Who Got the Most out of the New Tenancy?
It probably came as no surprise that the new tenure turned out to be far more beneficial to the freeholders than the leaseholders who saw their asset (the lease) decrease in value as its term got shorter. Freeholders didn’t have to grant lease extensions and the really unscrupulous landlords would forfeit the lease (which meant they took the lease and also the property) if they didn’t purchase the freehold (reversion) at the price the landlord named. Freeholders also served long schedules of dilapidations, i.e. repairs that leaseholders were under no obligation to carry out and even if they were, they were likely to be unnecessary. Freeholders would then allege breaches of covenants!
How could they do this?
Most leaseholders were so poor that they would not have known that they already had rights under s146 and s147 of the Law of Property Act 1925 and that not only were landlords legally required to serve notice specifying the alleged breach but they could require it to be remedied if it was possible. Leaseholders would not know that they could apply to the Court for relief and freeholders were not about to tell them. They also wouldn’t know that even though these sections didn’t protect them if an action for damages was threatened instead, they did still have some protection under s18 (1) of the Landlord and Tenant Act 1927 (provisions as to covenants of repair) which meant that the damages recoverable could not exceed the decrease in the reversion value caused by the breach!
It was the introduction of the Property Repairs Act 1938 which allowed leaseholders to serve a counter notice to the freeholder when they had been served with stringent schedules of dilapidations (to be served within 28 days of receiving it). This counter-notice would prevent leaseholders from being forced to purchase the freehold and allow them to apply for relief from forfeiture or actions for damage, whichever route the freeholder chose to take.
In 1948 official recommendations were made about the rights of leaseholders to acquire their freeholds but it was not until the Leasehold Reform Act 1967 that leaseholders of houses were grante the right to buy their freehold, a process termed enfranchisement.
The next main area of legislation came with the introduction of the Landlord and Tenant Act 1985 which was the platform for leaseholder rights according to the terms of their leases, especially those of service charges. The Landlord and Tenant Act 1987 built on this platform and was then followed by the Leasehold Reform, Housing and Urban Development Act 1993, which finally gave leaseholders of flats the right to collectively purchase the freehold. Then came the Housing Act 1996 which wasn’t a new Act as it only made amendments to the 1993 Act. The most radical reform of leasehold legislation came with the introduction of the Commonhold and Leasehold Reform Act 2002, giving leaseholders the right to manage their block without having to prove the freeholder at fault, and a new way of buying property, that of Commonhold which sadly never took off.