Articles

A busy residential road lies ahead

6th January 2020

By Nicola Muir

What’s new and happening in residential property law in 2020?

It’s that time of year again when I dust off my crystal ball and peer into the future. 2020 looks like it will be a busy year for residential property law. Now that the election is finally out of the way and the stasis in parliament has been resolved, we might actually see some changes in the law. Hopefully, the property market will also come out of hibernation.

The Conservative manifesto

The government has already consulted on ending section 21 (“no fault”) evictions and adding new grounds for possession, including the landlord wanting to sell the property. It has also promised to ban the sale of new leasehold houses and to prohibit ground rents in any new long lease. Both of these commitments are repeated in the Conservative Party manifesto, so some progress should be expected in 2020. The Conservatives also pledged in their manifesto that they would build more homes for local people by allowing councils to use developer contributions to fund a one third price discount. The plan is that the discounts would apply in perpetuity, but the details are currently vague. In addition, there is a pledge to encourage long-term fixed-rate mortgages with low deposits although, as there has not been much enthusiasm for the 10-year fixed-rate mortgages already available, there may be little demand for this reform. In the private rented sector, it is proposed that renters should be able to transfer their deposit directly between properties.

The Law Commission’s projects

The Law Commission has also been busy (see Rounding up on law reform projects, EG, 17 August 2019, p51). In 2019, it consulted on wholesale reforms to leasehold enfranchisement, the right to manage and commonhold. The Commission was asked to propose reforms to make it simpler, quicker and cheaper for leaseholders to enfranchise. The Commission’s report on possible amendments to the methodology for calculating the price to be paid for a new lease or the freehold had to be postponed because of the election. However, a full report on all proposed reforms to the enfranchisement regime is now expected in February 2020.

As the changes proposed are extensive and will involve a lot of drafting, the government may be tempted to implement any amendments to the valuation methodology in advance of the rest. As with enfranchisement, the current right to manage legislation is prescriptive and difficult to implement. Many modern estates simply do not qualify for the right to manage under the restrictive criteria contained in the Commonhold and Leasehold Reform Act 2002 and the procedure is unnecessarily cumbersome. The consultation on the Commission’s proposals for reform closed on 30 April 2019, and it intends to publish its final report in 2020. Both the Conservatives and Labour became very excited by the idea of reinvigorating commonhold in the hope that it would solve all leaseholders’ problems. The existing regime has not caught on and extensive changes have been suggested by the Commission to make it more attractive for developers to construct a commonhold block or for leaseholders to convert an existing block to commonhold.

The final report is due in February 2020. Although commonhold undoubtedly has many advantages over leasehold, my own prediction is that conversion will never happen and commonhold for new-build properties would probably have to be made compulsory if it is to take off.

The courts

The Supreme Court heard the appeal in Duval v 11-13 Randolph Crescent Ltd [2018] EWCA Civ 2298; [2018] PLSCS 177 in October and judgment is expected in early 2020. The case concerns whether a landlord of a block of flats is entitled to grant a licence to a lessee to carry out work which would be a breach of an absolute covenant contained in a lease of a flat, where the leases of other flats on similar terms require the landlord to enforce covenants at the request of a lessee of one of those other flats. The Court of Appeal found that he was not. Its decision has potentially far-reaching consequences for the management of residential blocks.

Can it really be right that a landlord of a 999- year lease can never permit any alterations in case that permission offends the mutual enforceability covenant? The meaning of “common parts” is also up for review in LM Homes Ltd v Queen Court Freehold Co Ltd [2018] UKUT 367 (LC); [2018] PLSCS 6. Following Dartmouth Court Blackheath Ltd v Berisworth Ltd [2008] EWHC 350 (Ch); [2008] 2 EGLR 141, the airspace above a block of flats has been considered to form part of its common parts, but this designation makes any upward development of a block a legally risky business. If the leaseholders decide to enfranchise, they are entitled to acquire the “common parts”. In LM Homes, the leaseholders were found to be entitled to acquire leases of the airspace, sub-soil and boiler room that had been granted to third parties who hoped to develop them. The Court of Appeal will reconsider the question of whether the leaseholders should be entitled to acquire these leases. Judgment from the High Court is awaited in Rees v 82 Portland Place Investments LLP, which concerns rectification under Schedule 4 of the Land Registration Act 2002.

This should throw some light on when “it would for any other reason be unjust for the alteration not to be made” and what amounts to “exceptional circumstances” that would justify not altering the Register. The issue of whether there is one or more building for the purposes of a collective enfranchisement is also due to be reconsidered in the appeal of Palgrave Gardens Freehold Co Ltd v Consensus Business Group (Ground Rents) Ltd [2019] PLSCS 39. It will be interesting to see which of the many reforms to residential property law proposed by the Law Commission actually happen in 2020. I will let you know later in the year!

This article was published in the Estates Gazette on 4th January 2020.

Team: Nicola Muir
Expertise: Real Property

 

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