Is Salisbury Cathedral justified in putting the squeeze on leaseholders living on its close?

Cathedral close leaseholders are excluded from enfranchisement rights owing to a sneaky Lords amendment to the 1993 Act, which was added as an after-thought

Now leaseholders face paying 3.33 times as much as other leaseholders to extend their leases.

The Crown Estate has the same powers but does not apply them

Prompting the question … is the mercenary spirit of the Rev Obadiah Slope alive and well in Salisbury?

By Professor Ron Johnston OBE

Acts of Parliament in 1967 and 1993 gave owners of houses and flats with long leases on their properties increased security of tenure, with the right either to buy the freehold or extend the lease, at a stated premium.

But when the 1993 Act was being debated in the House of Lords flats in Cathedral Closes were excluded from that right.

That affected a development of 78 properties in Salisbury’s Cathedral Close and when the directors of its Management Company sought the ability to extend their leases the freeholders (the Cathedral’s Dean & Chapter) and the Church Commissioners (who have the final say on all such transactions) only agreed – after nearly seven years of negotiations – to allow such purchases on terms much more restrictive than those that apply to all leaseholders living elsewhere than in cathedral closes.

In effect, the offer was six times more expensive than that set out in the 1993 legislation, and a substantial number of leaseholders was even excluded from that opportunity because the cathedral authorities did not want them “to make money”.

The possibility of significant leasehold reforms in the near future gives those leaseholders hope that this unequal treatment can be removed.

Sarum St Michael (SSM) is a development comprising 78 separate properties, most of which are flats. It occupies buildings that were formerly part of the Salisbury Diocesan Training College with the same name. The freeholder is the Dean & Chapter of Salisbury Cathedral; SSM has a 125-year underlease covering the entire development, and it issues sub-underleases to the 78 separate properties. All of those leases have 84 years left to run.

Under the Leasehold Reform, Housing and Urban Development Act 1993 almost all owners of flats with long leases have the right either to buy the freehold of their property or to extend their leases for a further 90 years, on terms set out in that legislation, as amended in The Commonhold and Leasehold Reform Act 2002.

That right does not apply to SSM leaseholders, however, because under Section 96 of the 1993 Act it is denied to owners of leasehold flats “within the precincts of a cathedral church”, which includes The Close in Salisbury.

That exemption was not in the original Bill. It was added as an amendment very late in the House of Lords debates, on the grounds that it was necessary to protect the unique environments in Cathedral Closes.

That argument was opposed by the government spokesperson (Lord Strathclyde) on the grounds that planning legislation provides all the protection needed (as do the SSM leases), but the amendment was carried and became part of the Act.

In 2012 SSM’s directors, aware that some owners were having difficulties selling their flats and that some potential buyers were having problems obtaining mortgages, approached the Dean & Chapter to see if they would agree, despite the absence of an automatic right, to allow SSM owners to extend their leases; there was no request for the right to buy the freehold.

There was a positive response, but negotiations were lengthy.

In February 2016 the Dean and Chapter made what they said was their final offer: a 50-year extension for a premium of 5% of the assessed freehold value.

In addition, they insisted on a much more rigorous residency qualification than applies elsewhere.

After the 1993 Act was amended in the 2002 Commonhold and Leasehold Reform Act the right to a lease extension was made available to all who had owned their property for two years, irrespective of whether it is their major residence.

However, the Dean and Chapter insisted that they would only sell lease extensions to owners for whom their flat had been their principal residence for the three years immediately preceding their application.

As the Dean & Chapter could not implement such an offer without the permission of the Church Commissioners, SSM’s Board agreed that the offer should be presented to them to test its acceptability; only if the Commissioners agreed to it would the terms then be presented to the company’s membership.

After a year the Commissioners declined consent to the proposal, on the grounds that the Dean and Chapter had “failed to demonstrate the reasons for disposing of the leases at less than full value and which resulted in a diminution of the freehold value of the Dean and Chapter’s interest”

This was an argument that was spelled out further in a letter to an MP from a constituent who owns a flat in SSM that: “The Commissioners asked Chapter to confirm that they had properly balanced the impact on the Chapter’s finances and Chapter’s ability to undertake mission both now and in the future. Chapter was unable to calculate this, and the matter remained unresolved.”

Responding to pressure from a number of MPs, including John Glen, MP for Salisbury, the Commissioners suggested to Salisbury’s newly-appointed Dean in 2018 that he re-visit the issue.

At a meeting with two SSM Directors in late 2018 he agreed to make a further case to the Commissioners, if Chapter agreed – which it did.

However, despite repeated requests, he declined to reconsider the terms of the offer, and the case made was just that, in his words, allowing the lease extensions was ‘important for the Dean & Chapter [so] that the Close be a harmonious community and residents feel part of a wider cathedral community’.

The Commissioners gave their consent in late May 2019 but in a subsequent meeting with SSM Directors the Dean declined to have any reconsideration of the terms, which he stated that he considered “just”; the residency restriction was justified because it would prevent “buy-to-let” owners (of which SSM has a small number) “making money”.

These terms were presented to a Company Extraordinary General Meeting in July 2019, which was unanimous in agreeing that “The terms of the Dean and Chapter’s offer are excessive, unjust and treat SSM leaseholders unfairly and unequally”.

The meeting also tasked the Board to seek ways in which the law can be changed so that SSM leaseholders are treated in the same way as all other leaseholders who have the rights under the 1993 legislation.

Apart from one other block of four flats adjacent to SSM, as far as the Company has been able to ascertain there are no flats in other Cathedral Closes that are subject to Section 96 of the 1993 Act.

Flats in Salisbury’s Close are, it seems, unique in being treated unfairly by that spurious piece of legislation.

It is also of relevance to note that the Crown Estate’s leaseholders were excluded from the provisions of the 1993 Act by Section 94, but the Crown Estate has decided to operate as if its leaseholders had the automatic rights to extend their leases – a model that SSM Directors hoped could be applied to their properties.

In brief, SSM’s flat-owners are being treated unequally by the Dean and Chapter. All other leaseholders of flats in the country whose leases have more than 80 years to run can purchase a 90-year extension for 1.5% of the assessed freehold value: for a flat valued at £400,000 that would cost £6,000, or £66.67 per annum.

The Dean and Chapter’s offer to SSM is for a 50-year extension at 5%, which for the same flat would cost £20,000, or £400 per annum.

In cash terms, SSM owners would pay 3.33 times as much as anybody else; in per annum terms they would pay 6 times as much. And a substantial number of SSM owners are even excluded from that – not only the small number of ‘buy-to-let’ owners but also the twenty or more for whom their flat is either a second home, in a number of cases their intended retirement home, or has been bought by family members for an aged relative.

SSM flat-owners feel unequally treated by the Dean and Chapter’s offer (sustained by the Church Commissioners) in three ways, therefore.

They are unequally treated compared to all other long-lease flat-owners in the UK; they are unfairly treated compared to their neighbours in The Close who have the unconstrained right to extend the leases of their houses under the terms of the 1967 Leasehold Reform Act (which some have done); and, because there is a small number of houses within SSM whose owners also have those rights, they are unfairly treated compared to some of their nearest neighbours.

It is for this reason that SSM has welcomed recent political debates over leasehold reform and the possibility that the Law Commission – to whom evidence has been submitted – might recommend changes favourable to its leaseholders.

Further the government’s announcements this summer that it intends to legislate for changes to leasehold regimes, Labour’s announcement that it too favours leasehold reform, and the pressure for change coming from the 200+-strong [in fact, 173] All-Party Parliamentary Group on Leasehold and Commonhold Reform, all give SSM’s Directors hope that within the major changes that might be proposed this small anomaly can be removed – by the simple procedure of repealing Section 96 of the 1993 Act.

If that can be achieved a small group of leaseholders will have the right to the same security of tenure accorded to all leaseholders whose properties lie outside Cathedral Closes and evade the attitude of their governing bodies who, in the words of one Cathedral office-holder when asked why they were proposing to charge SSM owners more than anyone else replied, simply, “because we can”!

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Professor Johnston OBE FBA FAcSS occupies a chair in the school of geographical sciences, at the University of Bristol