What does ‘residential’ mean?

A judgment involving one of the largest residential blocks in Europe will obviously cover a lot of ground and Judge Mann’s decision does not disappoint. Running to almost 160 pages it covers a road map of issues relating to the interpretation of the Act. This article considers one of those issues concerning the ratio of residential to non-residential space and whether the building should be excluded from the Act as a result of Section 4.

To fall within the Act, a building must be a self-contained building or part of a building containing a minimum of two flats. Section 4 provides that no more than 25% of the internal floor area, excluding common parts, must be for non-residential purposes. Although this test appears to be fairly straightforward there have been many cases concerning how the measurement should be applied and how certain areas of the building should be categorised.

Two particularly helpful decisions that the Judge relied on are Marine Court (St Leonards on Sea) Freeholders Ltd v Rother District Investments Limited 2008 and Indiana Investments Ltd v Taylor 2004.

Dolphin Square comprises 13 blocks containing 1,229 residential flats situated around a garden square. The building includes a basement car park, fitness centre, offices, shops, and a restaurant.

In 2010 Westbrook served a collective enfranchisement notice on the freeholder, Friends Life who served a counter-notice disputing the claim. For the purposes of the claim it was accepted that the complex was one self-contained building because each block was joined at basement level.

An argument the freeholder had failed to raise in its counter-notice but was allowed to rely on at trial was that the building should be excluded from the Act because of Section 4 and primarily because residential flats let as serviced apartments for periods of five to 90 days should be classed as non-residential.

The Judge did not propose to formulate a test for “residential purposes”.

Instead, he gave some indication of the meaning of the phrase. He said that premises could be used for residential purposes without being a home. He relied on Owen v Elliot 1990 in stating that residential use meant the usual activities of living, eating, sleeping and washing.

He also relied on Urdd Gobaith Cymru v Commissioners for Customs and Excise 1997 to confirm that it could encompass short-term accommodation. Using these indications he decided that the short-term lets under the name of a commercial entity Dolphin House were in residential use.

Some key points emerge from the decisions mentioned above:

When calculating the relative internal floor areas it is necessary to remove the common parts from both sides of the equation and then to compare the non-residential to the combined non-residential and residential space;

Residential use means the usual activities of living, sleeping, eating and washing rather than a home. Short-term accommodation such as serviced apartments will qualify;

Residential use extends to ancillary areas such as garages, parking spaces and storage areas if used in conjunction with a residential flat.

Obviously this list is not exhaustive and anyone advising on Section 4 should refer to the Dolphin Square decision which contains a useful analysis.