The Court of Appeal (CoA) provided a roadmap for how “ancillary” use is treated by confirming that, as long as a unit is physically self-contained (i.e., having its own basic amenities such as a kitchen and shower) and the lease legally allows for some residential use, it will likely be classified as a dwelling.
Facts:
The case concerns Unit 6 of Priory House, a property located within the Cloisters Business Centre. Historically, the building served as a Victorian Convent until it was converted into separate units in 1987. Unit 6 is situated on the top floor and is physically configured as a self-contained suite of rooms that includes both a kitchen and a shower room. Although the unit was being used for storage at the time of the legal dispute, its physical layout remained capable of supporting residential occupation.
A 999-year lease was granted in 1989, and this contains a significant internal contradiction regarding how the space may be used. In the first schedule of the lease, the permitted use is specifically defined as “Offices (and ancillary residential use).”
However, a later section of the lease—paragraph 16.12 of the second schedule—contains standard “boilerplate” language that prohibits the tenant from using the premises for residential purposes or as sleeping accommodation.
The dispute arose when the lessees sought to challenge the service charges levied by the landlord. To do so, they needed to prove that Unit 6 qualified as a “dwelling” under Section 38 of the Landlord and Tenant Act (LTA) 1985. If the unit met this definition, the tenants would gain the right to have the reasonableness of their service charges determined by a specialised tribunal. The landlord argued that, because the unit was located in a business centre and the residential use was merely “ancillary” to its primary function as an office, it should not be legally classified as a dwelling. The County Court ruled against the landlord.
Decision:
The CoA dismissed the appeal. Lord Justice Lewison began by analysing the LTA 1985. He noted that the Act contains several different definitions of residential property. Some sections specifically use terms like “wholly or mainly as a private residence,” but Section 18—which governs service charges—does not. The Court concluded that if Parliament had intended to limit service charge protection only to “purely” residential buildings, it would have used that restrictive language. Since Section 38 defines a dwelling simply as a building “occupied or intended to be occupied as a separate dwelling,” the Court held that mixed-use properties are not automatically excluded.
The Court relied heavily on a legal principle established in Vickery v Martin. This doctrine states that a property remains a “dwelling house” even if the business use is substantial and the residential use is secondary or “ancillary”. The Judge noted that, when Parliament updated the law in the 1980s, it deliberately removed a previous requirement that a flat be used “wholly or mainly” as a residence.
Finally, the Court clarified that for the purposes of service charge protection, a “dwelling” does not necessarily have to be someone’s primary “home”. The intended policy change underlying the 1985 Act is to protect a tenant’s “pocket” rather than their “hearth”. Therefore, the fact that the unit was currently used for storage or owned by a business pension fund did not change the fact that the lease intended for it to be capable of residential occupation.
Implications:
The implications of this judgement are significant for both commercial landlords and tenants, particularly in the “live-work” and mixed-use property sectors. It clarifies that the threshold for statutory protection is lower than many landlords previously assumed. Indeed, tenants of mixed-use units enjoy the same protections against unreasonable service charges as purely residential tenants. This means landlords cannot simply cite the commercial nature of a “Business Centre” to bypass the LTA 1985. Tenants in these units have the right to challenge the reasonableness of service charge costs, demand that works be carried out to a reasonable standard, and require formal consultation before the landlord enters into major works contracts.
This case serves as a warning to landlords and their solicitors regarding “boilerplate” lease terms. The Court showed a clear preference for the specifically negotiated “permitted use” over general restrictive covenants. If a landlord intends for a unit to be strictly commercial, they must ensure the lease contains no mention of residential use, even as an “ancillary” or “incidental” right. Failure to do so may inadvertently grant the tenant a suite of statutory rights that are difficult to claw back.
