Should we initiate collective enfranchisement or is it too late?

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A few months back the freeholder of our building wrote to all the leaseholders (via his solicitor) giving us ‘Section 5B’ Notice of his intention to sell the Freehold via auction with a deadline for the majority of qualifying leaseholders to make him an offer.

So the first thing we leaseholders did was make sure there was enough qualifying interest to purchase the freehold among us and conduct a full survey to get an idea of the value for the freehold.

We then responded with the full names and signatures of all the qualifying leaseholders of our acceptance of offer under the Landlord & Tenant Act 1987 Part 1 and requesting receipt of this notice and advising them of the solicitor who would be acting on our behalf for this matter.

They responded to this requesting an offer for which we duly replied.

Since them they have responded advising that they wish to continue to auction. Is this the normal process? We have made an offer and would negotiate, but this seems to have stopped us in our tracks. If we have first right of refusal then why would he want to proceed to auction? If someone does make an unrealistic offer at auction how can we contest this?

We are desperately seeking some additional guidance as to our rights and how to proceed. Should we initiate collective enfranchisement, or is it too late?

Many thanks

Mark

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Leaseholder Landlords and the Law

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This is the 11th post in my 2017 Legal Update series.

In most landlord & tenant situations where the landlord is a freeholder it is comparatively simple. You have a landlord. And a tenant.

However, if the landlord is himself a tenant under a long lease, it gets a bit more complicated. You will also have:

• The freeholder, and often
• The freeholder’s management company

How does this work in practice?

The answer is, not always as anticipated. If you rent a property under a long lease you have to be aware that you cannot always deal with it as if you were the freeholder. You are bound by the terms of your lease.

For example, your lease may prohibit subletting the property to tenants!

So, before you buy a flat as an investment property you need to check carefully the terms of the lease.

There has been a case, for example where the lease had a clause saying

“To use the flat as a private dwelling for the lessee and his family and for no other purpose”

Which, the First Tier Tribunal held, meant it could not be rented out to tenants.

Another lease had the wording:

“Not to use the premises hereby demised or permit the same to be used for any purpose whatsoever other than as a single private dwelling house in the occupation of the Lessee and his family.”

Which had a similar effect.  So be careful about this.

Then, even if you are using it as your home, you may find, like Ms Nemcova did in another case at the First Tier Tribunal, that you can’t let it out for weekends on Airbnb, because of the wording of the clause in the lease.

The problem about all of these is that, ultimately, if you carry on doing the prohibited thing, your landlord can forfeit your lease. Not something you will want to happen.

A question of repairs

Then there are issues about who is responsible for repair work. And can a landlord be held liable by their tenant for things which are actually the responsibility of the freeholder?

This issue came to a head in the recent case of Edwards v. Kumarasamy.

The Court of Appeal in that case basically found that the landlord was responsible for repairs to the exterior of the property even if the landlord had not been given notice and the repair in question was down to the freeholder.

To the relief of landlords and agents everywhere this decision was reversed by the Supreme Court who more or less re-instated the rule that landlords have to have been given notice of repairs before they are liable if they don’t do them.

However, that is not to say that problems will not arise in the future. So, make sure you keep yourself informed.

Further information:

Our 2017 Conference Course featured a talk by housing barrister Robert Brown specifically on leaseholder landlords and he discussed in greater detail the issues I have outlined above.

If you sign up for the course you will also get his comprehensive notes which include information about other issues he did not have time to discuss – in particular on service charges.

You will find more information about the Conference Course here.  There is a discount voucher for Property118 readers which is pp118cc30 – apply this on the checkout page and it will reduce the payment by 30%.  Note however that the coupon will expire after 16th September.

There is also a certain amount of information on my Landlord Law site plus members can always ask me questions in the members forum.

You can find out more about Landlord Law here

On Monday, I will be looking at landlords repairing obligations.

To see all the articles in my series please Click Here

Tessa Shepperson is a specialist landlord & tenant lawyer and runs the popular Landlord Law online information service.

To see all the articles in my series please Click Here

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Grainger ploughs into the PRS

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Build-to-Let:

Grainger PLC is to acquire, subject to planning, a site for a private rented sector (PRS) build-to-rent development at Gore Street in Salford, near Spinningfields, Manchester.

Grainger has identified Greater Manchester as a key marketplace its PRS investment strategy due to what it sees as its strong economic prospects and growth potential.

The £80m project will be forward funded by Grainger to be known as “UKLP Gore Street Limited” which will be a joint venture between UK Land & Property and Sir Robert McAlpine Enterprises, the latter being the main contractor.

Completion is anticipated for 2020 and will consist of 375 private rented homes with a mix of apartments and townhouses, with a range of amenities on site. Yield projections stand at c7% when fully let.

This acquisition is in line with Grainger’s divestment of its large portfolio of reversionary investments (occupied by regulated private tenants on Rent Act tenancies) and builds on its new strategy of targeting the private rented sector – build-to-let.

Grainger’s existing North West investments total over 1,200 rental homes, including its £100m investment at Clippers Quay in Salford which delivers 614 new rental homes. Construction is underway and first completions are expected in next year.

Helen Gordon, formerly of Nat West Bank and now CEO of Grainger, the UK’s largest listed residential landlord, said:

“We are pleased today to announce this significant £80m investment to deliver 375 new, high quality, purpose built rental homes in Salford, near Spinningfields, building on our existing portfolio in and around Manchester city centre and leveraging our operational platform and Manchester regional office.”

In her March financial statement she stated:

“I am pleased to report that the pursuit of our strategy is delivering strong results. In the first six months of the year we have increased adjusted earnings by 39% and net rental income by 11%.

“We expect this momentum to continue now that we have secured £439m of private rented sector (“PRS”) investment, over half of our £850m target, and have good visibility on additional investment opportunities to meet our overall target. We are making good progress delivering our pipeline, and on average we are completing a new PRS building every two months over the next two years.

“Grainger is a focused, simpler and more efficient business. We have made changes to the way we operate in order to enhance returns, through reducing costs, simplifying processes and improving the scalability of our operating platform.

“The private rented sector growth opportunity is compelling with strong investment fundamentals. Our strategy to grow rents and simplify and focus the business puts Grainger in a strong position to deliver further sustainable income led growth.”

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