Feature: Common Challenges and Disputes
Common Leaseholder Issues
Written by Agata Skupinova, Paralegal at Bishop & Sewell
There are familiar instances which commonly arise and often lessees are unaware of the options available to them. With this in mind, here are a few common problems and potential solutions.
Of course, each instance will be unique and therefore before embarking on any course of action, a lessee will nonetheless want to obtain full and proper advice tailored to them.
I (and other leaseholders) would like to gain more control over the management of the property, what are our options?
There are several ways to gain greater control over the management of a building, for example:
Enfranchisement
The Leasehold Reform Housing and Urban Development Act 1993 gives ‘qualifying leaseholders’ the right to collectively purchase the freehold from their landlord.
It requires the participation of at least 50% of the flats in the property that fulfil the ‘qualifying tenant’s criteria’ – so it may not be available to lessees by default.
When the complex procedure is correctly followed, the landlord cannot refuse the request for enfranchisement. Lessees will be required to ‘purchase’ the freehold, however at the same time will sometimes look to extend their leases and reduce ground rent liability.
Right to Manage (‘RTM’)
The Commonhold and Leasehold Reform Act 2002 provides ‘qualifying leaseholders’ with long leases the right to incorporate a company to take over the management of the properties in place of the lessor (an RTM Company).
Whilst the RTM Company acquires the right to direct the management of the property, it may also appoint managing agents to act for them. This provides lessees with the ability to decide on matters such as management, repairs, maintenance, improvements, and insurance.
In contrast to enfranchisement, there is no need to acquire the freehold or any interest in the land nor is there a need to prove the landlord’s default or bad performance.
Both options require for a complex statutory process to be followed that and you are advised to consult specialist solicitors and surveyors.
Court Appointed Manager
Part II of the Landlord and Tenant Act 1987 provides a single leaseholder or a group of leaseholders with long leases with the right to apply to the First-Tier Property Tribunal to have a managing agent appointed.
The appointed manager then takes over the management from the landlord and manages the building in accordance with the order of appointment.
The leaseholder(s) would need to prove:
• The landlord is in breach of its obligations; and • It is just and convenient for the Tribunal’s order to be made
It should be noted that having court appointed manager does not necessarily mean that leaseholder(s) will have more control over the management of the property.
My service charge is too high / not reasonable.
Generally, a lease will enable a landlord to recover from the lessees service charges – normally costs incurred in maintaining the property. Under the Landlord & Tenant Act 1985, these charges are limited “only to the extent that they are reasonably incurred”.
As such, you have the right to apply to the Court or Tribunal to challenge the “reasonableness” of any demand rendered to you. It may be that it is a sum a lessee is not contractually obliged to pay, or perhaps the sum is disproportionate against other options for the same services.
It should be noted that “reasonably incurred’ is not a defined term within the Act and the Court or Tribunal have the ultimate discretion on these assessments.
Your lease and service charge demands need to be carefully considered in order to assess the validity and reasonableness of service charge demands, and whether any demand was rendered at the correct time / in line with the relevant statutory formalities.
Repairing works need to be carried out, but my landlord is not doing anything about it, what are my options?
Where the landlord is in breach of its obligations, one of the available remedies is a common law remedy known as ‘self-help’.
This remedy might be appropriate in the following situations:
- Emergency situation that needs an urgent action
- Landlord has been delaying/failing to carry out repairs for a longer period of time
- It is within your property demise, and it is easier for you to carry out the repair works
- The repair works are easy and inexpensive
The lease needs to be carefully considered to establish the landlord’s obligations.
Where the landlord is indeed in breach and the leaseholder carries out the repairing works, they could be entitled to compensation for their expenses (Loria v Hammer [1989] 2 EGLR 249).
Caution should always be exercised however as there may be issues of trespass, damage, or liability for defective works.
When should I start thinking about extending my long lease?
It is important to be aware that leases are a deteriorating asset – each year then come closer to concluding and the landlord being entitled to recover possession of the leased property.
When a lease drops below 80 years, what is known as ‘marriage value’ becomes payable.
Marriage value gives the freeholder opportunity to charge an additional premium on a lease extension, meaning that the cost of extending generally increases considerably simply for this.
As such, it is generally advised to start enquiring about the lease extension process when your lease drops below 90 years in order to avoid being penalised by paying a higher premium or having issues with selling or re-mortgaging your property.
Statutory lease extension can regularly take between six to twelve months to complete and, where there is a dispute over the value of any premium to be paid, could involve formal proceedings.
Extending a lease is a time-sensitive process involving the cooperation of both specialist solicitors and surveyors, and therefore lessees should always be mindful about the period left on their lease and regularly review whether it is a suitable time to commence the process.
The above is accurate as at 15 December 2021. The information above may be subject to change during these ever-changing times. The content of this note should not be considered legal advice and each matter should be considered on a case-by-case basis. Agata Skupinova is a Paralegal in Bishop & Sewell’s Dispute Resolution team, taking on instructions in property, landlord and tenant and commercial disputes. If you would like to speak with Agata, or any member of the dispute resolution team, contact Bishop & Sewell by email to: litigation@bishopandsewell.co.uk.
Advising on property law is at the heart of Bishop & Sewell. Founded on property work, the issues matter to us as much as they do to our clients. We take pride in simplifying complex property issues, providing services covering every aspect – from purchase and sale, development and financing, to rental and enfranchisement.