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Landlord and Tenant L2 EP APC Residential 2022 > LL & TT (resi lease renewals) > Flashcards

LL & TT (resi lease renewals) Flashcards

1
Q

What is the current Landlord and tenant legislation and regulation?

A

Leasehold reform, housing and urban development act 1993 (as amended 2014).
Leasehold reform act 1967
Commonhold and leasehold reform act 2002

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2
Q

What are the current proposals to the leasehold reform?

A

January 2021 ministers announced a package of reforms that will make cheaper year the leaseholders to extend the lease or buy the freehold property, including;
1. Allowing leaseholders to extend the lease 990 years peppercorn rent.
2. Abolishing marriage value.
3.Capping the treatment of ground rent in the valuation calculation at 0.1% of the property value.
The government is committed to comprehensive reform of leasehold system. The leasehold reform (ground rent) Bill 2021-22 is the first part of this process stop the bill on broader leasehold reform is expected in the third session of this Parliament

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3
Q

What are the relevant RICS guidance notes?

A

Leasehold reform in England and Wales- 3rd edition August 2015
valuation of residential leasehold properties secured lending purposes - 1st edition May 2021

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4
Q

What 3 papers did the Law Commission publish?

A

July 2020 Law commission published three papers

  1. Buying your freehold and extending your lease
  2. Exercising the right to manage
  3. Reinvigorating commonhold, the alternative to leasehold.
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5
Q

What is the leasehold reform (ground rent) Bill 2021-2022?

A

Seeks to restrict ground rents newly created long leases of houses and flats to an annual rent of one peppercorn.

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6
Q

What is a peppercorn?

A

A peppercorn as a token or nominal rent. The name comes from leases where the rent is one peppercorn you year.

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7
Q

What is the leasehold in commonhold reform paper?

A

This paper considers trends in leasehold ownership, anger ongoing problems associated with them with the sector, and government plans for a seminal two-part reforming legislation in this Parliaments.

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8
Q

How many leasehold homes in England?

A

approximately 4.6 million

68% flats 32% houses.

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9
Q

Which act applies to lease renewal of flats?

A

Urban reform Housing and Urban Development act 1993

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10
Q

What right does the 1993 act provide?

A

Gives the right to eligible leaseholders of eligible properties to extend their lease by 90 years at peppercorn rent.

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11
Q

How to qualify as a leaseholder under the 1993 act?

A

Must’ve owned a long lease for the past two years

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12
Q

What is a long lease?

A

Along lease is mainly lease which had an original term of over 21 years when it was originally granted. How long is left on the lease is not relevant it is how long the lease was when it was first granted that matters.

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13
Q

What stops qualification as a leaseholder under the 1993 act?

A

The landlord is a charitable housing trust and your flat is provided part of the charity work.
it is a business or commercial lease.

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14
Q

According to schedule 13 part two of the 1993 Act what are the components of the premium?

A

The reduction in value your landlord interest in the flats (that is the difference between the value of your landlord’s interest now current lease on the value of their interest after the new lease is granted extra 90 years).
Your landlord’s share of the marriage value.
Compensation of any loss your landlord suffers. Be granted.
Reduction in the value of your landlord’s interest is the income they will lose the ground rent for the rest of the original term and the loss they suffered 90 years they will have to wait for the ownership flats transfer back to them (known as the reversion).

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15
Q

What is marriage value?

A

Marriage value is the possible increase in the value the flat rising from the new lease.
The act states that the marriage value should be shared equally between you and your landlord.

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16
Q

What is freeholder/Landlord compensation?

A

Compensation is to make up any further reduction in the value of your landlords interest in other property (other flats building all building itself) and any loss or damage arising from the new lease being granted. Likely compensation would be a claim for loss of opportunity to redevelop the site to convert a house which is being converted into flats back to a single house.

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17
Q

What are tenant/leaseholder improvements?

A

Improvements made to the flat which could affect its value must be disregarded for the purposes of the valuation- beyond standard repair and maintenance.
Major improvements the valuer will have to calculate the extra value improvements give to the flats not what they cost and then deduct this from the estimated current value of the flat two assesses an improved value.

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18
Q

What is protected occupancy?

A

most long leaseholders are protected by law and will be entitled to an assured tenancy when their existing lease ends.
Valuation of the landlord landlord interest where the leaseholder has protected occupancy improved value is sometimes reduced by percent to reflects the fact that the landlord will not receive vacant possession at the end the lease.

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19
Q

What is the informal route?

A

None statutory so no rules and therefore the landlord can refuse or set own demands including length of lease renewal and ground rents.

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20
Q

What is the formal route?

A

the statutory route is under the leasehold reform housing and urban development act1993 (as amended).
Gives right to the leaseholder to extend by 90 years at a peppercorn ground rents.

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21
Q

What is a section 42 notice?

A

A prescribed notice.
Formal request from the leaseholder to the freeholder or landlord and any other appropriate party to extend their lease on the property.

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22
Q

What is a competent landlord?

A

Competent landlord is the landlord’s interest in property is long enough to be able to grant you the 90 year extension - that is their interest is over 90 years longer that the time left on the lease.

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23
Q

What is an immediate landlord?

A

In most cases the immediate landlord will be the freeholder, however there will be cases where the immediate landlord has an intermediate lease which is too short to grant a 90 year extension.

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24
Q

What is section 41 notice?

A

Information notice.
Gives you the right to serve notices on your immediate landlord, the freeholder (if different) or any other person with an interest in the property and ask the details of their interest.

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25
Q

What happens when a section 42 is served?

A

Fixes valuation dates and freezes variables.

Leaseholder/tenants is liable for landlords/freeholders reasonable costs.

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26
Q

What must the proposed premium be?

A

proposed premium must be genuine offer - if to loathing could invalidate the notice.

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27
Q

What is an absent landlord?

A

An absent landlord is one that cannot be contacted to serve notice on.

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28
Q

What provisions are there for an absent landlord?

A

if after all reasonable efforts the landlord cannot be found the tenant can apply to the County Court for a ‘Vesting Order’ to extend the lease.

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29
Q

What is a Vesting Order?

A

County courts have the power to waive the requirement of serving notice on the freeholder completely.
The first-tier Tribunal will set the premium.

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30
Q

Section 42 process?

A

LL has 21 days to request information from TT ( proof of purchase etc) - TT has 21 days to respond
LL has right to inspect flat with three days notice
LL can ask for a deposit of either 10% of proposed premium or £250.
LL serves counter notice (section 45) by date stated in section 42 (minimum 2 months)
If needed negotiation period of 2-6 months - after 2 months either party can apply to tribunal for an independent decision.

31
Q

What happens if the LL does not serve a section 45?

A

The TT can apply for a vesting order on the proposed terms.

32
Q

What is a section 45?

A

Section 45 is a counter notice.
Agreed to extension on either TT terms or proposed new terms.
Deny the leaseholders right and give reason - County Court then decides.
Claim the right to redevelopment.

33
Q

Assignment of the right?

A

Notice can be served and if the property is sold and the new owner benefits from the application.

34
Q

Legal requirements for a new lease?

A

No ground rents for extension and remaining term
new lease on same terms.
New lease must be on the same terms
Modifications - take into account alterations to flat since existing lease was granted, or to correct a problem with the lease.
1993 act provides right to continuously renew lease existing so any clauses counter to this should be removed.
New lease must contain a clause giving the Landlord the right to redevelop the land.

35
Q

FTT application and process?

A

Application fee £100 / Hearing fee £200.
FTT decision becomes final after 28 days.
FTT decision can be appealed at Upper Tribunal.

36
Q

Cadogan v Sportelli (2007)

A

Landmark Lands Tribunal Case on deferment rates to use in lease extension and freehold enfranchisements
5% for flats nationally.

37
Q

What is a deferment rate?

A

Deferment Rate = Risk free rate (RFR) + Risk Premium (RP) - Real Growth Rate (RGR)

38
Q

Which piece of legislation does collective enfranchisement come under?

A

Leasehold reform Housing and Urban Development act 1993 (as amended)

39
Q

Collective enfranchisement tenant qualification?

A

50% of tenants need to participate then LL cannot refuse.
Leaseholder of lease originally over 21 years
Shorter lease with the right perpetual renewal
Shared ownership lease where TT has 100%
Tenants cannot qualify if tenant as a business or commercial lease landlord is a charitable housing trust or tenant owns more than two flats inn the building.

40
Q

Collective enfranchisement building qualification

A

Contain at least two flats
At least two thirds flats owned by qualifying tenants
Leaseholder of

41
Q

Collective enfranchisement 20% nonresidential rule?

A

More than 25% of internal floor area of building excluding common parts is either used or intended to be used for non residential purposes then the building will not qualify?

42
Q

Collective enfranchisement 25% non-residential rule?

A

More than 25% of internal floor area of building excluding common parts is either used or intended to be used for non residential purposes then the building will not qualify?
NB - proposals to extend this to 50% under new reforms.

43
Q

There is no right of collective enfranchisement when?

A

Building is conversion into four or fewer flats and
not a purpose-built block and
Some person owned freehold since before conversion and
landlord or adult member of family has lived there the past 12 months.
Excluded properties are within a cathedral precincts, National trust, or Crown properties.

44
Q

Collective enfranchisement - nominee purchaser?

A

Person named on the initial notice, they will acquire the freehold become the new landlord. Either tenant, corporate third-party, or a trust.
Most common is a company owned by the tenants.

45
Q

What is the role of the valuer?

A 
Provide best and worst advice
advise on amount of initial offer
responsive landlord counter notice
negotiation and settlement of price
advice on maintenance cost/service charges in future management.
46
Q

What is the role of the solicitor?

A

Setting up company/nominee purchaser (collective enfranchisement)
serving initial notice
responding to landlord’s requests the substantiation of claim
conveyance of title

47
Q

Enfranchisement - Process of initial notice - Section 13?

A

Triggers the statutory procedures (tenants become liable for costs from date notices received)
an incomplete notice can be rejected as invalid
protection for the tenants are right to register the initial notice with the land registry (if freehold sold an assault subject to the enfranchisement)
Notice fixes valuation dates as dates of notice served

48
Q

Enfranchisement procedure - specific differences?

A

Section 11 information notice (discretionary)
leaseholders make arrangements the nominee purchaser, If a company register at companies house
participating tenants serve section 13 initial notice
Landlord has right to inspect property (and flats) with 10 days notice

49
Q

What is ‘Right of first refusal’ (RFR)?

A

Legislation = landlord and tenant act 1987
where freeholder is disposing of an interest in the freehold they are required offer the leaseholders the right to buy that interest before selling it to a third party.

50
Q

Building qualification for ‘right of first refusal’?

A

Contain at least two flats
more than 50% of the flats in the building must be owned by qualifying tenants
No more than 50% of the building to be in non-residential use

51
Q

Tenant qualification for ‘right of first refusal’?

A

Qualifying tenants include leaseholders and some fixed term or periodic tenancies but not assured showed sure all tenancies
someone who is a tenants of three or more flats in the building will not be the qualifying tenant of any of the flats

52
Q

Landlord qualification for ‘right of first refusal’?

A

RF are applied to the immediate landlord of the tenants. Whom they pay their ground rents and who is entitled to possession when the tenants lease finishes.
RFR does not apply to some landlords - housing authorities, associations and charitable housing trusts..

53
Q

Exempt resident landlords for ‘right of first refusal’?

A

One who lives in the building and where to conditions apply

  1. The building is not a purpose-built block which has been converted into flats since its original construction
  2. The landlord genuinely lives in the building as their only or principal residence and has done for more than 12 months.
54
Q

What if tenants do not accept the offer of RFR?

A

the landlord is free to sell the freehold to a third party but not at a figure less than offered to the tenants for the next 12 months

55
Q

What if the landlord sells without offering RFR?

A

the qualifying tenants have the right to serve an information notice on the new freeholder requesting details of the terms of the sale
new freeholder is required to provide this within one month
once they have the information more than 50% of the qualifying tenants can serve notice on the new freeholder requiring them to sell the freehold on the same time terms as purchased.

56
Q

What is a section 5b notice?

A

Where the landlord intends to dispose by auction

57
Q

What is the collective right to manage

A

commonhold and leasehold reform act 2002
allows leaseholders to take over the management of their block of flats without showing defaults on the part of either the landlord or the management company

58
Q

Explain house enfranchisement?

A

When originally enacted the 1967 act applied to lower value houses.
The principle behind the basis of valuation (section 9 (one)) is that the land belonged to the freeholder and the building belong to the tenant
Following the subsequent amendments there are five areas of valuation
the extended lease (other modern ground rent)
section 9 (1) no marriage value payable
section 9 (1A) marriage value payable
Section 9 (1C) marriage value and compensation

59
Q

Valuer considerations?

A

Information to be obtained and considered by the valuer includes
details of any deeds of variation
the ground rent payable
any licences to alter and whether there have been tenants improvements which should be ignored in the valuation
the planning history

60
Q

Lease length and mortgage ability?

A

Most mortgage lenders won’t lend properties lease 70 years.
Lenders want the lease to extend for at least 40 years after the end of your mortgage term so that the value of property won’t be affected.
RICS guidance is applicable when these links are 55 years or longer with the remaining lease term is less than 55 years lenders may have specific instructions.

61
Q

What lease related costs to a valuer need to inquire about and consider?

A

Valuers should make appropriate enquiries regarding
service charge
ground rent
major works cost
permission for alterations or alienation
and make any relevant allowance in the valuations
mandatory requirements for these are set out in VPS2

62
Q

What assumption is included in the Redbook UK national supplements UK the PGA 11?

A

unless information is provided to the contrary value can assume the unexpired term of 85 years for the subject property
When this such detaills are available a readily apparent assumption that there are no odorous conditions in the lease all covenants being fulfilled may be made pending legal advice to the contrary.

63
Q

How long are house leases extended by?

A

The lease of a house is extended under the 1967 act will be extended by 50 years.

64
Q

What are onerous ground rents?

A

Was no simple definition and the effects on value and even suitability from mortgagee depend on the actual terms of the lease the local market and the lender policy
0.1% of the property value ought to hundred and £50 for low value properties
doubles every 20 years or more frequently
Particularly common in developments built since around 2005

65
Q

What is leasehold relativity?

A

Relativity curve is a graph prepared leasehold reform practitioners indicates relative leasehold value any point in the lease term compared to a freehold value.
The operation of the market will determine leasehold relativity.
Valuers should also appreciate that the market value of the lease could be approached by assessing the corresponding extended lease value then deducting the costs for extending the lease.

66
Q

What are the takeaways of Munday versus Sloane Stanley Estates 2016?

A

Gerald Eve 2016 graph was the industry standard

the FHVP enfranchisable 2015 graph is likely to be beneficial

67
Q

What is a no act world?

A

because of a legal technicality properties must be valued as it the right to freehold purchase or lease extension does not exist. Without this rright it would be more difficult to sell properties with shorter leases hence the value of such properties must be discounted the purpose of valuation.

68
Q

What are rent act 1977 regulated tenancies?

A

tenant has right to reside in the property of the term of their natural lives
on death may be passed to spouse or relative but becomes assured tenancy at market rents
rents set by rent officer’s fair rents, due to high market rents their rent is circa quarter to a third of market rents
reduced number of grounds for possession compared with HA act 88
value determined by life expectancy of tenants using parries tables on national graphs
discounting from market value
possible term and reversion

69
Q

What are housing act tenancies/common-law tenancies?

A

Don’t benefit from protection of the acts terms are agreed no notice to quit
Rent is £100,000 per annum
residential landlords
business tenancies

70
Q

what is an assured short hold tenancy?

A

under the Housing act 1988

Tennant given minimum security of tenure for six months

71
Q

What is an assured tenancy?

A

Housing act 1988

Tennant given security of tenure for life

72
Q

What is a statutory periodic tenancy?

A

automatically granted once an AST expires and the tenant remains in possession on the same terms as the original agreement
notice period is two months but could be longer in line with rent payments

73
Q

What is protection from eviction act 1977?

A

Schedule 15 the rent act 1977
20 cases including
rent arrears or breach of tenancy
deterioration in the condition of the property
assignments without the landlord’s consent

74
Q

What is section 21?

A

prescribed notice to quit of the Housing act 1988 for assured short hold tenancy’s

Landlord and Tenant L2 EP APC Residential 2022 (1 decks)

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