Landlord and tenant

Leasehold enfranchisement - tenant's right to acquire reversion - tenant reconverting house to single unit following conversion into flats by predecessor in title - reconversion constituting 'improvement' to be taken into account in assessing purchase price of freehold

Shalson v Keepers and Governors of the Free Grammar School of John Lyon: HL (Lord Bingham of Cornhill, Lord Steyn, Lord Hoffmann, Lord Millett and Lord Scott of Foscote): 12 June 2003

A house, let as a single unit under successive leases, was converted in 1947 by the then tenant into five flats under a covenant in the lease.

Subsequent assignees altered the house at their own expense and the current tenant, having reconverted it to a single dwelling, notified the landlord of his claim to acquire the freehold under the Leasehold Reform Act 1967.

The Leasehold Valuation Tribunal, in determining the purchase price as at the relevant date when notice was given, concluded that the reconversion was not an 'improvement' under section 9(1A)(d) (as inserted by section 118(4) of the Housing Act 1974) and, accordingly, should not be taken into account.

The Lands Tribunal and the Court of Appeal [2002] EWCA Civ 538; [2003] Ch 110, affirmed that decision.

The tenant appealed.

Edwin Johnson (instructed by David Conway & Co) for the tenant; Kenneth Munro (instructed by Pemberton Greenish) for the landlord.

Held, allowing the appeal, that to secure a diminution in the open market under section 9(1A)(d), the tenant had to identify any improvements carried out by him or his predecessors at their own expense and to show that but for them the house would have been worth less; that an improvement was an addition or alteration, not a repair or renewal, referable to particular works; and the separate question whether it had caused an increase in value was to be decided by comparing the value of the house as it stood at the relevant date with its value without the improvement; that, although the conversion and reconversion works were improvements, the former no longer existed and since the reconversion had increased the value at the relevant date, the tenant was entitled to a diminution in the price by that extent.

(WLR)