Category Archives: Leasehold industry information

Information relating to changes in the law or industry

Big news for managing agents .. they are going to be regulated

At the ARMA conference today, Lakhbir Hans gives the overview re MHCLGs work on commonhold and rent charges and the reforms more generally.

Some highlights from today’s speech at the ARMA conference below. Lots of interesting developments !

Headline news is the idea that the ground rent ban or restriction will take effect on all new properties from 22.12.2017.

Also – managing agents are to be regulated.

Other key points by way of summary below:

‘Leasehold can work’ it’s not all bad.

There have been sector abuses.

Modern ground rents have grown, paying high rents with unfair clauses.

Consumers have not been aware of what they have been getting into.

Government wants to move forward on banning – leasehold houses and restricting new ground rents to a ‘peppercorn.’

There will be some exemptions- shared ownership, community led housing, and inalienable land – the crown and also the National Trust.

There is a commitment to housing supply and government wants to ensure that their actions do not affect this.

Any ban will affect leases granted after not likely to come to affect in until after 22.12.2017 –

It will not be possible to register a long lease of a house at the land registry once the ban comes in.

£10 fixed rent – is likely to stay.

The stewardship issue is also to be addressed and Government wants to look at how this might work. Could some people be allowed to charge a ground rent?

Ground rent may be permitted for shared ownership and retirement housing.

Freehold house owners will have some rights – the right to challenge estate management charges. The right to challenge per the service charge legislation will be extended to them.

Managers – as per the call for evidence – government wants to commit to a single mandatory code of practice.

There need to be nationally recognised qualifications for agents. There will be a register and an overarching regulatory framework. It will be an offensive to practice if not qualified.

Lord Best will be chairing a working group – ARMA are not included, but many other sector bodies will be.

Service charges are to be regulated- consent fees for leaseholders particularly are going to be looked at. Any charges will have to be transparent.

Working group to look at the way in which these sorts of fees could be regulated.

Lots to think about and news all round …

Mark Chick

Leasehold Changes – A fairer deal for leaseholders of houses and flats?

We now have the publication of the Law Commission’s long awaited consultation on its proposed changes as these will affect the law relating to buying your freehold and extending your lease. You will note that even in the title they do not use the word ‘enfranchisement.’

 

A summary of the key changes appears at http://www.leaseholdreformnews.com

In their own words, “the Law Commission has indicated a series of radical reforms designed to provide a better deal for leaseholders who want to purchase the freehold or to extend the lease of their home.”

The proposals would:

  • Make the process (known as “enfranchisement”) easier, cheaper and quicker
  • Improve and enhance the rights of leaseholders to buy their freehold or extend their lease
  • Introduce a simpler unified procedure for houses and flats
  • Remove limitations on the right to enfranchise, including the requirement that leaseholders must have owned their property for two years before making a claim

In addition, at Government’s request, the Commission has provided options to reduce the price payable by leaseholders to buy the freehold or extend their lease while ensuring sufficient compensation is paid to landlords to reflect their legitimate property interests.

These proposals are open for consultation until 20th November 2018 and all interested parties would be well advised to visit their website http://lawcom.gov.uk to view further details and to make comments on some of the 198 questions that they pose.

Law Commissioner Professor Nick Hopkins said:

“The current system is complex, slow and expensive and it’s failing homeowners. Many feel that they are having to pay twice to own their home.

“Our proposals would make it easier and cheaper to buy the freehold or extend the lease of their home, ensuring the system works for ordinary homeowners across the country.

The enfranchisement system has often been criticised as being too costly and difficult for leasehold homeowners to understand and implement to their advantage. It is also seen as being complicated, being the product of over 50 Acts of Parliament, totalling hundreds of pages. There are numerous examples of this, for instance the different rules for leaseholders of houses and flats.. a subject about which I could go on.

We know that the Ministry of Housing, Communities and Local Government (MHCLG), and by the Welsh Government, has asked the Law Commission to propose reforms that would promote transparency and fairness in the residential leasehold sector and provide a better deal for leaseholders as consumers. This puts a pro-consumer slant on the proposed reforms and focuses (perhaps controversially) on reducing the premiums that freeholders would receive.

There is going to be a lot of debate about this subject and I look forward to the output from the consultation when this is finished and the eventual report and recommendations from Law Commission which are anticipated during 2019. One thing that is certain is that there is going to be change, however, in my view it is going to be some time before these changes are likely to come in because any report will then need to go to parliament for it to consider how best to adopt these recommendations and for any draft legislation to go through parliament.

Mark Chick

20th September 2018

If you would like to discuss an enfranchisement issue, or contact Mark Chick please email leasehold@bishopandsewell.co.uk. If you require legal advice please visit http://www.bishopandsewell.co.uk

Recognised Tenants’ Associations

Leaseholders who want a greater voice in the management of their building may want to think about forming a Tenants’ Association.

A Tenants’ Association can be set up by a group of leaseholders who own leases from the same landlord / freeholder on similar terms.

Forming an Association is a good way for the flat owners to express their collective views to the freeholder and / or their managing agent.

The association could be a company, but does not need to be. It can be a loose collective of people that want to work together to be recognised in consultation on service charge and management issues.

However, in order to be most effective the association needs to be officially “recognised.”

If the association achieves recognised status then the freeholder/landlord must then consult with the association on any plans for major works and notices (such as section 20 notices) must be copied to it. The association can then use its collective voice in any consultations on future works, or major cost items for the building.

There are two ways of obtaining recognition:

1.     Agreement with the landlord

The association approaches the landlord and the landlord agrees to recognise the association. The landlord then confirms this formally in writing. The association is then ‘recognised.’

Any written notification or ‘certificate’ from the landlord recognising the association will continue to be valid unless the landlord/ freeholder gives the association is given six months’ notice withdrawing recognition.

2.     Application to the tribunal

The other way is if a certificate is obtained from the First-Tier Tribunal of the Property Chamber (formerly the ‘LVT’ or ‘Leasehold Valuation Tribunal’). This is much more likely if the freeholder is unlikely to be a willing participant in the recognition of the association.

A certificate is usually granted for a specified period of time (normally four years), but it may be renewed at the end of this time. The tribunal can also cancel the certificate at the end of this period if it considers that there is no advantage for the Association to be recognised.

Who can become a Member of the Tenants’ Association?

Any long leasehold flat owners in the building who are paying variable service charges to their landlord are entitled to be members.

How many flat owners are needed?

As a general rule, the Association will need at least 60% of those flat owners who are entitled to join, to have become members. In other words, if there are 100 flats in the block and all of these are let out on long leases with a service charge, then at least 60 of the flats must join in.

How does the process work?

The formal request for recognition, whether made to the landlord directly or to the tribunal, must include copies of the rules of association or constitution, which should be fair and democratic.

The leaseholders will also have to submit the names and addresses of all of the elected members of the proposed Association with their application.

Can the landlord join?

The landlord and the managing agent are not entitled to become members of the Tenants’ Association. If there are any leasehold owners who do not pay variable service charges, then they can become members of the association, but they are not allowed to vote.

How do we go about forming a Recognised Tenants’ Association?

If you want to form a recognised Association, or to make an application to become one, then the first step is to investigate with your neighbours whether there is sufficient interest to set up an association. You will then need to consider whether to use an incorporated or unincorporated model.

For further information on forming an association, you may need to seek specialist advice. There are some good guides produced by the Federation of Private Residents Associations (FoPRA), or you may be able to get help from LEASE the government advisory body.

Mark Chick 

November 2017

Mark Chick is a solicitor specialising in leasehold issues. To make contact email leasehold@bishopandsewell.co.uk

Insurance premiums

A lot of leaseholders often ask me what can be done if they want to challenge their insurance premiums.

The position is of course that service charges are the subject of the FTT’s jurisdiction under s.19 of the Landlord and Tenant Act 1985.

However, the tribual is generally reluctant to look to far into the cost of cover. The received wisdom has been that the landlord places the cover and the tenant reimburses the cost.

However, the case of Cos Services Limited (mentioned below) shows that perhaps the tide is turning. The case concerns block policies and the failure to have competitive cover in the face of evidence to the contrary.

I know from speaking to leaseholders that this is often an issue and I think for those looking to place cover at lower cost, or to promote a discussion about whether costs are reasonable or not this case is good news.

The same will apply to managers who want to help leaseholders find competitive cover.

Mark Chick