In a recent appeal between the freeholder and the leaseholder of a ground floor flat, the High Court has judged that the subsoil below the property did not belong to the ground floor and basement flat.
A freehold house in London had been divided into two maisonettes; one on the ground floor including a small basement (Flat 1) and one on the first and second floors (Flat 2). The leaseholder of Flat 2 was also the Freeholder of the building. This is a common set up and can be seen in most built up parts of the UK.
The original lease of Flat 1 was granted on 17 December 1992. That 1992 lease demised the ground floor and the cellar beneath the ground floor, together with the patio at the back, for 99 years. However, a lease extension under the Leasehold Reform, Housing and Urban Development Act (1993) was later obtained, and took effect from 12 May 2016. The result was that a new lease was granted, on the same terms as the old, but for a term now of 189 years.
The owner of Flat 1 wished to convert the cellar into a living space, thus increasing the overall size (and value) of the property. As the cellar was only 5 feet high, it was decided that some more height was needed to make it habitable. This extra height could only be obtained by digging into the subsoil below the cellar, by around another 4 feet. The Leaseholder of Flat 1 obtained planning permission from the local authority to carry out the works, but the Freeholder opposed these plans.
Why did the Freeholder object?
The Freeholder's argument was that while Flat 1 included the cellar, as per the terms of their lease, it did not include the subsoil below the cellar. As the owner of Flat 1 did not own the subsoil, their planned development would amount to a trespass on the Freeholder's property and could not go ahead.
The main issue before the Court was this: when the lease was granted for Flat 1 was the subsoil included (either expressly or implicitly) in the land demised by the lease?
The parties agreed that, in line with current authorities, that a freehold interest in land will include everything below the surface and up to the sky, based on the latin maxim: Cuius est solum, eius est usque ad coelum et ad inferos (a curiously biblical legal term meaning "whoever's is the soil, it is theirs all the way to Heaven and all the way to Hell"). Therefore, if the lease of Flat 1 did not grant the subsoil to the Leaseholder, it must belong to the Freeholder.
It was commented on that where there is a lease of a whole building, vertically divided from adjoining properties, it will usually be inferred that the demise includes the airspace above and subsoil below. Where a property is horizontally divided (such as in this matter) the extent of the demise will depend on a careful interpretation of the lease as a whole.
Check your lease carefully
The description of the demise in the lease of Flat 1 included all parts of the building below the midway line, including the structure. "The maisonette" was separately expressed to include "...the foundations and the void or cellar below the ground floor". The Court held that this specific extension of the demise implied that the subsoil was excluded. This was further supported by a right reserved to the Freeholder to pass services through conduits in or under Flat 1 and a clause allowing the Freeholder to repair the foundations of the building. The Court held that subsoil was not included in the demise of Flat 1. The Freeholder therefore had complete discretion as to whether to allow the basement extension and on what terms.
The Judge was sympathetic to the Leaseholder, commenting on the premium placed on urban living space, but stressed that the right to develop land... "can only take place within the context of the legal rights which have been deliberately created by the parties or their predecessors in title. The mission – or a part of the mission – of property law is the allocation and management of resources, which requires (amongst other things) stability. Hence what governs is not what is reasonable in the circumstances. Instead, it is (within public policy limits) what is stipulated. The economics, however reasonable, do not control the law"
Understand what ownership really means
This case is an interesting commentary on the interpretation of lease wording and underlines the importance (for both Freeholders and Leaseholders) to have a clear and precise idea of the extent of ownership. This concept not only affects the ability for future development of a property, but does also determine the parties' respective repairing obligations.
The ability for a leaseholder to develop their basement can be valuable. An adapted basement can make a handy addition to the square footage of a flat, not to mention an increase to the market value. But care but always be taken; there are many people with basement flats who have happily converted their basement to a habitable space, oblivious to the fact that it is not part of their lease. This problem usually comes to light when they sell the property and the buyer discovers the issue, putting a potential end to that and any other sale. Before you undertake an alteration to your leaseholder property, you should always have the lease inspected by a legal professional.
The full judgment of the case, cited as Brenda Anna Gorst & Charles Corst v Anabel Mary Louise Knight (2018 EWHC 613 (Ch)) can be read HERE.
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