Category Archives: Leasehold industry information

Information relating to changes in the law or industry

Serving notice under the 1993 Act – “It’s just filling in a few forms, right?”

As I explained in my recent talk, “Take No Notice” with Andrew Pridell of APA Associates at the ALEP Autumn Conference on 18 October 2011, serving notice under the Leasehold Reform Housing and Urban Development Act 1993, is not as easy as it seems.

This was a talk to other professionals at the ALEP (Association of Leasehold Enfranchisement Practitioners) Autumn Conference and although that talk was aimed at professionals (a full set of notes appears at leaseholdreformnews.com) there are a few points that anyone looking to engage with this area should bear in mind.

  • The notice must be signed personally by the qualifying flat owner. For instance, someone holding a power of attorney cannot sign on behalf of someone else.
  • A UK company is going to need to execute the notice as a deed. An overseas company will present different issues.
  • Any offer figure must be made in ‘good faith.’ This has a specific technical meaning and ideally therefore (although it is not mandatory) specialist valuation advice needs to be obtained.
  • Allocating any offer figure must be done correctly. This will involve consideration of technical issues such as additional freeholds, or other leasehold areas to be included in the claim. If there are other leasehold interests or superior (head) leases then this too needs careful consideration. The valuation and legal advisor will need to liaise closely.
  • The notice needs to be addressed to the correct parties. Once again this is technical and any slips will make the notice void. The list to be served may include other landlords and other parties. The right addresses for service are not always readily apparent.
  • Multiple signatures of a single notice may present significant legal issues particularly, if this is done without proper advice and supervision. Using a solicitor will almost certainly assist in the event of a challenge.

Bear in mind that if the notice is not served correctly that you will be liable for the landlord’s costs of investigating your claim and serving counter notice (legal and valuation) and you will have to start all over again. If your lease has slipped below a critical point (e.g. below 80 years), then irreparable damage may be done.

Similarly, in a collective claim where a large number of people have to sign a notice, if there is an invalid notice, vital impetus will be lost and the claim may take a long time to start going again. This is to say nothing of the possible expense and inconvenience of a court case investigating the notice if invalidity is not conceded.

Likewise, without the benefit of specialist help, where difficulties have arisen, those qualifying may actually withdraw a perfectly good claim – leading to the position that they cannot bring a fresh claim for another year.

For all of these reasons (amongst others) specialist help should always be sought. As such you should always use a firm of legal or valuation advisors with a proven track record in this area, such as an ALEP member.

 

Kelton Court – One Year On, is the deferment rate outside PCL now 6%?

As I commented previously on Leasehold Reform News (see the article on that site) the decision in Kelton Court is of interest to any long leasehold flat owners with property outside of Prime Central London (PCL) who are looking to either purchase their freehold or extend their lease.

Why?

Essentially, because a 6 percent deferment rate was decided upon in a departure from the standard 5% rate in Sportelli. The Lands Tribunal came to this decision for three reasons; the enhanced risk of obsolescence, the perceived lesser rate of growth outside PCL and the enhanced ‘management risk’ associated with flats.

A higher deferment rate, of course reduces the amount that the flat owners will have to pay as part of the calculation.

Does this affect all property outside PCL?

Not necessarily. Whilst two of the factors, (obsolescence and growth rate) are features of any property outside PCL the combined effect of which is to take the deferment rate to 5.25%, the enhanced management risk will only be a feature of properties where the landlord is directly responsible for the management. Where there is a head lease, or the leases are fully repairing the ‘management issue’ does not arise and the most the flat owners can argue for is therefore likely to be 5.25%.

Management issues

The focus on management as an issue is interesting as in reaching this decision the Lands Tribunal looked at evidence of the increased use of the LVT’s service charge jurisdiction (411 cases in 2007 compared to 232 in 2005 and 27 in 2004). The interesting point is that is that the numbers mentioned relate to applications to the London LVT. Perhaps a better comparable might have been the regional LVT?

Developments since Kelton Court

Since Kelton Court, we have the decision in Ashdown Hove, (Ashdown Hove Limited v Remstar Properties Limited [2010] 37 EG 138) in which 6% was achieved for a block in Hove, the enhanced risk of management being argued for successfully despite their being a management company that was a party to the leases.

The point being made (successfully) that where the lease contains an obligation on the landlord to take on the management company’s obligations in the event of its failure, there is still a risk to the landlord that it may have to be involved in the ‘day to day’ management of the property and that this will therefore ‘taint’ the amount that an investor would pay for the landlord’s interest.

Conclusions

We are now at the point where outside PCL valuers will normally be arguing for 5.25% and if possible, more based on the arguments concerning management. The decision in Ashdown Hove is an LVT decision and arguably slightly unique for a number of reasons. Therefore it may be that the Upper Tribunal will need to comment further before there is any greater certainty in this area.