Category Archives: Leasehold reform

Leasehold reform news

Oldham Metropolitan Borough Council v Tanna [2017] EWCA Civ 50

Oldham v Tanna – Service on the registered proprietor’s address at the land registry – Is this good service?

Oldham Metropolitan Borough Council v Tanna [2017] EWCA Civ 50

This is a planning case, but it may well be of interest to those dealing with the service of notices.

Ordinarily the address for service, certainly, for 1993 Act matters, is the address shown on the service charge or ground rent demand in accordance with sections 47 and 48 of the Landlord and Tenant Act 1987.

Different considerations apply if the landlord is ‘missing.’

However what Tanna seems to be saying is that, (for planning cases certainly) that service on the registered proprietor’s address as shown at the land registry will be sufficient.

It can only be a matter of time before the point is taken in a leasehold reform case.

For full details of the case see http://www.bailii.org/ew/cases/EWCA/Civ/2017/50.html

The Facts

The case concerned the service of a notice under section 215 of the Town and Country Planning Act 1990 (‘TCPA’) on a Mr Tanna.

Mr Tanna was the registered proprietor of a run down and derelict former nursing home. The local authority wished to serve notice on the basis that the amenity of their area was adversely affected by the condition of the property. This would then pave the way for the local authority to demolish the property and reclaim the cost from Mr Tanna.

Legal Background

The legal issues related to the service of notice under section 215 of the TCPA. Service may be effected at a person’s ‘last known address’ (section 233(2) of the Local Government Act 1972, or ‘by leaving it at the last known place of abode of that person, or where a service address has been given by that person at that address’ (section 329(1)(b) of the TCPA.

The Issue

In this case the local authority served notice on Mr Tanna by serving the address shown in the proprietorship register at the land registry. The local authority also served other addresses, although Mr Tanna sought to argue that he was not resident at the address that had been served. Accordingly, the court had to determine whether service had been effected by serving on the address shown in the proprietorship register.

The Law

At first instance in the county court the judge had found that service had not been effected properly and that the council’s officer should have taken further steps including contacting all council departments and emailing Mr Tanna to seek confirmation of an address for him.

The Court of Appeal rejected this suggestion and reviewed the provisions relating to the address for service that appear in the proprietorship (ownership) register at the land registry.

The previous provisions were contained in rule 315(1) of the Land Registration Rules 1925, the relevant provisions are now contained in Rule 8 of the Land Registration Rules 2003 (‘LRR 2003’). These provide that the proprietorship register must contain an address for service.

Rule 198 of the LRR 2003 states that anyone who will be a registered proprietor must give an address for service ‘to which all notices and communications’ may be sent. The requirement is also to give ‘an address for service which is a postal address, whether or not in the United Kingdom.’

The Decision

The Court of Appeal allowed the appeal by the local authority. It did so because in its view service had been validly effected by serving the address in the proprietorship register. In this particular case, as the property itself was unoccupied, serving this address made sense.

The Court also added that the land registry address itself would not be enough if the person serving the notice had been given a more recent address. If that was the case this address should be served also. However, the onus is on the registered proprietor to keep his address up to date.

The Court of Appeal stated that in seeking to serve a notice like this the obligations on the part of the person serving ‘to make reasonable enquiries’ goes no further than searching the proprietorship register, unless they are aware of a more recent address or place of abode.

Comment

There are strong policy grounds for arguing that a local authority should not be frustrated in carrying out its objectives by a ‘technicality’ or a person who avoids service of a notice by not providing an up to date address or being hard to find.

The provisions of Section 215 clearly relate to difficult situations and possibly (as was the case here) abandoned property. In these sorts of cases information can be hard to find and there is good reason for saying that service on the last ‘known’ address is valid if sent to the registered address.

Would the policy considerations be the same, if this were a leasehold reform case? I suspect that tacitly a court might feel that given the expropriatory nature of the enfranchisement legislation that the consequences of deemed service would be harsh.

In addition, if this case truly supported this proposition in enfranchisement terms then the missing landlord procedure would be a lot easier – deemed service on the registered proprietor’s address being sufficient.

Surely, this cannot be what parliament intended, as the 1993 Act and 1987 Act have provisions that will assist in dealing with absentee or non-performing landlords.

However, the case does raise a very interesting point.

Mark Chick

16th May 2017

Mark Chick is a specialist leasehold property solicitor and head of the Landlord and Tenant Team at Bishop & Sewell LLP, a firm of solicitors based in Central London.

This note is not designed to be a complete summary of the law in this area and should not be relied upon as such. If you require assistance with legal issues then please take legal advice. For further details, or to speak to one of the Landlord and Tenant Team at Bishop & Sewell LLP visit www.bishopandsewell.co.uk or telephone 020 7631 4141 or email: leasehold@bishopandsewell.co.uk

 

 

Commentary on the Housing White Paper – Fixing Our Broken Housing Market

The Housing White Paper has some interesting themes but sets some pretty ambitious targets. 

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/590463/Fixing_our_broken_housing_market_-_accessible_version.pdf


Are we really going to be Fixing our Broken Housing Market ?

My thoughts on the main themes affecting long leasehold appear below (the details of the exact paragraphs in the consultation appear in my earlier post).

New leasehold houses and ground rents –
Stopping increasing and onerous payments on leasehold houses  

How will this be achieved in practice? Banning the creation of all leasehold houses probably won’t work as this wouldn’t help cover situations with ‘overlap’ or ‘undercut’ with adjoining property. 

Perhaps leasehold ‘houses’ could be deemed to be ‘flats’ (in the legal sense) that just happen to look like houses. That would then allow the service charge legislation to apply. 

There could perhaps then also be a restriction on creating any leasehold house at a ground rent.

Some of the problems of new leasehold houses have been well documented. 

See the articles below….


http://www.thisismoney.co.uk/money/mortgageshome/article-3088134/The-great-divide-Buy-165-000-house-left-road-outright-buy-one-right-don-t.html

https://www.google.co.uk/amp/s/amp.theguardian.com/money/2016/oct/29/new-builds-house-buyers-leasehold-property-trap?client=safari

What are the advantages of leasehold in this sort of situation?

The need to impose maintenance obligations in shared estates remains and leasehold is an attractive solution from the legal point of view as this makes the collection of common cost contributions easier. 

However, this could be achieved by the use of ‘rentcharges’ and/ or deeds of covenant on each individual transfer. 

This is how the maintenance arrangements and management charge are usually dealt with in existing freehold developments with shared estate roads and other facilities.
So, would all of this need primary legislation? – The answer is a resounding ‘yes’ and therefore it would also require a significant amount of parliamentary time.

Ground rents that review at short periods and that have significant increases

The review periods for ground rents are clearly an area where the ‘consumer legislation’ could be used to some effect. 

Options presumably include:-

  • Banning the creation of new ground rents in any new residential lease.
  • Restricting the frequency of reviews – perhaps to every 20 years – and then also imposing a cap or limit on the rent level that can be set.

This is contentious as it potentially will restrict freedom to contract and might have unintended consequences for shorter term Lettings with a premium.

One solution could be a ban on rents that equate to more than a certain fraction of the open market value of the property with a certain (assumed) lease term say 125 years and no rent. 

Examples of the problems that can be caused by escalating ground rents ….


https://www.google.co.uk/amp/s/amp.theguardian.com/money/2016/nov/05/ground-rent-scandal-engulfing-new-home-buyers-leasehold?client=safari

This would avoid the situation where homeowners end up with an unsaleable asset because of a combination of poor advice and clever drafting.

‘Whether and how to invigorate commonhold’ 

That is an interesting statement in itself. 

It is often said that there are more books written about commonhold than commonhold developments and no doubt this may be true. Not making it compulsory was of course its failing. 

It would be a bold political move, but legislating to make all new developments of flats commonhold could be a solution. 
Anyone remember this BBC news item from 2005?

http://news.bbc.co.uk/1/hi/business/3675612.stm

What about the valuation impact?

If commonhold were made compulsory for new builds then there could be a ‘backlash’ in valuation terms against those living with existing ground rent landlords as these assets would instantly get more valuable. Accordingly, the impact on the Enfranchisment cost for all remaining residential leaseholders would need to be considered as a point of policy. 

What would a ‘two tier’ system or market look like, with some properties commonhold and others not? 

Perhaps that is the biggest reason why commonhold has not taken off to date – namely that people do not like change and no developer wants to ‘go first’ when there is no incentive (or compulsion) to do so.

So, will it really happen?


The pressure of other legislative requirements may well mean that whilst the White Paper suggestions on long leasehold are very well intentioned in my view they may not fully progress. This is likely to be because of other demands on parliamentary time from numerous quarters and not least because of other ‘small’ matters that the government currently have to deal with such as Brexit. 

Mark Chick 

This article being general in nature is not a substitute for legal advice. If you require legal advice please visit www.bishopandsewell.co.uk or email: leasehold@bishopandsewell.co.uk


White paper on housing

The governent has just published its Housing white paper.

There current press and parliamentary interest in leasehold has brought leasehold issues into the spotlight and the recent stories about escalating ground rents and also leasehold houses in particular are an area where government is going to look to intervene 

In particular see the paragraphs below:

Leaseholders

4.36 The Government will act to promote fairness and transparency for the growing number of leaseholders. Leasehold has been a traditional part of the housing market in this country but there are areas where urgent reform may be needed, particularly when buying a house on a leasehold basis. New leasehold houses can be marketed at a reduced price compared to freehold. But some purchasers are not aware at the point of sale that the associated costs of buying a new leasehold house can make it more expensive in the long run. Some freeholds and ground rents of leasehold houses are sold on and traded, with leaseholders left in the dark, and facing increasing and onerous payments. This is not in consumers’ best interests.


4.37 In particular, ground rents with short review periods and the potential to increase significantly throughout the lease period may not be offering a fair deal. We are absolutely determined to address this. We will therefore consult on a range of measures to tackle all unfair and unreasonable abuses of leasehold.


4.38 We will consider further reforms through the consultation to improve consumer choice and fairness in leasehold, and whether and how to reinvigorate Commonhold. We will also work with the Law Commission to identify opportunities to incorporate additional leasehold reforms as part of their 13th Programme of Law Reform, and will take account of the work of the All-Party Parliamentary Group on Leasehold and Commonhold.

There is quite a lot of food for thought here and is good to see that government are prepared to intevene to stamp out abuses. 

In addition to regulation and legislation as I and several of my ALEP colleagues have been saying for a number of years, part of the solution is also better education for professionals and leaseholders so that consumers are better informed.

It will be interesting to see how the debate develops and how much parliamentary time will be available to devote to these issues given other pressures such as the Brexit negotiations.

Mark Chick

Mark Chick is a solicitor dealing with leasehold issues. 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 

The Trustees of The Sloane Stanley Estate v Adrian Howard Mundy (Flat 3, 36 Elm Park Road, London, SW3 6AX)[2016] UKUT 0223 (LC)

The Mundy decision what does it mean?
The decision in Mundy deals with the question of relativity. This begs the question as to what relativity means in the context of a lease extension or buying your freehold.

The first thing to say in answer to this question is that it is only relevant in practical terms if your lease has less than 80 years to run on it.
This is because it will only be needed if marriage value is payable as part of the compensation payable to the landlord and this only applies if the lease has less than 80 years to run at the ‘valuation date’ (the date of the notice of claim).
So what is it? Well, as you might expect it is a ‘relative’ measure – effectively the ‘gap’ between the short lease and long lease value.
Why is it important?
In working out what needs to be paid to the landlord the valuer needs to assess two things – firstly the value of the tenant’s interests and secondly the value of the landlord’s interests both before and after the transaction has taken place.
Obviously you can’t know both of these things at the same time and hence, over time valuers have developed a way of working out from any given lease length and stated flat value a percentage of the ‘freehold value’ of the flat that the current lease value represents.
There is a certain circularity in this approach as ultimately the percentage adopted needs to refer back to something as an opinion of the freehold value.
Over time, this has been assessed by various graphs of relativity and these have been hotly contested because a few points up or down the scale makes a big difference to the amount that the tenant pays.
In Munday a new approach was tried to calculating relativity which ultimately failed – however it did raise some very interesting questions – not least of which was a criticism of the underlying accuracy of many of the graphs.
Some of The graphs have been effectively statements of opinion based on ‘sampling’ of the value of a notional ‘basket’ of properties by estate agents – not completed transactions.
In Munday, Parthenia research for the tenant sought to argue that a more appropriate and statistically robust way of dealing with the matter would be to use what is known as ‘hedonic regression’ to effectively determine the impact of lease length on value for a sample of pre- act 1993 Act properties, based on data obtained from one Prime Central London estate agent, John D Wood and Company.
The ‘hedonic regression’ model is a statistical analytical tool that is used in economics and market analysis to enable a reasearcher to ‘strip out’ the impact of a particular variable on the price of an item. A suitable example might be in a market for cars, where it should be possible by analysing sufficient transactions to determine the impact that say, colour has on price (for instance, it might be said that red cars sell at a premium, when all other factors are the same). The approach that was tried here was to look at the impact of lease length as a variable when considering the relative impact on pricing of short lease property, and by doing so to arrive at a ‘new’ way of calculating relativity.
So why didn’t this work?
The Upper Tribunal was not persuaded by the fact that the data set related to only pre-act transactions. Whilst the 1993 Act requires analysis in a ‘no-act world’ it was held that this is not the same thing as a pre-act world and in fact, the correct treatment in the valuation schedules is to assume that the tenant has ‘no right’ to extend or buy the freehold under the statute, thereby increasing the amount due to the freeholder.
In other words, one of the problems, was not with hedonic regression itself but also with the data set that was analysed to try to produce the results.
It could also be said that the outcome was too radical a departure from the accepted ‘norms’ of relativity (althought this was not a reason given).
The result – a victory for landlords and a windfall for many owners of reversions outside of Central London.

Mark Chick

Mark Chick is a solicitor dealing with leasehold issues. 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