Leasehold law: the reforms

So many changes and it still doesn’t work

Below is a chronology of legislative changes to leasehold law since 1954, with the main features highlighted. So many laws and it still doesn’t work: which is why the best possible solution to leasehold is not to build any more of it and join the rest of the world with commonhold tenure.

Landlord and Tenant Act 1954
Local Government and Housing Act 1989 (schedule 10)
• Gives most long leaseholders the right to remain as a renting tenant at the end of their lease.

Leasehold Reform Act 1967
• Gives most long leaseholders of houses the right to purchase the freehold
or extend their lease.
• Gives landlord’s of leasehold houses the right to apply for the retention of management powers for the general benefit of the neighbourhood (estate management schemes).

Landlord and Tenant Act 1985
• Gives tenants rights in relation to service charges.
• Gives tenants rights in relation to consultation about major works (qualifying works & long term agreements).
• Gives tenants rights to information about and to challenge service charges.
• Gives tenants rights relating to the insurance of their property.
• Gives tenants the right to have a recognised tenants’ association.
• Gives tenants rights to consultation about managing agents.

Landlord and Tenant Act 1987
• Gives qualifying tenants of flats the Right of First Refusal to buy the freehold.
• Gave tenants the right to seek the appointment of a new manager by a court.
• Gives tenants rights to compulsory purchase of a landlord’s interest in certain circumstances.
• Requires service charges to be held in a separate account and in trust.
• Gives tenants the right to seek variation of their leases.
Leasehold Reform, Housing and Urban Development Act 1993
• Gives most long leaseholders of flats the collective right to buy their
freehold and the individual right to renew their leases.
• Gives leaseholders the right to a management audit.
• Gives the Secretary of State or National Assembly for Wales the power to
approve management codes of practice.
• Gives landlord’s of leasehold flats the right to apply for an estate
management scheme.
• Transfers responsibility for estate management scheme variations to LVTs.

Housing Act 1996
• Makes it easier for leaseholders to challenge unreasonable service charges and restricts the landlord’s right to forfeit where an item or items of service charges are disputed.
• Strengthens the Right of First Refusal by making it a summary offence.
• Extends the rights of leaseholders to buy the freehold of their building.
• Gives jurisdiction for LVTs to determine service charge disputes and applications for the appointment of a manager.

Commonhold and Leasehold Reform Act 2002
• Relaxes the qualifying rules for buying the freehold of a leasehold property or extending the lease (flats and houses).
• Provides that marriage value is disregarded where leases have more than 80  years to run, and that it is split 50/50 in all cases where it does apply.
• Raises the ‘commercial limit’ for blocks of flats from 10 per cent to 25 per cent.
• Gives new rights to personal representatives of deceased leaseholders of flats and houses.
• Allows leaseholders of houses who have already extended their lease under
the 1967 Act the right to buy the freehold, or remain in the property as a renting tenant when the lease expires.
• Widens the right to seek the appointment of a new manager for blocks of flats.
• Widens the grounds under which a lease can be varied.

Second phase of provisions commenced on 30 September 2003 in England
and 30 March 2004 in Wales.

• Gives leaseholders of blocks of flats a ‘no-fault’ right to take over the management of their block.
• Includes ‘improvements’ in the definition of service charges.
• Widens the jurisdiction of the LVTs, for example to determine the liability to pay service charges, the reasonableness of administration charges payable under a lease, variations of leases, and charges payable under Estate Management Schemes.

Second phase of provisions commenced on 31 October 2003 in England and
30 March 2004 in Wales.

• Improves the rights for leaseholders paying variable service charges to be consulted about long term agreements and qualifying works.

Third phase of provisions commenced on 28 February 2005 in England and
31 May 2005 in Wales.

• Requires landlords to demand ground rents in a specific manner before they
are able to take any action or impose any penalties for late payment.
• Requires landlords to first satisfy a leasehold valuation tribunal, court or arbitral tribunal that a disputed breach of a covenant or condition of the lease has occurred before they are able to take any forfeiture action.
• Prevents landlords from forefeiting leases as a result of trivial debts that consist of ground rent, service charges, administration charges (or a combination of them) where the debt does not exceed £350, unless all or any part of the sum has been outstanding for more than 3 years.
• Prevents landlords from insisting that leaseholders of houses use a particular
insurance company nominated or approved by them to insure their house.
• Fixes the valuation date for collective enfranchisement of flats at the date
that the initial notice is served.
Fourth phase of provisions commenced on 1 October 2007 in England and
30 November 2007 in Wales.
• Requires landlords to send a summary of the tenant’s rights and obligations
with a demand for service charges, using particular wording set out in
regulations.
• Requires landlords to send a summary of the tenant’s rights and obligations
with a demand for administration charges, using particular wording set out
in regulations.

Comments

  1. Ernest Hartland says

    Yet another opportunity for Peverel to Rip us Off? FIRE RISK ASSESSMENT

    Very short notice that this is to be carried out on our Loft Spaces, and as I judge it, not an Health and Safety Requirement, seeing as there is no evidence to support it on the HSE Web Site. Any observations and comments from others?

    • GLaws says

      We have the same problem with Fire Risk Assessment. Massive bills for ‘repairs to loft hatches’ and self adhesive fire door keep shut signs put on every door possible at a cost of over £20 a sign, yes they cost about £1 each if bought by anyone other than the council.

      Have you managed to challenge the assessment and associated costs?

    • Jean lemon says

      the fire assessment, asbestos and health and safety seem to be the flavour of the month for rogue managing agents to try and fleece more money from,their leaseholders. Our managing agents HML Hathaways tried to include all of these items in this years service charges. However we managed to get all of them removed as being unnecessary before they employed themselves to carry out the work.

  2. says

    Ernest,
    We had a Fire Risk Assessment which cost us £690.00 for a 17 page document where 95% of the report was NOT APPLICABLE?
    WE have no communal areas and the only visits noted, were the 10 out of 14 roof spaces that were viewed. The surveyor refused to use my fixed ladder and used his own, which wasn’t high enough to allow him to enter the roof space, which was the plan, he also then took pictures, which he did not ask us for permission.
    The Company Cardinus also carried out a Re-evaluation Survey for insurance purposes where we believe they are not RICS Chartered Surveyors, which we also paid for over £324.00.
    We also paid out for 2 further Risk Assessments for Risk Assessment Reviews one for £60.00 and the other for £29.57?
    Check who was the surveyor and ask for the report that they produce?
    Sebastian has my details and I will try to provide help if required?

  3. lucy watts says

    I have a leasehold flat. The freeholder has gone into liquidation and receiver is the freeholder. Building has S20 to fix roof. Receiver is looking after 15 freehold flats – there are 14 leasehold flats. My flat is letting in rain water every time it rains so much so that the flat above me and my flat are not fit to live in. Receiver wants to do works but leaseholders are saying they want a new surveyor and they have got a solicitor to say that management agent is not qualified to do the specifications even though they had phase 1 of the works done on their roof in the south of the building. The west roof is now in a terrible state where I live but leaseholders will not pay their share and are putting objections in the way to stop work. My question is ‘What can I do to get the work done?’ My flat cannot go through another wet winter – I fear the beam has wood rot and will fall if work does not start soon….’ Please help me…..

    • Jean lemon says

      I have only sympathy for,you. I also have water pouring through the ceiling in my flat. HML Hathaways who unfortunately are our managing agents employed their own company , HML Shaws to manage our section 20 repairs. The builders took the coping stones off the roof and replaced them with some metal tubing not even sealed. Shaws signed off all of the shoody work. Now after 9 months neither of these two companies will do anything about the repairs and I am having to start a court case to get the repairs done. I suggest you look at getting an order of specific performance against whoever is responsible for the freehold. This hopefully will force them to do the repairs

      • Lesley Newnham says

        Jean,

        Are you in a position to exercise RTM? You may find it cheaper and quicker than court cases but my worry is that the companies you mention have been accredited by LKP!

  4. Sue Stuckey says

    Leasehold Reforms? There are far too many reforms and too little enforcement.

    My simple solution is to abolish s42(1) of the Landlord & Tenant Act 1987 that gives Trust status to residential service charges – but only to service charges operating in the private sector. At a stroke, you would relieve managing agents of their wily scheme – devised by the lawyers and supported by toady accountants – that service charge money should be treated differently, removed from the accounts filed at Companies House and hidden from public view.

    Why should private sector landlords and their managing agents have the benefit of such covert accounting that allows them to hide from their competitors their fees and charges? After all, similar companies operating in the charitable sector – or, indeed, as landlords in the public sector as ‘registered social landlords’ are exempt from s42(1). Their accounts must be filed in full as income & expenditure (P/L) and balance sheet – for all the world to see. So if you own a flat on a council-owned estate, you get better accounting transparency than tenants on private estates. And better protection.

    What is the point of s42 – a law that is not properly understood even by the lawyers? A law that is interpreted in different ways by those acting for private landlords and their managing agents, on the one hand – and HM Revenue & Customs and Companies House, on the other?

    It seems it was introduced by well-meaning but short-sighted government. Equally well-meaning but short-sighted are the reforms enshrined in the Companies Act 2006. Leaseholders who once found it difficult to access the service charge accounts now find it even harder because their management will have taken the opt-out route of abolishing the AGM (general meeting) and of filing the flat management accounts as ‘dormant’.

    No longer are leaseholders given the democratic right of being asked to adopt the accounts in general meeting; nor do they get to appoint directors who are now appointed by other directors – in a closed shop; nor do they get to question the management in open forum on housekeeping and other issues of collective concern.

    But leaseholders can call a general meeting if 10% want it, can’t they? True. But in practice, how do you achieve that when more than 60% of leaseholders live off-site and the management won’t let you have a list of names and addresses, citing the Data Protection Act as an excuse?

    So, thanks to the many government reforms intended to protect them, leaseholders are being shafted by wily managing agents and the puppet directors of flat management companies, many of these directors themselves involved in the property market as surveyors, letting agents and the like.

    Solution? Repeal the reforms.

    • Sue Stuckey says

      A bit of news. A glimmer of hope and a real blow for managing agents and puppet directors.

      It looks as if ICAEW has proposed that income and expenditure arising from s42 service charge funds should be incorporated into the P/L account. We will no longer be compelled by managing agents to file the statutory accounts as dormant with the service charge statements prepared as an advisory note for leaseholders’ eyes only. The way I read it, reserve funds will still be treated as monies held in trust for reporting purposes.

      Key to the proposals are the legal distinction of whether the RMC is acting as principal or agent. ICAEW proposes that, in managing a leasehold property, the RMC is acting as principal.

      The main proposals, which could come into force as early as 1 January 2015, are:

      – A RMC always acts as principal (not agent) when entering into transactions, with third party suppliers, relating to the management of maintenance and provision of services to a property
      – Service charge expenses incurred by the RMC and the income from drawing on the service charge cash received from tenants should be concurrently recognised in the RMC’s profit and loss
      – The cash and other assets arising from service charges received from contributing tenants are held in statutory trust and are not assets of the company. They should not be recognised in the statutory accounts of the RMC but should be disclosed in the notes.

  5. Angela says

    I’m new to this site , finding it as I did research on buying two retirement flats to let. The property’s are both managed by Peverel now known as First Port.
    . I was quilt confident it was going to be a good investment BUT no I’m really not sure. Please give me your views and advice. I am using online conveyancing legal company but my advise has just admitted she knows very little about lease hold property’s!!!!
    (Between the devil and the deep blue sea!!!!!)

  6. Karen Peel says

    Ground Rent:

    How much is it a year to ‘rent the space your apartment stands on’?
    Do you have a parking space?
    Ground rent per annum, will it go up any time soon?
    Term left on the lease before you have to start paying extra premiums to live there.

    Management/Maintenance Fees:

    How much is it a year?
    Any fees to pay if you are subletting?
    Any age restrictions on tenants
    Any additional Service Charge demands paid by previous owners over the last 10 years
    Is there any leaseholders who owe money for service charges currently and if so how much is outstanding?
    Any debts owed by previous owners of the properties you want to buy?
    Have you spoken to owners who live there already and asked them any questions about the development?
    Any section 20 agreements in place?
    Any planned over the next 5 years?
    Proof of service charge for the last 5 to 10 years?
    Estimate of service charge for the next 12 months
    Is there a sinking fund for major repairs?
    Is there a Residents Association?
    Is there a wardens flat which you will have to pay for
    Have you checked out Peverel on the http://www.lease-advice.org/lvtdecisions/
    If you want to make any improvements you will have to ask your landlords permission and they will charge you for the priveledge.

    Buildings Insurance:
    How much is it?
    Does the landlord receive any commission for the insurance and if so how much is it?

    That is just a few for starters…
    Last but not least:
    Don’t use a solicitor who has no experience of leasehold issues or contracts, you will be asking for trouble…..
    Do your own due diligence and don’t rely on others to do it for you becuase they won’t!!

    Lastly: Buy 2 houses……..

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