Council loses Upper Tribunal battle over modification of headlease that would allow conversion of 76,000 sq ft office building into 114 flats
Basingstoke and Deane Borough Council must modify the headlease of a former office building to allow for conversion to residential use, the Upper Tribunal (Lands Chamber) has ruled.
Property firm Shaviram Normandy brought the case over Normandy House, an office building in the centre of Basingstoke formerly used as IBM’s UK headquarters.
The case of Shaviram Normandy Ltd v Basingstoke And Deane Borough Council (RESTRICTIVE COVENANTS - modification) [2019] UKUT 256 (LC) was heard by Martin Rodger QC, Deputy Chamber President, and Paul Francis. The judgment was published on Bailii this week.
Normandy House is a purpose-built office building of some 76,000 square feet. The council owns the freehold and in 1985 granted a headlease with a covenant restricting its use to offices and which reserves an annual rent equal to 15.5% of the “aggregate of the net annual rents…actually received by the lessee”.
Since IBM left in 2013 Normandy House had fallen into disrepair and Shaviram Normandy wants to convert it to provide 114 residential flats, let on assured shorthold tenancies at open market rents.
Although the company could make this conversion under permitted development rights, it cannot act while the requirement remains for Normandy House to be used as offices.
The council wants the building restored to lettable condition as town centre office accommodation regarding it as an important part of Basing View, its 65-acre office park near the town’s station, and so has refused to vary the headlease as it wishes to prevent residential uses in the area.
In its ruling, the tribunal said that after a site visit Mr Rodger and Mr Francis had concluded “Normandy House, is not part of Basing View. Rather, it is an area of mixed uses…noticeably different from Basing View.
“Nor, from our observation and consideration of the evidence, can the Station Quarter as a whole, or Normandy House and its immediate neighbours, be described as the essential gateway into Basing View.”
They also said Normandy House had not been treated as part of Basing View in planning terms.
The tribunal noted that the value of the council’s lease reversion with Normandy House as an office building would be £3m, and as residential £3.125m.
Its estimated annual income from the building as offices would be £160,000 and as homes £144,500.
“Our conclusion is therefore that the continuation of the restriction on the use of the building to offices secures no benefit to the council in terms of the capital value of its reversion, which was the main focus of the parties’ submissions,” adding that the £15,500 difference income was small and anyway uncertain.
The tribunal modified the lease by adding “or as a residential building comprising 114 flats”.
Mark Smulian
