Who Got the Most out of the New Tenancy?
The long lease turned out to be far more beneficial to the freeholders than the owner-occupiers. This was because not only did leaseholders continue to pay for the upkeep of the common areas, but their asset (the lease) decreased in value as its term got shorter. Freeholders didn’t have to grant lease extensions and the really unscrupulous landlords would take steps to forfeit the lease (taking it back before its natural end) if they didn’t purchase the reversions (i.e. the freehold) at the price the landlord named. This would be a considerable loss to the leaseholder as they also lost their homes. 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 against this sort of practice 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 from forfeiture (and freeholders were not about to tell them). They also wouldn’t know that whilst these sections didn’t protect them if an action for damages was threatened (instead of forfeiture) they did 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!
Leaseholders remained unprotected from this practice until the introduction of the Property Repairs Act 1938 which allowed them 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 reversion (freehold) and allow them to apply for relief from forfeiture or actions for damage, whichever route the freeholder chose to take.
In 1948 official recommendation was made regarding the rights of leaseholders to acquire their freeholds but interestingly discussions on this go as far back as 1884 when The Royal Commission on the Housing of the Working Classes held discussions on this very issue, asking if such a right would improve living standards for those people who lived in freehold properties.
It was the Leasehold Reform Act 1967 that finally gave leaseholders of houses the right to buy their freehold, a process termed enfranchisement but for some reason leaseholders of flats were to wait until 1993 to be able to buy the freehold of their blocks of flats.
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, the Housing Act 1996,.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.
The sector still remains remains very problematic despite the rights granted to leaseholders over the decades. Leaseholders have some powerful support in terms of addressing these continual problems from the Leasehold Knowledge Partnership, secretariat of the All Party Parliamentary Group on leasehold and commonhold reform chaired by the MPs Sir Peter Bottomley (Conservative), Jim Fitzpatrick (Labour) and Sir Ed Davey (LibDem) who are also patrons of LKP. The deputy chairs are Justin Madders (Lab) Marie Rimmer (Lab) and Baroness Gardner (Con).
At the moment, vigorous campaigning from the above and media coverage has resulted in new freehold houses banned from being built and the calls for leasehold to be abolished remains strong in certain quarters.