Forsters named finalists in four categories at The News on the Block Awards 2021
1 November 2021
News
Forsters have been shortlisted as finalists in four categories at The News on the Block Awards 2021.
The firm has been shortlisted for:
Property Management Awards (PMAs)
Legal Services Provider of the Year
Enfranchisement and Right To Manage Awards (ERMAs)
Solicitors Firm of the Year
We are also delighted to announce that Property Litigation Senior Associate, Lucy Zaremba, and Associate, James Carpenter, have been shortlisted as finalists in the following ERMAs categories:
Solicitor of the year, Lucy Zaremba
Young Professional of the Year, James Carpenter
On the awards, the News on the Block commented:
“We are delighted to announce the shortlist for this year’s NOTB Awards 2021. It is a fantastic achievement to be a finalist, especially this year. After what has been a challenging 18 months for the industry, and the entire country, we didn’t want anyone to miss out this year. Therefore, we decided we would bring both PMAs and ERMAs audiences together for one joint event and celebration to welcome you all back! Our independent judging panel has reviewed all of the entries and the scores are now in. The peer reviewed judging process assures independent quality in the decision making process.”
The Law Commission has today published its three final reports on leasehold reform and the future of home ownership. Their recommendations about leasehold enfranchisement and the right to manage are aimed at improving the existing system of leasehold ownership, whilst the third report about commonhold seeks to create a viable alternative to leasehold ownership, with a view to its widespread use in the future.
Arguably the greatest change suggested by the Law Commission is their recommendation that commonhold become the preferred alternative to leasehold ownership. This would be a huge change to the status-quo given that many practitioners will never have come across commonhold.
In summary, the Law Commission’s recommendations look to:
make it easier to convert to commonhold ownership
improve the management of commonhold ownership
What is Commonhold?
In brief, commonhold is where each person owns the freehold of their unit, which could be a flat, a house, a car parking space etc. That unit owner then becomes a member of the Commonhold Association which owns and manages the common parts of the block or estate. The Commonhold Community Statement is the document which sets out the boundaries of the common parts and the rights and obligations of the unit owners and the Association. The Commonhold Community Statement has a number of prescribed terms which are determined by Government to provide consistency. The intention is that there is no landlord in charge, instead the unit owners run the block or estate for themselves.
Making it Easier to Convert to Commonhold
The Law Commission’s recommendations intend to make it easier for leaseholders to convert to commonhold. They main proposals are, in summary:
Allowing conversion without freeholder’s consent by a streamlined “acquire and convert” process which will entail the leaseholders acquiring the building by a collective enfranchisement process as a first step.
Reducing the required number of leaseholders that support the process to 50%.
Government to work with lenders to ensure they will accept the transfer of the mortgage to the commonhold title.
Making the registration process easier at the Land Registry and providing that the leaseholders as well as the freeholder can register the commonhold.
Developers should be able to register the development as commonhold in phases and they should be able to reserve rights in the Commonhold Community Statement to allow completion of the development.
Shared ownership leases and lease-based home purchase plans are permitted as under the current commonhold scheme they are not.
One particular area of difficulty arising from the above is what happens with those leaseholders that do not participate in the conversions to commonhold. The Law Commission have suggested that non-participating leaseholders’ units should also convert to commonhold and they will become members of the Association on conversion. The funding for such non-participating leaseholders will be provided by Government equity loans, similar to the Help to Buy scheme, which will rank after any existing mortgage and would be repayable on sale. It is also suggested that these loans are made available to the participating leaseholders as well. However, the Law Commission appear to accept that this may not be viable as they have also suggested that if the Government is not able to provide these loans, there should instead be a two-tier ownership where non-participating leaseholders will continue to hold their unit on leasehold after conversion on the remainder of the block to commonhold. It is proposed that leaseholder ownership will then be gradually phased out by replacing the right to a lease extension with a statutory right to convert to commonhold.
Improving the Management of Commonhold
The Law Commission has also made various recommendations to improve the way commonhold is managed moving forward. The main recommendations in this regard are:
To facilitate the management of mixed-use buildings, “sections” can be created to allow for management of different areas to be separated where necessary.
Any change to the Commonhold Community Statement would require 75% of those attending to agree to the change.
It should be possible for a Commonhold Community Statement to restrict certain short-term lettings. This is specifically intended to allow commonhold owners to prohibit lettings such as Air BnB should they wish to do so in their block.
“Event fees” (sums payable on the occurrence of an even such as a sale or letting of a unit) should be prohibited.
The Association should have the power to apply for the sale of a defaulting owner’s unit if they are in arrears, subject to certain safeguards.
Directors of the Association should be elected on an annual basis by ordinary resolution. If unit owners are unwilling to be directors, an affected party can apply to the Tribunal for a professional director to be appointed. Furthermore, there should be a right to apply to the Tribunal for the temporary appointment of a replacement director where it is considered that they are failing in their duties.
Various recommendations are made to avoid disputes in relation to service charges and to make the payment regime fairer. In particular, unit owners will be given the opportunity to vote to approve the annual budget. The commonhold will also be able to set an expenditure threshold for the amount they can spend without challenge. It will also be compulsory for an Association to have a reserve fund.
Allowing sale or mortgaging of common areas to raise emergency funding for large projects that the unit owners are unable to fund.
There are a number of recommendations in relation to dispute resolution, including giving the Tribunal jurisdiction to deal with disputes and providing that when a unit owner is in breach that they must indemnify the other unit owners and the Association for any loss.
A minority protection regime is suggested to provide some protection where the majority decision impacts upon a minority that does not agree. The minority will be able to apply to the Tribunal where they are concerned about: variation of the Commonhold Community Statement, the creation or combination of a “section” or the approval of a budget in excess of a cost threshold.
Clarity on insolvency of the Association by making it clear that a liquidator cannot demand contributions from unit holders but they will have the power to sell saleable common parts.
The Courts should be given a discretion to decide whether a voluntary termination of the commonhold should be allowed.
Next Steps
There may certainly be some benefits to the commonhold system. It is clear that the Law Commission’s recommendations have sought to take the lessons learned from the issues that arise in leasehold ownership to improve the way commonhold ownership is regulated. However, it remains to be seen whether these proposals will result in the dramatic change that a shift to commonhold ownership would require.
The End of Leaseholder Alterations?: The Supreme Court Decision in Duval
7 May 2020
News
Those in the leasehold world have been waiting with bated breath for the Supreme Court’s Decision in Duval v 11-13 Randolph Crescent Ltd. [2020] UKSC 18 (6 May 2020) (“Duval”) to provide guidance on a landlord’s liability when granting consent to leaseholders to carry out structural alterations.
In Duval the Supreme Court held that where a lease contains landlord covenants for all leases to be in substantially the same form and an obligation on the landlord to enforce leaseholder covenants upon the request of another leaseholder, a landlord will be in breach if it gives consent to a leaseholder to carry out works in breach of an absolute covenant.
Absolute and Qualified Covenants
In order to understand the ramifications of this decision, it is first necessary to consider the difference between a qualified or absolute leasehold covenant:
Qualified covenants: in most residential long leases, there will be a covenant for the leaseholder not to undertake works to their own premises without permission from their landlord. In accordance with section 19(2) of the Landlord and Tenant Act 1927, such consent cannot be unreasonably withheld.
Absolute covenants: residential long leases will also often contain a covenant prohibiting the leaseholder from undertaking any work to the structural elements of the building or any other areas which fall outside of their demise. Such a clause will not provide for the landlord to allow these works by consent. However, landlords will often give consent to leaseholders for such works, in exchange for a premium.
The Decision in Duval
The facts of Duval will seem familiar to many as this case arose from a fairly common set of circumstances. The block in question is a terraced house which had been converted into nine flats. Mrs Winfield was a leaseholder of one of those flats and applied for permission from the landlord to carry out works to her flat, including the removal of a substantial part of a load bearing wall at basement level. It was agreed by the parties that the works proposed would amount to a breach of clause 2.7 of the leases, which contained an absolute covenant against structural alterations. Upon learning of these plans, another leaseholder in the building, Dr Duval, objected. This ultimately led to Dr Duval issuing proceedings against the landlord for a declaration that the landlord was not permitted to give consent to the works.
Dr Duval relied on clause 3.19 of the leases, which contained a covenant on the landlord to ensure that each lease contained similar covenants and stated that the landlord would enforce any leaseholder covenants at the request of another leaseholder, subject to that complainant leaseholder indemnifying the landlord’s costs.
The Supreme Court decided that clause 3.19 did not expressly state that the landlord was prevented from giving Mrs Winfield permission to carry out the structural work but such a prohibition must be implied into the clause. In his Judgment, Lord Kitchin stated that clause 3.19 would have no practical effect if the landlord was able to authorise a breach of the covenant and thereby prevent the complainant leaseholder from asking the landlord to enforce the breach.
Is it still Possible for a Landlord to Grant Consent for Works?
If works are contemplated for a leasehold flat, it is clear that the landlord and leaseholder will now need to carefully consider whether Duval applies.
In light of Duval, a landlord will be in breach if consent to works is given in the following circumstances:
The works are prohibited by an absolute covenant;
The leases contain a clause that all leases will contain similar covenants; and
The landlord has covenanted to enforce leaseholder covenants at the request of another leaseholder.
It will clearly be necessary to consider carefully exactly what is proposed and this could lead to potentially difficult questions about the extent of a leaseholder’s demise. It is clear that Lord Kitchin thought that leaseholders should be able to prevent works which “go beyond routine alterations and improvements and are intrinsically such that they may be damaging to or destructive of the building”. However, it seems that the decision may prevent fairly routine alterations and improvements.
What happens if a leaseholder wishes to knock down a non-structural wall in their flat but an absolute covenant in their lease prevents such works? This type of work does not appear to be what the Supreme Court sought to prevent but arguably it would not be possible for a landlord to consent to the same without finding themselves in breach.
It is possible for the landlord to obtain consent from all of the leaseholders to the proposed works before providing consent themselves. This may be simple in smaller blocks and where the landlord is a leaseholder entity. However, this will clearly present difficulties in larger blocks or in blocks where there is one or more leaseholders that objects to the proposals.
Finally, a brave landlord may continue to provide consents for works where Duval applies on the basis that any breach would result in little or no loss to the leaseholders. If this approach is taken, it would seem sensible to seek an indemnity from the leaseholder asking to carry out the works for any claims that may be brought by an aggrieved leaseholder.
This is probably not the end of leaseholder attempts to carry out alterations but careful consideration will clearly be necessary and we recommend that advice is obtained.
If you require further clarification or advice please contact Lucy Zaremba of Forsters LLP.
“Cash in the attic”- Is your Landlord looking to re-develop the roof space?
2 October 2017
News
With space at a premium, particularly in urban arears, landlords often look to develop the roof space of their existing properties. This article considers what a leaseholder can do to prevent their landlord from developing the roof of their building.
Your Lease
Check your lease to see whether your landlord:
Owns the roof as it will not be able to develop land that it does not own. Usually a freeholder will retain the structure of a building, including the roof. However, if the roof is part of the common parts and the leaseholders have a right to use it as a terrace this could prevent development.
Has demised the roof and the airspace above to any of the leaseholders.
Has an express right in the lease to develop the building. If it does not this does not necessarily mean development will be prevented, unless there is an express prohibition.
Has an obligation to provide you with "quiet enjoyment" of your property. The works involved in the development of the roof may cause such a nuisance to you that your landlord will be in breach of this obligation. Your landlord also has an implied obligation not to derogate from its grant, this means it cannot do something that would deprive you of rights under your lease relating to the enjoyment of your property. Your landlord must strike a balance between you and any development right it has. Your rights in this regard may not prevent your landlord from developing the roof but you may be entitled to damages if they are breached.
Consider Statutory Protection
Leaseholders have certain statutory rights in relation to leasehold property:
The right to form a "right to manage" company (RTM), which allows the leaseholders to take over the landlord's management function. In the recent case of Francia Properties v Aristou 2017 L&TR 5, the County Court decided that the existence of an RTM will not prevent the landlord from developing the roof. This was because the development of new dwellings was not part of the management function. However, the Court did decide that the landlord has a duty to take all reasonable steps to ensure that management of the building is not affected. This case is on appeal to the Court of Appeal so is subject to change. Leaseholders should also be aware that this case was decided on the basis that the landlord was constructing a new dwelling. If your landlord has a different development plan that could fall within the remit of an RTM's obligations, this may be a means of preventing the works.
The right of first refusal in relation to certain disposals made by the landlord. If your landlord has disposed of the roof space, or airspace above the roof, to an unconnected third party developer (for example by a lease) this may be a breach of your landlord's obligation to allow the leaseholders to have "first dibs" on purchasing this land. If your landlord is in breach, you can force the third party to transfer the interest to you but this will mean paying the purchase price or rent agreed and so may be expensive.
The right to purchase the freehold, known as collective enfranchisement. If your building meets the relevant requirements, you can request that the freehold is sold to the leaseholders of the building. However, the premium to be paid to the freeholder will include any development value and so may be increased if the landlord has firm development plans for the roof space.
Planning Permission
Your landlord may need planning permission to carry out certain development and it will be worth checking to see if they have applied for the same. If your landlord has planning permission, this does not mean it has carte blanche to carry out the works without consideration of the above issues.
Conclusion
If you are concerned that your landlord is planning development to the roof of your building it is best to act proactively to try and stop the works before they begin. If you are able to make a claim for collective enfranchisement, this can be the best way to ensure that you and your neighbours obtain control over your building.
