U.K. Supreme Court Hears Case Over Law Forcing Property Sales

Photographer: Jason Alden/Bloomberg

Residential properties in Mayfair, London. Close

Residential properties in Mayfair, London.

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Photographer: Jason Alden/Bloomberg

Residential properties in Mayfair, London.

Two property owners asked the U.K. Supreme Court to overturn a ruling that a 1967 law enabling long-term leaseholders to forcibly buy their homes at market prices should apply to buildings used as businesses.

The law was intended to apply to properties used as homes, not buildings constructed as houses and later adapted for other uses, Edwin Johnson, the lawyer for owners Hugo and Hilary Day, said at a hearing today in London.

“Parliament chose to confer the benefit on a particular type of property -- that type of building is a house,” Johnson, of Maitland Chambers in London, told a panel of seven judges. “These properties are plainly not houses.”

The Days sued to avoid being required to sell three Victorian properties in London’s South Kensington neighborhood to Hosebay Ltd., a company that purchased their leases in 1996 and now rents more than 50 rooms to tourists as self-catering hotels. The leases were created in the 1960s and 1970s to last as long as 60 years, according to court papers.

If the 2010 judgment by the Court of Appeal is upheld, Britain’s top court may start a flood of corporate entities forcibly buying the properties they lease and reduce the holdings of some of the city’s wealthiest property owners -- even if they are compensated at a market rate.

“It would effectively widen the primary intention of the legislation,” Sara Dolley, a lawyer at Eversheds LLP in Cardiff who isn’t involved in the case, said in a phone interview. “Arguably that probably wasn’t the intention of the legislation at the time.”

Country Estate

While hearing the arguments, the judges asked questions including whether the law would apply to the courthouse in which they sit if it were converted into an opulent country estate.

The judges’ ruling will provide the latest interpretation of a law that was originally intended to apply to properties rented at a low price, according to the 2010 judgment. The law was amended about a decade ago to remove tests to determine who qualified, giving affluent leaseholders the same rights as less- fortunate ones. A ruling in favor of the leaseholder would change the law further.

The other owner involved in the case is Howard de Walden Estates Ltd., which seeks to avoid selling a five-story building constructed as a house in 1760 and now leased to a company called Lexgorge Ltd. The structure, which now has lawyers’ offices on some floors, is subject to a lease issued in 1952 for a period of 109 years.

To contact the reporter on this story: Erik Larson in London at elarson4@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

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