Property Use Restriction is Reasonable

It is normal for any building divided into flats to have rules relating to the use to which the flats can be put as well as other internal regulations.

The potential scope of such regulations was tested in a recent case which dealt with whether or not it was reasonable to have a rule that required flat dwellers to be owner/occupiers, rather than short-term tenants. The argument resulted in a decision by the Upper Tribunal, which refused to amend a provision in a lease which restricted the use of the residential premises to the long leaseholder and his family.

The flat was held under a 90-year lease and formed part of a small residential block. The lease contained no restrictions on assignment or subletting but included a covenant whereby the leaseholder agreed ‘to use the flat as a private dwelling for the lessee and his family and for no other purpose’.

When applying under the Leasehold Reform, Housing and Urban Development Act 1993 for an extension to his lease, the leaseholder had sought deletion of the words ‘for the lessee and his family’. The landlord would not agree to the amendment and the leaseholder’s arguments on that issue were subsequently rejected by the Leasehold Valuation Tribunal.

In dismissing the leaseholder’s appeal, the Upper Tribunal found that the covenant should be interpreted in accordance with its natural and ordinary meaning. In the context of a residential building, comprising flats let on standard terms which were intended to be enforceable by the leaseholders against each other, an intention to restrict use to leaseholders and their families was neither improbable nor surprising.

The Tribunal noted that it was only to be expected that owner/occupiers might prefer their neighbours also to be owner/occupiers, rather than tenants with a more limited interest. In the circumstances, a covenant which sought to restrict use to the leaseholder and his family was reasonable and, on the evidence, had been ‘included deliberately’ in the lease.

If you are considering the purchase of a flat or other property in a multi-occupied building, a good understanding of any restrictions on use and the internal regulations generally is important. Contact us for advice.