QUESTION
I am the chairman of an Independent Leaseholders Association (10,000 RTB members) We have held regular monthly meetings for approximately the last eight years.
My RTB (flat) lease dates from 1992. Since I do not wish to pass on a problematic legacy to my family on my demise, I have recently been negotiating with the council to purchase a 99 year extension to the existing lease.
I was recently sent a draft of the proposed extension stating that the extension is granted under S 56 of the 1993 Act.
The draft also contained a clause in regard to S 61 (Landlords right to terminate new lease) which on my insistence the council's solicitors removed from the draft copy.
However, after many readings of my original lease/deeds I can find no reference to s61 or the councils ability to terminate for redevelopment under the terms of the original lease. (Is there such a provision in the earlier RTB leases?)
1. I assume that signing this extension would legally bind me under the new terms...i.e s56?
2. What is my legal position in regard to demanding the reference to s 56, and thereby s61 be removed entirely from the new extension?
3. Since the terms of my original lease were presumably governed by the Act immediately preceding the 1993 Act? (not sure which one may be relevant) would It be advisable to sign the new lease and commit myself to the proposed revised terms under s56 or refuse the extension due to the inclusion of an onerous clause?
ANSWER
Thank you for your email.
Without sight of the correspondence and the offer that was/is being negotiated with the Council it is difficult to advise comprehensively. However the generally position is that when a statutory lease extension is applied for i.e. one requested formally under the Leasehold Reform Housing and Urban Development Act 1993 (“the 1993 Act”) (sometime referred to as a “Section 42 Notice claim”), that lease extension and the contents of the lease extension document are governed by the 1993 Act (unless other terms can be subsequently agreed between the parties).
Under the 1993 Act the new lease must contain certain provisions. One of those provisions is a statement reserving to the landlord a right to apply to the court at any time during the last 12 months of the existing lease or the first five years of the new lease for possession order on thegrounds of redevelopment - pursuant to Section 61 of the 1993 Act.
In practical terms a landlord cannot use section 61 of the 1993 Act unless a Court so orders (on its application, at that later time) because the landlord seeks to demolish and reconstruct. Further the Tenant would be entitled to compensation under Schedule 14 to 1993 Act; paragraph 5 makes compensation equal to flat's open-market value, on the assumptions set out there.
As it is a statutory provision, the clause will be implied into the lease whether or not it is actually included in the lease.
I note however from your email that you and your solicitors have successfully managed to get this provision removed from you new lease and without sight of the correspondence, I assume on the grounds that the lease extension was a voluntary deal and not one to be granted under the statutory provisions.
I hope that helps.
Yashmin Mistry is Partner and Head of the Property Practice Group at JPC Law
