The Practical Lawyer

Another interesting case on the strict application of the consultation provisions under LTA 1985. Long lessees (who had bought under the right to buy legislation) challenged various service charge items raised by Leicester City Council. In particular, Leicester had self-insured (ie it had not obtained insurance on the open market but had self-insured by taking on the insurance risk). The Upper Tribunal held that the wording of the leases did not cover any charge that Leicester made for self-insurance and thus was irrecoverable.

We now have the first High Court judgment on the Tenancy Deposit Scheme.

What happened was that T entered into a 12-month assured short-hold. A deposit was paid to the agents who held the money as stakeholder. That deposit was not registered with the authorised scheme (DPS) until six weeks later. Subsequently, T brought a claim against the agents, on the basis that the deposit had not been registered (and information given to T) within 14 days of the money being received by the agents. Accordingly, T claimed the statutory penalty (three times the amount of the deposit). There were two issues to be resolved:

Long lessees have the right to claim an extended lease under Leasehold Reform, Housing and Urban Development Act 1993. T must serve a notice on L, and in response L must serve a counter-notice within two months.

Once T has served a notice, the T can assign that right to an extended lease to a successor in title (ie an assignee of the lease). This is important, because there is a two-year qualifying period before being able to claim the lease extension; accordingly, any potential purchaser of a flat may well want the vendor to serve a notice of claim before the sale, and then transfer the benefit of the claim along with the ownership of the flat itself (which means the buyer does not have to wait for two years, and will hopefully get an earlier valuation date and a reduced premium).

However, all this does presuppose that the lease, and the benefit of the notice, are assigned simultaneously. This may sound straightforward, but in practice there is a major pitfall. This is because the deed assigning the benefit of the claim will usually be completed at the same time as the assignment of the lease, and will often state that the legal title to the claim passes immediately. But, the key point to remember is the conveyancing principle that the beneficial title to the lease will pass as soon as the deed of assignment is completed, but the legal title will only pass when the purchaser is registered at the Land Registry. Accordingly, on the date of completion the purchaser will have full title to the lease extension claim, but only beneficial title to the lease. Ls have used this situation to argue that there has been a separation of the legal titles to the lease extension claim and the lease itself (and thus the lease extension claim is automatically deemed withdrawn under s43(3) of the 1993 Act).

The judicial authorities are confusing: ?Aldavon [1999] supported the argument put forward by Ls, but that was subsequently challenged by ?Typeteam [2007]. The answer is for the deed that assigns the benefit of the lease extension claim to clearly state the parties’ intentions, with the transfer of title to the claim being expressed to take effect on the registration of the purchaser as proprietor of the existing lease of the Land Registry. This will then ensure that the assignments of the legal and beneficial interests in both the claim and the lease take effect simultaneously. For commentary and authorities see article in [2010] 243 PLJ 20.

We have frequently mentioned the importance of the consultation procedures when dealing with residential service charges. A failure to comply with those procedures means that L is restricted to claiming £250 (maximum) from each T.

When the right to enfranchise (to buy the freehold) was introduced by LRA 1967, there was a requirement that T had occupied the premises as a ‘residence’ for at least five years. That five-year period was reduced to three years in 1993, and the residence requirement was largely abolished by CLRA 2002.

Under CLRA 2002 the standard test is now one of two years of ownership (not residence). As far as businesses are concerned, the right to enfranchise does not apply to an LTA 1954 business tenancy, unless T has been occupying the ‘house’ as his ‘residence’ for at least two years (which would be impossible for a company).

Until recently, the view of the ECHR was that Article 6 would not be relevant at an injunction, or other interim proceeding, because it would not be a conclusive ‘determination of a civil right’. Thus, Article 6, and other human rights issues, would only be relevant at a full trial.

A recent CA decision has radically altered the landscape in the world of set-aside applications. It has done this by focusing on the meaning of ‘trial’, and the result is that what many of us have always thought of as a trial, will not be a trial at all. The case involved the possession claim but is of much wider importance.

Under LRA 1967, the right to enfranchise (or to have a lease extension) was originally limited to leases where T was paying a ‘low rent’.

The Commonhold and Leasehold Reform Act 2002 has inserted new service charge consultation procedures into LTA 1985.

Consultation is required in respect of ‘qualifying works’ (ie ‘works on a building or any other premises’), or ‘a qualifying long-term agreement’ (ie an agreement that will last more than 12 months). If the works will require a contribution from any one T which exceeds the relevant threshold (£250 for qualifying works; £100 for qualifying long-term agreements) then the consultation provisions apply. There are three separate procedures:

The CA has held that registered social landlords have to consider their T’s human rights when exercising housing management and housing allocation functions.