Roof space: To build or not to build? That is the question

18th March 2022

Why is Vectis v Cambrai of interest?

Whether to build on the roof of a block of apartments or flats is an increasingly prevalent query facing landlords and management companies.

The Upper Tribunal recently considered, in Vectis Property Company Ltd v Cambrai Court Management Company Ltd [1], whether a landlord has rights to build on the roof space of a block of flats without express rights to do so in the lease.  This was considered in the context of the premium payable in a collective enfranchisement claim (the process whereby leaseholders of a block of flats collectively buy out the freeholder).

What were the facts?

Cambrai Court is a block of nine flats let on tripartite long leases made between the landlord, tenants and the residents’ management company (the RMC). Pursuant to those leases, the RMC had obligations to carry out maintenance and repairs to the roof.

In 2018 the landlord, Vectis Property Company Ltd, obtained planning permission to build two new flats on the roof of the building. The leaseholder tenants subsequently exercised their right to collectively enfranchise (that is, buy the landlord’s freehold interest) pursuant to the Leasehold Reform, Housing and Urban Development Act 1993, with the RMC as their nominee purchaser.

The landlord admitted the right to enfranchise, and the parties agreed that the price payable for the purchase of the freehold would be £24,500, plus an additional sum for the development value to the roof space. The parties were in dispute with regard to the latter amount.  The landlord argued that the value of the loss of potential future development was £203,300, whereas the RMC claimed that it had no value because there was no express right to develop the roof reserved to the landlord by the leases.

What did the Upper Tribunal decide?

The roof space was not demised to the tenants, and therefore the Upper Tribunal held that the landlord could do whatever it wanted with its own land. As such, Vectis was not prevented from adding two new flats on the roof (subject to the development not interfering with the rights of others), despite their being no express right to do so reserved to the landlord in the leases.

Consequently, the Upper Tribunal held that Vectis was entitled to be paid a fair price to reflect the loss in development value, as part of the premium to enfranchise.

What practical advice arises?

A key question is: ‘how does this affect the premium payable when enfranchising?’

Landlords will be looking to maximise the premium payable by leaseholders where they are compelled to sell their freehold interest as a result of enfranchisement, not least because they will be losing the right to collect future ground rents and the benefit of premiums payable from future lease extensions.

This case highlights the importance of factoring in development value, where possible, when assessing the premium payable on collective enfranchisement, as this could well amount to a significant sum.

How we can help

Walker Morris’ block management specialists Karl Anders, Asia Munir and Pawan Pandit have extensive experience and particular expertise in helping developers, landlords and agents to manage all aspects of their residential long lease portfolios.  If you have any queries or concerns relating to additional development at any of your blocks, enfranchisement or any block management issue generally, please do not hesitate to contact Karl, Asia or Pawan.

[1] [2022] UKUT 42 (LC)