But, how do you calculate the 25% ratio; in particular, do you include common parts? The answer lies in s101 of the 1993 Act, which says you exclude common parts (which is defined as including the structure and exterior and any common facilities within). Thus, the area of the common parts is first deducted from the total gross internal area, and you apply the 25% test to the remaining area. Note that this is so even if there are clearly commercial-only common parts in a separate part of the building; the fact that the common parts are not relevant to the residential unit users does not matter (ie all common parts – of whatever nature – are deducted).

What about balconies? Since the calculation is based on internal floor area, it could be argued that external balconies should be excluded (even if included within the demise of long leases). There is no hard and fast rule to apply, but it does seem that if a balcony is fully enclosed then it will be counted as internal (whereas a balcony that is open, with mere railings, may well be excluded). For the authority see article in [2008] 205 Property Law Journal 2. © Practical Lawyer