Key Acts of Parliament and Leaseholder Rights
Over the decades, leaseholders have been granted a large number of rights in attempts by successive Governments to make leasehold tenure more equal to that of freehold. One of the two primary statutes that govern leasehold reform is that of the Leasehold Reform Act 1967 which gave leaseholders of houses the chance to buy their freeholds, and extend their leases, a process known as enfranchisement.
Note: The 1967 Act has been amended to either extend its application, or to void the effect of loopholes upheld by the courts.
Then came 5 main Acts of Parliament specifically concerned with the management of blocks of flats and leaseholder rights and they are as follows;
- There are two main statutory provisions for regulating variable service charges and which provide a framework for supporting tenants rights under the terms of the leases, particularly those of service charges. The first is the Landlord and Tenant Act 1985 which is also the first of the five main Acts of Parliament specifically concerned with the management of blocks of flats. One of the Act’s most significant rights is enabling a group of leaseholders who hold houses or flats on tenancies/leases from the same landlord upon similar terms to set up a Recognised Tenants Association. It also allows a tenant or an Association to request that the landlord provides to provide a summary of service charge costs. It also provides leaseholders some rights regarding buildings insurance.
- The Landlord and Tenant Act 1987 is the second statutory provision for regulating variable service charges and the second Act specifically concerned with the management of blocks of flats. It builds upon the 1985 Act by enabling leaseholders to seek new management via the First Tier Tribunal, compels the freeholder to serve an offer notice to leaeholders when disposing of the freehold interest (known as the Right of First Refusal), allows the leaseholder(s) to apply for the lease to be varied and the service charge contributions to be held in trust.
- The Leasehold Reform, Housing and Urban Development Act 1993 is the third Act (and the second primary statute governing leasehold reform) which gives leaseholders of flats the right to group together to collectively purchase the freehold from the current freeholder, (providing both the building and the leaseholder meet certain criteria). It also provides the right for leaseholders to acquire the freehold through compulsory acquisition, particularly if there has been failure to comply with any relevant provision of an approved code of management practice. It gives leaseholders the right to obtain a management audit and gives individual leaseholders the statutory right to extend their lease by 90 years added onto the unexired term (by granting a new lease in substitution for the existing lease).
- The Housing Act 1996 wasn’t actually a new Act as it only made amendments to the 1993 Act.
- The Commonhold and Leasehold Reform Act 2002 contains provisions to update parts of the Landlord and Tenant Act 1985 and the Landlord and Tenant Act 1987 but the sections relating to accounting for, and reporting on, variable service charges and the holding of service charge contributions in a designated bank account have not yet been implemented. This means that the original provisions of s21 of the Landlord and Tenant Act 1985 (request for summary of relevant costs by a lessee) and s42 of the Landlord and Tenant Act 1987 continue to apply. The 2002 Act is however the most radical reform of leasehold legislation to date as it introduces Right to Manage (a no-fault process of removing the managing agent and replacing them with one of the leaseholders own choosing) and a third way of purchasing property, that of Commonhold which is being revisited as so far it has failed to take off.
- Because primary legislation under the 2002 Act was only amended the Housing and Regeneration Act 2008 (provision of information and designated accounts) refers to Schedule 12 of the Act (provision of information about service charges and to service charge funds) and under s303 (provision of information and designated accounts) referring to clauses relating to ‘a regular statement of account’ as the ‘provision of information’ and the ‘accountant’s report’ with that of a report by a ‘qualified person’.