Live/Work Units – Do Leaseholders Have a Right to Enfranchise or Manage?
_1440x1440.jpg "News on the Block")
The rights of leaseholders in live/work units have generated considerable interest, particularly in the context of collective enfranchisement and the right to manage. These units, often created in mixed-use developments, present unique legal and practical challenges that turn on their classification under landlord and tenant legislation.
The Statutory Framework
Under the Commonhold and Leasehold Reform Act 2002, a leaseholder has a right to participate in a collective right to manage or enfranchisement if they are a “qualifying tenant of a flat” (Section 75(2)). That right does not apply, however, where the lease falls within Part II of the Landlord and Tenant Act 1954 (LTA 1954) – the regime which governs business tenancies.
Section 23 of the LTA 1954 provides that this part applies where premises are (my emphasis) “occupied by the tenant and are so occupied for the purposes of a business carried on by him or for those and other purposes”. Importantly, the definition of "business" in this context is very broad: it includes any trade, profession, or even an activity carried on by a body of persons, whether incorporated or not. Moreover, occupation by a company in which the tenant has a controlling interest, or by a person who controls a corporate tenant, is treated as equivalent to occupation by the tenant themselves.
The Nature of Live/Work Leases
Live/work leases may designate certain rooms for “work” and others for residential use or make no demarcation between the two. Related planning permissions for the development may impose restrictions, such as requiring the unit to be used as a live/work space and permitting a one-way change to business use alone.
This creates a practical and legal tension: where a unit is occupied by a leaseholder for both residential and business use, the leaseholder may fall within the business tenancy exclusion, and so lose the status of “qualifying tenant” for the purposes of the right to manage or enfranchisement.
Conversely, where the unit is not occupied for business purposes—say, if it is vacant or sublet to a relative using it for business—the exclusion may not apply. In that case, the leaseholder may retain their statutory rights.
Strategic Considerations
This leads to some surprising outcomes. A leaseholder who personally uses the unit partly for business may not qualify, whereas a leaseholder who sublets may do so. That’s because in the latter case, the leaseholder is no longer in occupation for business purposes.
Law Commission Proposals and Government Policy
The Law Commission’s 2020 report, Leasehold Home Ownership: Exercising the Right to Manage, recommended that where a lease permits both residential and non-residential use, the leaseholder should still qualify for the right to manage—unless the premises are used exclusively for business purposes. This would reflect the practical reality of modern mixed-use developments.
However, the Leasehold and Freehold Reform Act 2024 did not implement this recommendation.
The Government has indicated an intention to include the remainder of the Law Commission's proposals in a future Leasehold Reform Bill, but we await the detail.
What Can Leaseholders Do?
In the meantime, leaseholders of live/work units may wish to consider the following:
Subletting to qualify: Temporarily subletting the unit may enable the leaseholder to regain qualifying tenant status.
Seeking to vary the lease and planning status: For example subject to obtaining a variation of the lease restriction they may then apply under s.73 of the Town and Country Planning Act 1990 for a variation or removal of the planning conditions requiring live/work use. Alternatively, they could seek a full change of use to Class C3 residential, thereby removing any doubt as to the leaseholder's rights.
Live/work units remain a legal grey area for lessees seeking to exercise their statutory rights. Until legislative reform is enacted, careful analysis of lease terms, planning status, and actual occupation is essential.
If you are a leaseholder in a live/work unit and wish to explore your rights, please feel free to contact me or one of the enfranchisement team at Ashley Wilson Solicitors LLP.
Mark Vinall, Solicitor, Ashley Wilson Solicitors LLP
© 2025 News On The Block. All rights reserved.
News on the Block is a trading name of Premier Property Media Ltd.