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Our Property Litigation and Leasehold Management team help landlords and tenants navigate the sometimes complex area of property management. They act for a range of clients from individuals to multi-million-pound businesses and investors managing large property portfolios.
Applications to vary Leases
Can the terms of a lease be changed?
In short yes! Both landlords and leaseholders can vary the terms of a lease by agreement or by making an application to the First Tier Tribunal.
Section 35 of the Landlord and Tenant Act 1987 (“the Act”) provides that where the lease fails to make satisfactory provision with respect to one of the following matters:
- the repair or maintenance of the flat in question, or the building containing the flat, or any land or building which is let to the tenant under the lease or in respect of which rights are conferred on him under it.
- the insurance of the building containing the flat or of any such land or building.
- the repair or maintenance of any installations (whether they are in the same building as the flat or not) which are reasonably necessary to ensure that occupiers of the flat enjoy a reasonable standard of accommodation.
- the provision or maintenance of any services which are reasonably necessary to ensure that occupiers of the flat enjoy a reasonable standard of accommodation (whether they are services connected with any such installations or not, and whether they are services provided for the benefit of those occupiers or services provided for the benefit of the occupiers of a number of flats including that flat).
- the recovery by one party to the lease from another party to it of expenditure incurred or to be incurred by him, or on his behalf, for the benefit of that other party or of a number of persons who include that other party.
- the computation of a service charge payable under the lease.
- such other matters as may be prescribed by regulations made by the Secretary of State.
The Act also provides under section 37 that an application can be made by the landlord or any of the tenants under the leases, to vary two or more leases where the object to be achieved cannot be satisfactorily achieved unless all the leases are varied to the same effect. This application can only be made if:
- in a case where the application is in respect of fewer than nine leases, all, or all but one, of the parties concerned consent to it.
- in a case where the application is in respect of more than eight leases, it is not opposed for any reason by more than 10% of the total number of the parties concerned and at least 75% of that number consent to it.
Whether you are a landlord or leaseholder we can assist you should you wish to make an application to the First Tier Tribunal to vary leases.
Breach of Lease
A covenant is a legal promise that you will do or will not do certain things.
There are two types of covenant in relation to property leases:
- Positive Covenant: These include things like, paying service charges, painting every 7 years, keeping the property in good repair etc
- Negative Covenant: These include things like, not to sublet, not cause to cause nuisance, not having a pet etc
All leases contain covenants and obligations for both landlord and tenant. It is extremely important that both parties understand what restrictions apply when buying a leasehold flat.
Whether you are the landlord or leaseholder we can discuss the remedies available to you for breach of the lease.
Collective Enfranchisement it is a right, subject to qualification, for the owners of flats in a building, and sometimes part of a building, to join together and buy the freehold of that building. It's a right that requires the freeholder to sell the freehold of the property to them and was given under the Leasehold Reform Housing and Urban Development Act 1993.
Do I Qualify?
The right to collective enfranchisement is a ‘no fault’ one. You will qualify for this right if:
- The building is a self-contained building or part of a building. A self-contained building is one which is either structurally detached; or part of a building attached to another building but can be divided vertically from the whole so that the structure of it is capable of being independently redeveloped, and have independent services, or services which could be provided without significant interruption of any services for occupiers.
- Not more than 25% of the building is non-residential.
- Two or more of the flats are held by qualifying tenants i.e., tenants of flats let on leases for more than 21 years.
- The total number of flats held by those tenants is not less than two-thirds of the total number of flats.
- The premises must not include a track of an operational railway.
- There must not be a resident landlord (only relates to premises which are not purpose-built blocks).
Where applicable there will also be the costs of setting up the management of a company to acquire the freehold. In addition to those costs, you will have legal and other professional costs such as surveyors’ fees.
Once the claim is triggered by the service of an Initial Notice the nominee purchaser (usually a company incorporated to acquire the freehold on your behalf) will be liable for the reasonable costs of the freeholder and any relevant landlord. These costs are limited to certain matters and do not include costs incurred by the freeholder should an application be made to the First Tier Tribunal if terms cannot be agreed.
The Law Commission published its report on 21 July 2020 on leasehold reform. It included changes to leasehold enfranchisement rights, proposing to make it quicker, easier, and cheaper.
Should you wait for the reforms to be enacted or should you proceed with our collective enfranchisement claim now?
It really does depend on your circumstances. We do not know when the reforms will become law and the exact form the legislation will take, however, it was announced on 7 January 2021 that the Government plans to begin implementing the reforms around lease extensions and collective enfranchisement and expects to enact the first part of the reform legislation within the current session of Parliament.
If you are a landlord of a residential long lease your consent may be required before a leaseholder proceeds on matters such as alterations to the property, subletting and transfe rring the lease to another new leaseholder. Notices and Licences are required so that you can manage and regulate the property.
Typically, they include but are not limited to the following:
- Licences to sublet
- Licences for alterations
- Deeds of variation
- Notices to assignment
If you are a leaseholder you MUST comply with the terms set out in the lease to avoid breach of covenant.
Whether you are the landlord or leaseholder we can manage the lease compliance for you.
Lease Interpretation and Advice
Your residential lease can be complex and therefore difficult to understand. If you are buying a flat or are already a leaseholder of a flat it is important to know:
- The parties to the lease
- The extent of the property
- The length of the lease
- The rights granted with the property
- Landlords obligations
- Leaseholders obligations
We can help you interpret the lease. Some of the most common questions we are asked to interpret are:
- Is there a head lease?
- Who is responsible for insuring the building?
- What part of the flat belongs to the leaseholder/landlord?
- Who is responsible for external repairs?
- Whether a leaseholder needs the landlord's consent to carry out alterations (see Lease Compliance)
If you would like to know more please contact our specialist team who can take you through the possible benefits and alternative options available to you.
Right of First Refusal: What are my rights?
In ‘legal terms’ the right to be offered the first refusal is where a landlord of premises comprising solely or partly of flats wishes to dispose of its reversionary interest is provided in Part 1 of the Landlord and Tenant Act 1987 (“the Act”).
The landlord is prohibited from making the disposal unless it first serves all Qualifying Tenants of the flats on the premises with an offer notice under sections 5 and 6-10 of the Act.
For the right to apply a number of criteria must be met:
- The premises must consist of the whole or part of a building; and
- The premises must contain two or more flats held by qualifying tenants and a tenant is a qualifying tenant unless his tenancy is (i) a protected tenancy; (ii) a business tenancy under Part II of the Landlord and Tenant Act 1954; (iii) a tenancy terminable on cessation of employment; or (iv) an assured tenancy under the Housing Act 1988.
- The number of flats in the premises held by qualifying tenants must exceed 50 per cent of the total number of flats and the internal floor area of any non-residential parts of the premises must not exceed 50 per cent of the internal floor area of the whole of the premises.
- The landlord must not be an exempt landlord. Local Authorities, the Housing Corporation and private sector resident landlords Participating Tenants must form an RTM Company. It must be a private company limited by guarantee and have the correct Memorandum and Articles of Association
Any disposal by the landlord of any legal or equitable estate or interest affecting any premises to which the Act applies will be regarded as relevant disposal. Most transfers including the surrender of freehold or lease reversion, entering into a contract to create or transfer an estate or interest in land, whether conditional or unconditional, the grant of an option or right of pre-emption will constitute relevant disposal.
The form of notice depends on the type of disposal. The notice is required to set out the terms on which the landlord is proposing to dispose of the premises. The landlord must give all qualifying tenants a period of time to accept or reject the offer.
If the offer is accepted, the landlord must dispose of the premises to the qualifying tenants following a procedural timetable leading to the exchange of contracts or withdrawal. Failure to follow the timetable will lead to the loss of the right of first refusal.
If the offer is rejected the landlord can make the disposal to another party but only on the same terms as set out in the offer notice
If a landlord fails to offer its interest to the tenants or sells to a third party at a lower price than that offered to the tenants, the tenants can compel the new owner to sell the freehold back to them at the price it paid for it.
It is a criminal offence for a landlord not to serve the offer notice and can become liable to criminal prosecution and, on conviction a fine up to £5,000.