QUESTION
The 1993 Act on Leasehold Reform, quoted by the correspondent highlighted in one of your recent Ask NOTB emails about a request for a leasehold extension, was also referred to by one of our leaseholders earlier this year.
Unlike your correspondent, we are shared freeholders. There are only four of us in our small company. This was formed by previous owners in 1987, but the original shared freeholders foolishly did not extend the leases. We are looking to extend them now - they all have less than 70 years left.
One of the leases, the first one written, is actually a draft lease with many confusing hand-written amendments, crossings-out and alterations. Our accountant has told us that as none of these alterations were initialled, the document was not legal; it should have been retyped before it was signed by the original freeholder and leaseholder.
One of the clauses in the draft lease is very poorly worded. When he bought the flat, the current leaseholder was told by his solicitor that it meant he did not have to pay a quarter of the cost of repairing the roof. Another solicitor says it does mean that, because it ends with the phrase "and one-fourth of the cost shall be payed by each leaseholder"!
Three of us want to replace that clause when the leases are extended with the clause in our own correctly typed leases which makes it perfectly clear that we all pay for repairing the roof. The other leaseholder says he will not accept this change of wording and claims that the 1993 Act says he is entitled to extend his lease for 90 years, whether the freeholder agrees or not.
Is he right? If not, will we have to take the matter to the Small Claims court?
As you can imagine, this matter is upsetting all of us. Any advice from you would be gratefully received.
ANSWER
The Leasehold Reform, Housing and Urban Development Act 1993 is the Act that governs the lease extension process for flats. This Act is applicable to your situation. In my response to your queries, I shall deal with each issue that you raised in turn.
In terms of the draft lease, if a lease has been signed by both parties and validly completed, then it could be deemed to be a final lease even if it states “draft” on the face of it. The handwritten amendments, crossing out and alterations, even if not initialled, does not necessarily invalidate the document if the document is signed by the original freeholder and leaseholder. If the correct completion formalities have been complied with, then the lease is a binding contract and therefore can be relied on.
The clause which states ‘and one – fourth of the cost shall be paid by each leaseholder’ implies that there are four leaseholders, each of whom is required to pay a quarter share towards the costs. I have only seen half the clause so cannot confirm that it means paying one-quarter of the cost of the roof but it clearly intends the leaseholder to be liable for one-quarter of the cost of some works within the lease. Whilst I have not seen the full lease, on the assumption that there is nothing within the lease to qualify this clause, then it would be binding on the leaseholder to pay his quarter share of the costs as defined in either the remainder of this clause, or an associated clause within the lease. If the leaseholder entered into the lease in reliance on his solicitor stating that there is no obligation to pay costs, then there is a potential professional negligence claim against the solicitor if the leaseholder can demonstrate that its loss as a consequence of its reliance on the solicitor’s advice. The leaseholder would be advised to obtain independent legal advice on this.
The Leasehold Reform, Housing and Urban Development Act 1993 permits leaseholders to apply for an extension of their lease providing that the qualifying criteria are met. These include owning the property for a full 2 years prior to the application for a lease extension being made, and the lease must be a long lease for a term exceeding 21 years. Under the statutory provisions a leaseholder is entitled to an extension of their lease for 90 years at a peppercorn rent and the remainder of the lease remains as is save for any necessary updating in line with statutory amendments. Therefore the leaseholder is able to extend his lease for a further 90 years providing that he follows the correct statutory procedure.
A lease cannot be varied unilaterally and if the leaseholder does not agree that his lease is to be varied to bring it in line with the remaining three leases, then it may be appropriate to apply to the First Tier Tribunal (Property Chamber). The First Tier Tribunal will determine whether the lease should be varied, and if the leaseholder is deemed to be disadvantaged as a consequence of the lease variation, the First Tier Tribunal may order the freeholders to pay compensation. When making an application to the First Tier Tribunal, you would be advised to consider whether any other clauses within the lease need varying at the same time.
I would advise you to obtain legal advice from a law firm which has expertise in leasehold services if you need further assistance.
Sarah Taylor, Associate at Royds Withy King
