UPDATE July 25: Mark Chick, a solicitor at Bishop and Sewell, has responded to this reader’s letter and can be read below.
The issue concerns a leaseholder feeling powerless in a two-flat block, where the other flat owner has the freehold. Especially … when the leaseholder has let her lease run down to 69 years
All comments gratefully received.
I am a leaseholder of one of two flats within a house conversion in North London. The leaseholder of the other flat is also the freeholder of the building. I am seeking a freehold purchase.Unfortunately, because of the other owners’ status, I am effectively discriminated against from ever acquiring an interest in the freehold (or RTM) because, as the rules presently stand, a majority of 51% of qualifying leaseholders are required in order to collectively enfranchise.
As the other tenant in my building is also the freeholder, it means I will never be in the majority and therefore can never gain a meaningful interest in the property I call my home through a freehold purchase.
I have enjoyed an excellent relationship with the freeholder for several years, but 12 months ago she moved out of her flat and rented it to 3 students.
This caused tremendous disruption to me as the noise has increased substantially.
I raised the issue regarding noise with the freeholder but she has been very unwilling to do anything more than install carpet to address the issue.
Needless to say, the carpeting has not resulted in much relief at all. As this is not what might be considered ‘antisocial noise’, I do not seem to have any recourse to get anything more done about it.
Unfortunately the freeholders’ lease has had all but the very general clauses relating to noise removed, whereas my lease contains several more strict covenants pertaining to noise nuisance.
My frustration with this situation comes from the fact that if the FREEHOLDER had raised exactly the same complaint SHE could compel me to contribute toward any fixes to resolve the issue (as per my lease, each leaseholder should contribute one half of the costs toward installing any new measures the freeholder deems necessary to improve the accommodation).
The freeholder seems to have totally avoided any responsibility here, meanwhile I have to live with the consequences of her actions (renting her flat out to 3 tenants without soundproofing her flat first) and will have trouble selling my flat because of the noise complaint.
My lease effectively gives the freeholder carte blanche to impose ‘improvements’ to the property as and when they feel necessary, but of course the leaseholder do not enjoy the same right.
It seems perfectly possible that two flats within the same building may have very different leases, obviously causing great consternation for the party whose lease contains the more strict covenants. Why is this possible? Both leases should be uniform.
Additionally, any covenants in the freeholder’s lease that could help in the this regard are only enforceable at the freeholder’s discretion – and of course she has so far not enforced any of these covenants against herself.
I find this imbalance in the favour of the freeholder extremely unjust.
The freeholder absolutely refuses to allow me any part in a freehold purchase. She knows she has the upper hand, as demonstrated by her handling of our recent disputes. She knows if I had an interest in the freehold I might have more rights and could fight any dispute on a much more equal footing. Unfortunately I am also barred to claiming RTM – again because I am not in the majority.
At the same time, my lease is becoming dangerously short – it expires in 67 years but I really cannot bring myself to extend as I am so fundamentally against this antiquated, unfair, stupid system.
The cost of extending my lease by the statutory minimum (90 years) is equitable to purchasing an interest in the freehold, therefore the freeholder has absolutely no incentive to share the freehold at all.
She has simply refused to sell, leaving my only option being to extend the lease which means it keeps them ‘in the money’ (via ridiculous service charges) as well as ensuring they retain all control.
Additionally – again because I am not in the majority – once the freeholder decides to sell her property (which I believe may be in the next 2 – 3 years) there is absolutely no obligation on her to offer me right of first refusal. Yet another gross injustice which leaves me frozen out of ever obtaining a meaningful interest in this property.
Absolutely ludicrous system.
I would like to know why there are so few entitlements for individuals in my situation (i.e.: two flats in the building, one party has a lease on one flat as well as the freehold on the property)? It is obvious that a freeholder in this position has way to much control, this situation plays in favour of the freeholder only, none of the decisions they make will ever be unbiased or fair.
In my view, I believe that I should be allowed to forcibly acquire an interest of the freehold just as others are so that i can have a fair and equal control of the building and an equal voice in any dispute. At the moment, I am relying on the goodwill and sense of justice of the freeholder to ‘do the right thing’ morally. This reliance does not work because the freeholder will not do anything more than the bare minimum required of them and they will not enforce covenants contained within their leases against themselves.
I do not want to pursue this via the LVT because the bottom line is currently UK law is not on my side. Fundamentally there is an imbalance whereby I am effectively barred from any reasonable chance of obtaining a fair stake and control in my own home. The LVT route therefore does not offer a viable alternative.
I’d be most grateful to hear what advice you might have on this?
A landlord and tenant solicitor offers his thoughts
Mark Chick is a solicitor dealing with leasehold issues and is a partner at Bishop & Sewell LLP and a director of ALEP (the Association of Leasehold Enfranchisement Practitioners).
This note (being very general in its nature) is not a complete statement of the law in this area. It is therefore not a substitute for legal advice from a suitably qualified professional and should not be relied upon as such. No liability can therefore be accepted for any actions based on reliance upon it.
If you require legal advice please visit www.bishopandsewell.co.uk or email leasehold@bishopandsewell.co.uk
This is an interesting enquiry and as the enquirer says there is no legal compulsion on a freehold collective (or single owner) to sell a share in the freehold to a flat owner that did not take part in the original purchase.
In this situation it may be because the previous owner of the freehold resided in their flat and as such was not bound to offer a share in the freehold under the 1987 Act when they sold their flat (and the freehold).
I am assuming also that the structure is that there are two leases, one for each flat.
You mention that the ‘freeholder’s lease’ has been modified so that the restrictions against noise nuisance are not so severe. Perhaps rightly so, you say that this is unfair. It may be that there is something that you can do about this aspect as the freeholder has an implied obligation to keep the leases on broadly similar terms and not to grant concessions unilaterally to one or more flat owners at the expense of the other.
Similarly, apart from the implied covenant to keep the leases on similar terms, there may also be a remedy for what is called ‘derogation from grant’ if the situation between the two properties is now so unbalanced that the changes to the freeholders’ lease mean that you can now longer have proper enjoyment (in the legal sense) of your flat.
You mention the declining lease length. Clearly the best course of action to take to preserve longer term value in your property is to apply for a lease extension under the 1993 Act. This will give you an extended term of 90 years on top of the unexpired term – in your case, 157 years. There will be a nil ground rent and the terms of the renewal lease will be controlled by statute.
The issue in your case may be that the statutory position is that you get the same terms that appear in your current lease. So, unless there are changes in legislation since your lease was originally granted, or defects in the existing lease that need to be remedied then the scope for amendments may well be limited.
In particular any tribunal dealing with the terms of your new lease would not have the power to order changes to the lease of the other flat. For this reason, you may need to proceed down a ‘twin track’ approach looking to extend the lease but also perhaps to have the amendments to the freeholders’ lease set aside if they will not voluntarily harmonise these.
Clearly, there are limitations on the sort of guidance that can be given without reading your lease and title documents and understanding the full background to your case. The first step is to make sure that you consult with someone suitably qualified to advise you further such as an ALEP member.
Mark Chick
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For freehold enfranchisement to succeed participation of only 50% of leaseholders is required, not 51%.. However, you would likely have trouble with other criteria.
See http://www.lease-advice.org/publications/documents/document.asp?item=11#2
You can check RTM eligibility criteria here
http://www.lease-advice.org/publications/documents/document.asp?item=21
This is generally easier and less expensive to achieve. You don’t need to worry about the resident landlord exemption, but it hinges on whether your landlord qualifies as a “qualifying tenant”. Just because he or she owns the freehold doesn’t mean they aren’t a tenant. If they are qualifying tenants then you cannot achieve the required 2/3 criterion, if not then you constitute 100% of the qualifying tenants.
I am not a solicitor or laywer but I think you may be able to achieve right to manage. You can then take over all of the landlord’s rights except in respect of collecting any ground rent giving permission for structural alterations.
Your next step should be to contact a firm specialising in RTM enfranchisement and get quotes, based on their confirmation that you can proceed (if indeed you can). After than you can extend your lease (not to exercise your right to so could be unwise). And after that you can sell and move to a non-leasehold property.
These are not your only options. If noise is the problem I would imagine that there are things you could do that might make your neighbours anxious to move and which might in the end make your landlord interested in selling up (I’ll leave these to your imagination, and no I don’t mean anything illegal). Especially if you already have RTM.
I am in almost exactly the same situation as the OP and can confirm that while many leaseholders have benefited from a strengthening in their rights the legislation has been consistently and specifically designed at every turn to exclude those in situations comprising just two leaseholds where the freeholder simultaneously owns one of them*. The result is that the leaseholder is denied key legal remedies and left with rights closer to that of a long term lodger. As illustrated above it makes a nonsense of enforcing covenants where the landlord himself is in breach because it is not possible for him to take action against himself. I face the same galling prospect of paying an extortionate fee for extending my lease – thanks again to the C&LRA 2002. It introduced the concept of ‘marriage value’ at a time when there was no great market for freeholds but in doing so it effectively created one by inserting this highly inflationary element in to the calculation. The government provided neither warning nor protection from the financially crippling consequences which for those affected are as great as any financial misselling of recent times. Like the OP I just want the opportunity to have a fair stake and associated control over the property I own. Having been through the harrowing experience of the LVT/FTT Property Chamber I have little faith in them as a safeguard. The tribunals are inconsistent and unaccountable with no independent recording of their machinations.
* Freehold enfranchisement is in fact not possible because of an amendment (s. 13 2ZA) to the Leasehold Reform, Housing and Urban Redevelopment Act which is likely never to be implemented but which is also covered by a hidden transitional amendment in paragraph 2 of schedule 2 to the Commonhold and Leasehold Reform Act 2002. Both require 100% participation.
Oh and by the way the Right of First Refusal is a joke. The freehold to my property was sold illegally over my head a few years after this was introduced and long before it became an issue for me. But guess what, even if I had realised in time it turns out there has never been a single prosecution under this legislation.
Mark Chick, thank you for your response to my original query.
I have to say though, I do not feel that the real substance of my plight has been adequately recognised or tackled. The advice seems to hinge around extending my lease – but does this not leave me in exactly the same position? I am still powerless in a situation which, although seemingly legally acceptable, is absolutely not fair or morally acceptable and a change in the law is most urgently required. I still have no answer as to why the law seems to deliberately discriminate against leaseholders in a two-flat block, where the other flat-owner has the freehold. Leaseholders in this situation are firmly trapped in a position with rights closer to those of long term lodgers. Given the investment we have made in our properties (which very often is quite equitable to the investment made by the freeholder), is this fair? I want to understand why this legislation exists, because only then will I be able to grasp what the rationale behind it is. There needs to be a very definite change in legislation to recognise the vast inequality this creates. As the other poster, Arty, points out: “a leaseholder [in this position] is denied key legal remedies”. The galling prospect of a lease extension, with no acquired benefit [other than a piece of paper which entitles the owner the right to live in the property for X number of years], leaves the freeholder in a far superior position whilst the poor leaseholder pays to maintain a property which ultimately is not theirs! Not to mention, put up with all the other quirks of the system pointed out in my original post. Arty rightfully makes mention of C&LRA 2002 which created a lucrative market in freehold ownerships which previously did not exist – but there was no previous warning or protection of leaseholders against the financially crippling consequences of such.
How can such a morally deplorable situation be justified under the British legal system? What advice do you have for suffering leaseholders such as myself and Arty, to challenge this legislation?
I can only sympathize with you and Arty and anyone else in your situation as you have highlighted yet another anomaly in this “ludicrous system” that is leasehold. It is clear from your comments that it should not even be possible to sell only one flat as leasehold in a 2 flat property but both should be shared freehold only.
The response from Mark Chick is typical of a solicitor making money out of leasehold issues when in fact leasehold should be ABOLISHED ASAP!! Perhaps it is time estate agents and solicitors were held accountable for NOT giving enough information and highlighting potential problems BEFORE purchase. Our lease had only 63 years remaining but we were not told it would cost significantly more to extend as the years diminished only that it would probably not be possible to get a mortgage. Subsequently a cost of just £2,000 after 2years has now risen to around £20,000 which we don’t have and as you rightly say even if paid the property will still not be ‘ours’.
My only suggestion to you would be perhaps to try and sell your flat back to the freeholder (no doubt minus the cost of the extended lease!) or to rent your flat out (if of course your lease permits this!) and move to somewhere that will give you peace of mind that is NOT leasehold!!
From the original correspondents:
I notice my question was posted on the LKP website and received a response from Mark Chick, Director of ALEP. Whilst I am very thankful for the responses received, I found the advice hinged around extending my lease – leaving me in exactly the same position with regards to any entitlements, thus highlighting the weak position leaseholders are forced into by the current regulations. I would still have no right to RTM, no right to any part of the freehold, no right of first refusal, indeed no right to Notice of Acquisition. Extending the lease will only feather the freeholder’s pocket and leave me battling on trying to face down the quirks of the system highlighted in my original message.
These are obvious shortcomings in the current legislation and I still have no answer as to why the law seems to deliberately discriminate against leaseholders in a two-flat block, where the other flat-owner has the freehold. The various Acts specifically deny us the rights granted to most leaseholders. The legislation seems to have been systematically modified with active determination to protect the freeholder’s powers. The leaseholder is powerless in a situation which, although seemingly legally acceptable, is absolutely not fair or morally acceptable and a change in the law is most urgently required. How can such morally deplorable legislation be justified under the British legal system? I am totally exasperated by the fact that most people I speak with seem to just accept this gross injustice – so far there has been no explanation for why leaseholders in a two-flat situation are systematically sidelined by every potentially helpful regulation related to this. I am desperate to find some positive way for leaseholders in my position to proceed in order to gain the same entitlements granted to other leaseholders and ultimately obtain fair control of our own homes.
To this end, I would be very appreciative if you could suggest any other avenues to pursue in order to highlight the vast inequalities this current legislation creates. Indeed, I’d be most grateful to hear what advice you might have for suffering leaseholders to challenge this legislation?