Presentation 25 September 2013 Leasehold Management Lucy Walsh, Sam Coward
Introduction
Introduction Recovery of service charge arrears Long leases Shared Ownership leases Management Charges Calculation Recoverability Variation of Leases Deeds of variation Landlord and Tenant Act 1987 Anti-social behaviour Leaseholders v Tenants
Recovery of Service Charge Arrears
Long Leases - Forfeiture Forfeiture Ultimate remedy for non payment of service charge arrears Brings a lease to an end earlier than it would normally terminate provided - Tenant has breached lease covenant - There is a forfeiture provision in the lease Restrictions on forfeiture for residential long leases Commonhold & Leasehold Reform Act 2002 (sections 166-172) Protection of Eviction Act 1977 (section 2)
Long Leases - Forfeiture Need to ensure that there has been no waiver of the right to forfeit otherwise right potentially lost What amounts to waiver? Acknowledgement of continued existence of the lease - Acceptance of rent/demand for future rent
Long Leases - Forfeiture In order to forfeit the level of arrears (of ground rent or service charge) must be: Over 350 or, Include an amount which has been outstanding over three years In respect of ground rent arrears, a demand for rent must have been served s.166 Commonhold and Leasehold Reform Act 2002 (CLRA) In respect of service charge arrears, the demand must have been accompanied by a Summary of Rights and Obligations s.21b Landlord and Tenant Act 1985 (LTA)
Long Leases - Forfeiture Before forfeiting for non payment of service charge (or any other breach) there must be either: Determination by court Determination by LVT Admittance of breach by tenant Usual course is to make an application for a monetary judgment Be aware that the leaseholder could apply for the matter to be transferred to the LVT
Long Leases - Forfeiture After determination, next stage is to serve a section 146 notice Can only serve 14 days after the final determination (which includes the time for bringing an appeal, usually around 5 weeks) Notice must give them a reasonable time to remedy the breach Notice should be served on any mortgagee
Long Leases - Forfeiture If leaseholder fails to pay, next step is to issue court proceedings Issue in court where property situated Hearing date usually 6-8 weeks after issue Forfeiture arises on service (copy to mortgage company) Leaseholder does have right to relief would need to make an application - Generally a condition of relief that all arrears are cleared and costs paid
Shared Ownership Leases - Possession Joint Guidance on recovering possession of a shared ownership lease (HCA, CML, NHF) Status of Shared Ownership lease Before staircasing to 100%, it is as a matter of law an assured tenancy Richardson v Midland Heart however Re Corscombe Block has muddied the waters Assured tenancy terminated by service of an NSP Limited to grounds 2, 7, 8 and all discretionary grounds save 9 and 16
Shared Ownership Leases - Possession Serve NSP on leaseholder and any mortgagee Notice period Check lease provisions as maybe longer than statutory requirement, usually 28 days If fail to remedy, issue possession proceedings copy served on leaseholder and mortgage company Possession hearing usually 6-8 weeks Impact of possession order Leasehold interest distinguished Windfall for landlord
Shared Ownership Leases - Possession Position different when tenant not residing there No longer occupying as only or principal home Has tenant died? Practical considerations Is there a mortgage company - If so likely to pay on receipt of NSP or claim form otherwise their interest is at risk - Is this what you want may clear bad debts but mortgagee will be able to rely on mortgagee protection clause
Management Charges
Management Charges Starting point is what does the lease allow you to charge for? Reasonableness of management charge One of the most challenged items at LVT Subject to principles of reasonableness set out in s19 of the LTA Relevant costs shall be taken into account in determining the amount of a service charge payable for a period (a) only to the extent that they are reasonably incurred, and (b) where they are incurred on the provision of services or the carrying out of works, only if the services or works are of a reasonable standard; and the amount payable shall be limited accordingly
Management Charges RICS Code of Practice Consideration of QLTA
Variation of Lease
Variation of Leases Landlord cannot unilaterally vary the terms of a lease Variation can be achieved by Deed of Variation Application to vary pursuant to s.35 of the Landlord and Tenant Act 1987
Variation of Leases Deeds of Variation Deed of Variation Consent of both parties required therefore if tenant does not agree, cannot go any further Must be in writing The consent of any mortgagee will be required - Can delay the process and make it more expensive as they will want their fees paid for consenting Will need to be registered at Land Registry Where there is a fundamental change, it may amount to a surrender and regrant SDLT implications?
Variation of Leases Section 35 application Section 35 allows any party to a long lease to apply for a variation where the lease fails to make satisfactory provision for one or more of the matters listed in section 35(2) Section 35(2)(e) the recovery by one party to the lease form 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
Variation of Leases Section 35 application Power of the LVT to vary the lease is discretionary Cannot make an order to vary if it appears to the LVT: That the variation would be likely to prejudice; - The respondent to the application, or - Any person who is not a party to the application That for any other reason it would not be reasonable to effect the variation Notice of any application must be served on all persons likely to be effected
Variation of Leases Section 35 application Section 37 enables a single application to be made to vary two or more leases BUT Leases must all be long leases of flats under which landlord is same person (don t have to be in same building or in identical terms) The object to be achieved must only be achievable satisfactorily if all specified leases are varied Where the application involves 8 or less leases, the application must have the consent of all or all but one of parties Where the application involves 9 or more leases, the application must have the consent of at least 75% of the parties concerned and must not be opposed by more than 10% of them
Anti Social Behaviour
Anti Social Behaviour Assured tenants Express terms in tenancy not to commit or engage in anti-social behaviour - Comprehensive clauses re nuisance, harrassment etc Leaseholders Express terms in lease generally not as extensive as in tenancy agreements Right for leaseholder to have quiet enjoyment Anti-social behaviour committed against leaseholders - By tenant? By private owner/occupier
Contact Name Lucy Walsh JobTitle Senior Associate d 0161 838 2064 e lwalsh@trowers.com Name Sam Coward JobTitle Solicitor d 0161 838 2038 e scoward@trowers.com Trowers & Hamlins LLP 2013 Trowers & Hamlins LLP is a limited liability partnership registered in England and Wales with registered number OC 337852 whose registered office is at 3 Bunhill Row, London EC1Y 8YZ. Trowers & Hamlins LLP is authorised and regulated by the Solicitors Regulation Authority. The word partner is used to refer to a member of Trowers & Hamlins LLP or an employee or consultant with equivalent standing and qualifications or an individual with equivalent status in one of Trowers & Hamlins LLP s affiliated undertakings. A list of the members of Trowers & Hamlins LLP together with those non-members who are designated as partners is open to inspection at the registered office. Trowers & Hamlins LLP has taken all reasonable precautions to ensure that information contained in this document is accurate, but stresses that the content is not intended to be legally comprehensive. Trowers & Hamlins LLP recommends that no action be taken on matters covered in this document without taking full legal advice. (c) Copyright Trowers & Hamlins September 2013 All Rights Reserved. This document remains the property of Trowers & Hamlins LLP. No part of this document may be reproduced in any format without the express written consent of Trowers & Hamlins LLP.