Law Commission: ‘We want to hear about problems in leasehold law’

LKP met Professor Nick Hopkins, the Law Commissioner concerned with property law, at Westminster yesterday.

The meeting, held by Sir Peter Bottomley and Jim Fitzpatrick – the MP patrons of LKP – and trustees Martin Boyd and Sebastian O’Kelly – concerned issues surrounding leasehold law as part of the 13th law reform consultation which launched at the Supreme Court on July 14.

In particular, discussion focussed on establishing a consolidation act to bring together all existing leasehold law into a coherent whole.

Mr Boyd is a leaseholder at Charter Quay in Kingston, Surrey, and co-owns the freehold along with the other leaseholders at the site after an epic showdown between the leaseholders and the previous freehold owner, ultimately Vincent Tchenguiz.

“As one of the joint freeholders at Charter Quay, I have to say that the laws as they stand suit me me fine,” Mr Boyd told the meeting. “But as a leaseholder, I am considerably disadvantaged.

“There is no balance in leasehold law; its is weighted considerably towards freeholders.”

Mr Boyd referred the “one-way casino” of legal costs, which allows freeholders to claim their legal costs – even in a case they do not win – while leaseholders get no costs at all.

Another issue raised was forfeiture, which was considered by the Law Commission in 2006.

It is still unknown how many cases of forfeiture come before the county courts, and the government declined to answer on grounds of cost a Parliamentary Question on the subject from Emma Reynolds, when Labour shadow communities secretary.

LKP is well aware that forfeiture is threatened routinely. It also believes it is granted with more frequency than the sector likes to believe.

As forfeiture can lead to a considerable cash windfall to the freeholder – which no one in the leasehold sector has attempted to justify – it is urgently required that forfeiture’s fundamental unfairness is addressed.

The criminal courts, in Regina v Waya, scrupulously returned seed capital to a mortgage fraudster involved in leasehold flat scams.

Mr Waya was treated far more leniently than leaseholders in the civil courts faced with forfeiture. The case was discussed by David McCluskey, a partner at Peters & Peters, for the Law Society here

The Law Commission said: “There is a raft of legislation governing long and short residential tenancies, which is vital for those with an interest in the millions of such tenancies in England and Wales.

“In England alone, the most recent statistics show 8.2 million households being rented privately or socially, and 4.1 million dwellings being held under a long residential tenancy.

“We are interested to hear whether there are areas where the law is causing practical difficulties for landlords and tenants.

“For example, the existing regulation of service charges payable by tenants of long residential leases could be examined.

“The Competition and Markets Authority has recommended a review of the regime governing the recoverability of charges in respect of major works and long-term agreements (in section 20 of the Landlord and Tenant Act 1985), which it criticised for being out of date and inflexible.

“It also recommended that tenants of long residential leases be given a new power to require a landlord to re-tender for property management services.

“Another related issue flows from our work on event fees in retirement properties.

“In that work we looked at one potentially unfair term – namely a requirement to pay a fee on a particular event, such as when a lease is sold.

“Other terms may also be potentially unfair, such as ground rents subject to exponential price escalation clauses.

“But it is unclear how unfair terms law applies to residential leases made between a consumer leaseholder and a business tenant once the lease is sold to a new leaseholder or a new landlord.

“The upshot of this uncertainty (and others) is a gap in consumer protection for leaseholders.

“We want to hear about problems in residential leasehold law and in particular how common those problems are, the extent to which they have a practical and economic impact, and why they should be considered a law reform priority.”

The Law Commission will be looking for proposals for areas of law they might review in the period 2017-2020. They are dependent on individual government departments sponsoring issues suggested for change but they also need to hearing from the public by 31st October 2016. A copy of the Law commissions programme page with a link to their online questionnaire can be found here.

You can contact the Law Commission here