represented Aggio.

'We will see an influx of claims from head lessees who until now were not regarded as qualifying tenants,' said Rees.

'This is particularly the case where their leases are for less than 21 years, and they are no longer able to grant subleases.'

Rees said that, before today's ruling, these head leases would have gradually withered away.

Concluding his judgment, Lord Neuberger said: 'As a matter of statutory language, it appears clear that a lessee under a lease of property which includes a flat can be a 'tenant' of that flat for the purposes of Chapter II of Part I of the 1993 Act, irrespective of the nature or extent of the other property included in the demise.

'In particular, there is no reason to exclude a lessee under a lease of a block of flats, or a lease which includes property other than flats, from being a 'tenant of a flat' for the purposes of Chapter II of Part I of the 1993 Act.'

Lord Neuberger said there was no good argument to the contrary based on the policy of the Act or alleged practical

difficulties, inconsistencies or oddities.

He allowed both appeals. Lords Hoffman, Scott and Walker and Baroness Hale agreed.