Check the term of years left on your lease.
WARNING! Please do not become complacent – if you have a lease term over 80 years you are fortunate. Now, instead of putting away your Lease and forgetting about the issue you should seize the opportunity of extending a strong lease to an even stronger lease. The result is that you would pay a relatively low premium to obtain an additional 90 years to the existing term and the ground rent is reduced to a peppercorn. – essentially ZERO rent. A lease term above 80 years does not attract marriage value. Marriage value is the difference between the current property value against the value of the same property with a long lease term and peppercorn ground rent. The difference, referred to as “profit” is split and half of the “profit” is payable to the Freeholder.
Contact a surveyor and solicitor who specialise in Leasehold Enfranchisement.
– The solicitor shall investigate whether you and the building qualifies pursuant to the Act.
– The surveyor shall provide an opinion on the likely Premium to be paid for a lease extension.
The Legal Process.
a) The solicitor shall prepare the section Notice which initiates the claim. It is important that a valid notice is effectively served on the Competent
Landlord/Freeholder. To assist the solicitor, you should provide your most recent ground rent and service charge demands.
b) Once a valid section 42 Notice is served a strict timetable is initiated. Provided you have instructed specialist advisors you need not worry as they shall safeguard your interests through the process. Please note that once a section 42 Notice has been served you become liable for the Competent Landlord/Freeholder’s reasonable section 60 costs.
c) It is very likely that a Competent Landlord/Freeholder shall exercise their right and request payment of the statutory deposit. This will be either 10% of the premium quoted in your initial notice or £250, whichever is greater. TIP! Good finance management is important here. Upon receipt of your surveyor’s report you should discuss the amount to be set aside to cover the statutory deposit which is payable within 14 of the request from the Competent Landlord/Freeholder’s solicitor who will hold the deposit as stakeholder.
d) It is also likely that the Competent Landlord/Freeholder’s surveyor will require access to inspect the property for the purposes of completing their own valuation report.
e) Once two months have lapsed you should have received a Counter Notice. The consequence of failing to serve the Counter Notice are that as a Lessee you are entitled to a lease extension as per the terms you set out in the initial Notice. WARNING! Do not be alarmed upon receipt of the Counter Notice if the figure quoted is exceptionally high as the Competent Landlord/Freeholder are not bound by the same constraints of having to serve a reasonable offer. This does not mean that you have to pay an unreasonable amount.
f) The Competent Landlord/Freeholder may also offer an informal deal alongside the Counter Notice. This may need some careful consideration but for some Leaseholders may offer the more attractive option if they are seeking to sell their property in the foreseeable future.
g) Upon receipt of the Counter Notice you can sit back and allow your surveyor to negotiate. There is a two-month period known as the statutory negotiation period whereby the surveyors thrash it out to reach an agreement.
h) Upon expiry of the two-month negotiation period your solicitor will reassess the progress being made between the surveyors and consider making an application to the First Tier Tribunal, Property Chamber. An application must be made within six months of receipt of the Counter Notice or you would risk a deemed withdrawal. The timetable in Leasehold Enfranchisement is very strict and it is imperative to instruct a specialist in this area to ensure the deadlines are not missed.
i) Once the Premium has either been agreed or determined at a Tribunal, the latter is unlikely as most cases settle without the need for a hearing, the solicitors would agree the form of the new lease and proceed to complete the lease extension.
j) Once terms of acquisition have been agreed you have four months to complete the lease extension. This is a strict deadline and failure to complete within this timescale would result in a deemed withdrawal (in the absence of an application to Court).
NOTE: If you are remortgaging, it is important your solicitor and broker communicate with the timing of making an application for the remortgage and the drawdown of funds.
k) A completion date will be agreed and you will complete the lease extension. The Land Register will be amended and you would have successfully completed the process – protecting and adding value to your leasehold interest.
Possession Proceedings – Unprecedented Changes (PD 55C)
The purpose of the changes is to take into account the effect of the pandemic on all parties maintaining confidence in fairness of outcomes, encouraging compromise and to ensure the defendants are provided with legal advice.
Current Restrictions
- Moratorium on forfeiture of business tenancies extended until 31 December 2020 and is further extended until 31 March 2021.
- In Commercial Rent Arrears Recovery proceedings (“CRAR”) the minimum unpaid rent must be equivalent to 276 days rent until 24 December 2020 and 366 days from 25 December 2020. The restriction on landlords using CRAR to recover unpaid rent will also automatically extend to the end of March, in line with the moratorium’s expiry date. This allows businesses sufficient breathing space to pay rent owed.
- PD 55C: Possession Proceedings
- Reactivation Notice required for stayed claims
- New notice requirements for new claims
Overall Arrangements
- Emphasis on compromise
- Legal advice and assistance for defendants
- Non-statutory best practice guidance:
– MHCLG guidance for private and social landlords and tenants
– NRLA Pre-Action Plan: Managing Arrears and avoiding possession claims
– FCA guidance ‘Mortgages and Coronavirus’ (to 31.7.2021)
– MHCLG Code of Practice for commercial property relationships during the Covid-19 pandemic (to 24.6.2021)
New Listing Priorities
- Court will no longer fix hearing dates when claim is issued
- No more block listing
- 21 days’ notice
- Cases will be given priority if they involve the following:
- Anti-Social behaviour allegations;
- Extreme rent arrears;
- Squatters or illegal occupiers and persons unknown;
- Fraud or Deception;
- Unlawful Subletting;
- Allegations of abandonment of the Property;
- Local authority temporary accommodation needed for reallocation
Covid-19 Case Marking
- Intended to highlight settlement suitability and assist the court in dealing with listing, case management and the exercise of discretion
- Any Defendant or private Claimant may request a case is marked
- Specified information required
- Upon making request must inform all other parties. Request will result in case marking unless objection raised
- Judge may also direct that a case is Covid-19 marked
Review and Substantive Hearing Dates
The Review (R) Date:
– a 5-minute non-attended appointment on the documents
– requirements of the claimant relating to bundles before R date
– requirement that claimant is available to discuss the case during the R date
– consequence of failure to resolve case on the R date
The Substantive (S) Hearing Date:
– a 15-minute hearing attended by all parties 28 days after the R Date
– a physical hearing unless the parties agree otherwise or contingency arrangements apply
– unless case resolved, a decision by the Court or further case management directions
– adjournment considered without application where advice not yet made available to Defendants and consequences of order ‘may be serious’
Accelerated Possession Claims
- As with existing rules, the court can still make a possession order without a hearing
- Reactivation notice requirements apply for stayed claims
- The same priorities apply as with normal cases in the order in which they will be dealt with
- Will be referred to judges “at a manageable frequency”
- Where the parties agree or there is no objection a review hearing can be ordered
Evictions
- 14 days’ notice of an eviction date required
- Indicated that applications for transfer to High Court will not be prioritised
- No execution of possession warrants or delivering notices of eviction between 17/11/2020 and 11/01/2021.
- The Public Health (Coronavirus)(Protection from Eviction and Taking Control of Goods)(England) Regulations 2020
- There will be no enforcement of possession orders “Where lockdown measures are in place to protect public health”
- No evictions over Christmas Period save for the most serious of cases
How will the arrangements work in Practice?
The key aims of the overall arrangements are to reduce volume in the system by enabling earlier advice and facilitating settlement. How well this works in Practice is yet to be seen. What we do know is that delays will be inevitable and Covid-19 Case Marking is likely to become the norm. In the circumstances, it appears the Accelerated possession claims may be the ‘Cinderella’ of the situation.
Possession Proceedings – Unprecedented Changes (PD 55C)
The purpose of the changes is to take into account the effect of the pandemic on all parties maintaining confidence in fairness of outcomes, encouraging compromise and to ensure the defendants are provided with legal advice.
Current Restrictions
- Moratorium on forfeiture of business tenancies extended until 31 December 2020 and is further extended until 31 March 2021.
- In Commercial Rent Arrears Recovery proceedings (“CRAR”) the minimum unpaid rent must be equivalent to 276 days rent until 24 December 2020 and 366 days from 25 December 2020. The restriction on landlords using CRAR to recover unpaid rent will also automatically extend to the end of March, in line with the moratorium’s expiry date. This allows businesses sufficient breathing space to pay rent owed.
- PD 55C: Possession Proceedings
- Reactivation Notice required for stayed claims
- New notice requirements for new claims
Overall Arrangements
- Emphasis on compromise
- Legal advice and assistance for defendants
- Non-statutory best practice guidance:
– MHCLG guidance for private and social landlords and tenants
– NRLA Pre-Action Plan: Managing Arrears and avoiding possession claims
– FCA guidance ‘Mortgages and Coronavirus’ (to 31.7.2021)
– MHCLG Code of Practice for commercial property relationships during the Covid-19 pandemic (to 24.6.2021)
New Listing Priorities
- Court will no longer fix hearing dates when claim is issued
- No more block listing
- 21 days’ notice
- Cases will be given priority if they involve the following:
- Anti-Social behaviour allegations;
- Extreme rent arrears;
- Squatters or illegal occupiers and persons unknown;
- Fraud or Deception;
- Unlawful Subletting;
- Allegations of abandonment of the Property;
- Local authority temporary accommodation needed for reallocation
Covid-19 Case Marking
- Intended to highlight settlement suitability and assist the court in dealing with listing, case management and the exercise of discretion
- Any Defendant or private Claimant may request a case is marked
- Specified information required
- Upon making request must inform all other parties. Request will result in case marking unless objection raised
- Judge may also direct that a case is Covid-19 marked
Review and Substantive Hearing Dates
The Review (R) Date:
– a 5-minute non-attended appointment on the documents
– requirements of the claimant relating to bundles before R date
– requirement that claimant is available to discuss the case during the R date
– consequence of failure to resolve case on the R date
The Substantive (S) Hearing Date:
– a 15-minute hearing attended by all parties 28 days after the R Date
– a physical hearing unless the parties agree otherwise or contingency arrangements apply
– unless case resolved, a decision by the Court or further case management directions
– adjournment considered without application where advice not yet made available to Defendants and consequences of order ‘may be serious’
Accelerated Possession Claims
- As with existing rules, the court can still make a possession order without a hearing
- Reactivation notice requirements apply for stayed claims
- The same priorities apply as with normal cases in the order in which they will be dealt with
- Will be referred to judges “at a manageable frequency”
- Where the parties agree or there is no objection a review hearing can be ordered
Evictions
- 14 days’ notice of an eviction date required
- Indicated that applications for transfer to High Court will not be prioritised
- No execution of possession warrants or delivering notices of eviction between 17/11/2020 and 11/01/2021.
- The Public Health (Coronavirus)(Protection from Eviction and Taking Control of Goods)(England) Regulations 2020
- There will be no enforcement of possession orders “Where lockdown measures are in place to protect public health”
- No evictions over Christmas Period save for the most serious of cases
How will the arrangements work in Practice?
The key aims of the overall arrangements are to reduce volume in the system by enabling earlier advice and facilitating settlement. How well this works in Practice is yet to be seen. What we do know is that delays will be inevitable and Covid-19 Case Marking is likely to become the norm. In the circumstances, it appears the Accelerated possession claims may be the ‘Cinderella’ of the situation.
