Property Law: Is your public house a house?
Subject to meeting relevant criteria under the Leasehold Reform Act 1967 a leaseholder may be able to forcefully acquire the freehold of his/her pub.
Among the criteria to be satisfied it must be shown that the pub is a house pursuant to the Act and over recent years there have been several decisions about what the law considers to be a 'house', which could include a pub.
What are the criteria?
Firstly, the house must be a house or a building that can be reasonably
considered as a house and which is vertically divisible from the adjoining premises. In addition, you need to own the lease of the whole house.
The leading case law in this area sets out that as long as a building of mixed use can reasonably be called a 'house', the leaseholder can enfranchise the freehold interest from the landlord even though the building could quite reasonably be called something else.
For example, a shop with living accommodation above which was contained in a row of similar premises is said to be a 'house'. Premises which had the ground floor sub-let as a betting shop and the remainder of the building used for residential purposes was also seen as a 'house'. A building that maintained the appearance of a house externally and notwithstanding the terms of the lease was entirely used as offices was also 'a house reasonably so called'.
The upshot is that a 'house' could arguably include a pub.
Secondly, the lease must be a long lease, originally granted for a term of more than 21 years or with the right to renew. For the purposes of determining whether your lease is a long lease the relevant date to consider is the date of the grant of the lease and not what is left to run. Even if the lease you own is a business lease, then all is not lost. There are certain additional provisions to meet but you can still satisfy the requirements.
Thirdly, the leaseholder must own the lease of the house at the time you apply to acquire the freehold and have owned the lease for the past two years or for a total of two years in the last 10 years.
How much?
In terms of the sum payable for the freehold interest a surveyor well versed in the Act can advise on the valuation procedures and likely premium payable.
How you meet the above qualifications also determines which valuation procedure is applied.
What next?
If you satisfy the relevant criteria, the enfranchisement action can be commenced by serving a Notice of Tenants Claim which must contain certain prescribed information.
It is at this stage that you become liable for certain aspects of the landlord's reasonable costs. The landlord will usually serve a Notice in Reply within two months. Thereafter, the parties surveyors shall negotiate and usually agree upon a price that is payable for the freehold. If the price cannot be agreed, a tribunal can determine the price that is payable.
Leaseholders should therefore consider whether your pub is a house and see if you can unlock its potential value.
