Freehold ‘can be gained forcibly in some circumstances’

The court rejected the landlord’s argument that if consent were not refused, its freehold interest in the building would become prone to compulsory purchase by flat owners acting collectively. The court judged the possibility of future enfranchisement to be entirely speculative and therefore did not accept that this represented a good reason for rejecting the plans.

This ruling could potentially have an impact on future cases, with tenants of commercial buildings being able to forcibly acquire the freehold interest in certain circumstances.

Mark Vinall, a solicitor at Winckworth Sherwood, said: “Tenants seeking to develop their building in this way face hurdles in the form of restrictions contained in their lease that they must surmount if they are to be able to proceed with their project. Commonly the relevant restrictions will relate to the use to which the building can be put and the alterations that can be made.

“In this case, the lease did not prohibit the tenant changing the use to residential but did contain a covenant restricting alterations. Unfortunately for the landlord the alterations restriction was of the softer conditional form so while it required the tenant to apply to the landlord for consent, the landlord was not entitled to withhold that consent unreasonably.”

“Those holding or looking to buy reversions to buildings currently put to non residential use need to be aware of the risk that they might be disenfranchised via this route.”