Quiz - how well do you understand your lease?
Understand the key things you should know about your lease. If you are a purchaser, this can help make sure your solicitor has covered all of these points and explained them clearly to you.
Last updated 13 March 2017
The National Assembly for Wales (NAW) was established by the Government of Wales Act 1998 following a referendum in 1997. It is now called the Welsh Government.
With the creation of the NAW, legislation passed in Westminster required that the NAW would thereafter need to pass legislation to bring the law into force in Wales.
For instance, the Commonhold and Leasehold Reform Act 2002 (2002 Act) received Royal Assent on 1 May 2002 in England. The 2002 Act contained new provisions relating to consultation with leaseholders over the costs of major works that would be recovered as service charges. The relevant provisions were brought into force in England on 31 October 2003. However, for dwellings in Wales provisions to the same effect did not come into force until 31 March 2004.
Whilst much of the legislation is identical, there are nevertheless differences in the content and format requirements between England and Wales.
This article highlights these differences. Whilst it is aimed at those with an interest in residential leasehold property, landlords or agents who manage a portfolio of properties spread across England and Wales should be particularly alert to the requirements of the separate documents.
On 1 July 2013 the First-tier Tribunal (Property Chamber) was created, replacing the Leasehold Valuation Tribunal (LVT) among other bodies. New procedural rules were introduced and consequential changes made to certain documents. The remit of the First-tier Tribunal (Property Chamber) is confined to England. The LVT continues to exist in Wales and its procedure is governed by the Leasehold Valuation Tribunals (Procedure) (Wales) Regulations 2004 SI 2004/681 (W69). The fees for the LVT in Wales can be found in the Leasehold Valuation Tribunals (Fees) (Wales) Regulations 2004 SI 2004/683 (W71) and the Leasehold Valuation Tribunal (Fees) (Wales) (Amendment) Regulations 2014 SI 2014/287(W36) See Residential Property Tribunal Wales for more information.
NOTICE TO LONG LEASEHOLDERS OF RENT DUE (SECTION 166 OF THE 2002 ACT)
The Landlord and Tenant (Notice of Rent) (England) Regulations 2004, SI 2004 No 3096, introduced on 28 February 2005.
The Landlord and Tenant (Notice of Rent) (Wales) Regulations 2005, SI 2005 No 1355, introduced on 31 May 2005.
By Section 166 of the 2002 Act, ground rent is not due from a tenant under a long lease unless the landlord has given a notice in the prescribed form. The notice must specify the amount due, the date it is due to be paid, and the date due under the lease (if different). It must give a date for payment that is no earlier than 30 days and no later than 60 days after the notice has been given.
The Welsh version is in columns, has tick boxes and is in both English and Welsh. Furthermore the Welsh version refers to rent periods of a week, a calendar month, a quarter or any other period. There is also an illustration of when the rent is due in accordance with the lease.
In addition the Section 166 notice must specify certain summary information relating to the rights of long leaseholders, as set out in the Regulations. This summary information relates mainly to Section 167 of the 2002 Act. This states that a landlord is prohibited from exercising a right of re-entry or forfeiture for ground rent unless the sums owed are more than £350 or have been outstanding for more than three years.
On 26 April 2011, the wording of the summary information changed for properties in England through a correction slip published by the Stationary Office.
It was changed to read:
|Section 167 of the Commonhold and Leasehold Reform Act 2002 and regulations made under it prevent your landlord from forfeiting your lease for non-payment of rent, service charges or administration charges (or a combination of them) unless the unpaid amount is more than £350 or consists of, or includes, an amount that has been outstanding for more than three years.|
The notice of ground rent in Wales was not corrected and the summary still reads:
|Mac Adran 167 o Ddeddf Cyfunddaliad a Diwygio Cyfraith Lesddaliad 2002 a’r rheoliadau a wnaed odani yn atal eich landlord rhag peri i chi fforffedu’ch les am beidio â thalu rhent, taliadau gwasanaeth neu daliadau gweinyddu (neu gyfuniad ohonynt) os yw’r swm sy’n ddyledus yn £350 neu lai, neu os nad oes dim o’r swm sydd heb ei dalu wedi aros heb ei glirio am fwy na thair blynedd.||Section 167 of the Commonhold and Leasehold Reform Act 2002 and regulations made under it prevent your landlord from forfeiting your lease for non-payment of rent, service charges or administration charges (or a combination of them) if the amount owed is £350 or less, or none of the unpaid amount has been outstanding for more than three years.|
On 1 July 2013 the notice of ground rent in England was changed to remove the words “leasehold valuation” from the notes for leaseholders. The notice of ground rent in Wales remains the same.
NOTICE OF INSURANCE COVER (SECTION 164 OF THE 2002 ACT)
The Leasehold Houses (Notice of Insurance Cover) (England) Regulations 2004, SI 2004 No 3097, introduced on 28 February 2005.
The Leasehold Houses (Notice of Insurance Cover) (Wales) Regulations 2005, SI 2005 No 1354, introduced on 31 May 2005.
Section 164 of the 2002 Act, applies to leasehold houses only and provides that the covenant imposed on the leaseholder to insure through the landlord’s nominated or approved insurer does not apply if the house is insured through an authorised insurer, the policy covers the interests of both the landlord and the leaseholder, it covers all the risks required to be covered by the lease and covers at least the sum assured as required by the lease.
A “notice of cover” is to be given by the leaseholder to the landlord within 14 days from the current renewal date or, if it has not been renewed, the date the cover takes effect. The notice must contain the name of the insurer, the risks covered, the amount and the period covered and also such further information as may be prescribed.
The Welsh version has a number of boxes to tick and carries a Welsh translation. It also directs that all dates must be completed using numbers as well as words.
SUMMARY OF RIGHTS AND OBLIGATIONS IN RELATION TO SERVICE CHARGES AND ADMINISTRATION CHARGES RESPECTIVELY (SECTIONS 153 AND 158 OF THE 2002 ACT)
The Service Charges (Summary of Rights and Obligations, and Transitional Provisions) (Wales) Regulations 2007, SI 2007 No.3160 introduced on 30 November 2007.
The Administration Charges (Summary of Rights and Obligations), (England) Regulations 2007, SI 2007 No 1258, introduced on 1 October 2007.
The Administration Charges (Summary of Rights and Obligations), (Wales) Regulations 2007, SI 2007 No 3162, introduced on 30 November 2007.
Section 21B of the 2002 Act inserted by Section 153 of the 2002 Act provides that a demand for payment of services charges must be accompanied by a summary of the rights and obligations of tenants in relation to them.
Section 158 of the 2002 Act under Schedule 11 paragraph 4 thereof provides that a demand for administration charges must be accompanied by a summary of the rights and obligations of tenants of dwellings in relation to them.
The form of the summary is prescribed and must be printed or typewritten in a font no smaller than 10 point. Should the summary not be provided with the demand, the leaseholder may withhold payment of the service charge or administration charge, as the case may be.
As originally introduced the summary advised leaseholders of their right to bring proceedings in the Leasehold Valuation Tribunal and then to appeal to the Lands Tribunal.
The Lands Tribunal was abolished on 1 June 2009 and its functions transferred to the Upper Tribunal (Lands Chamber). Accordingly, the summary of rights in respect of both charges was altered to advise leaseholders of their right to appeal to the Upper Tribunal. However this change applied to England only. The Welsh versions of both documents still refer to the Lands Tribunal.
On 1 July 2013 a further change was made to the English version of the form of the summary. The words “the First-tier Tribunal” were substituted for “a leasehold valuation tribunal” and further changes were made in the body of the summary. The Welsh versions of the summary remain the same.
RIGHT TO MANAGE
The Right to Manage (Prescribed Particulars and Forms) (England) Regulations 2010 (2010/825), introduced on 19th April 2010.
The Right to Manage (Prescribed Particulars and Forms) (Wales) Regulations 2011 (2011/2684), introduced on 30th November 2011.
Part II of the 2002 Act allows leaseholders of flats to take over the management of their building without having to prove fault on the part of the landlord. Provided that the eligibility criteria are met and the correct procedures followed, management will be vested in a company limited by guarantee of which the members are the participating leaseholders.
Certain notices have to be served on other flat owners and the landlord to progress Right to Manage. The content of these forms is laid down by Statutory Instrument. It should be noted that the Welsh statutory instruments differ in some ways from the English versions.
The Welsh versions of the required notices have tick boxes that do not appear in the English versions and the text generally appears in two columns; one Welsh, one English.
NOTICE INVITING PARTICIPATION (NIP)
Section 78 of the 2002 Act states that before the landlord is formally notified of the claim an RTM company must give formal notice to every other qualifying tenant who is not already a member or agreed to become a member of the RTM company.
The NIP must be accompanied by a copy of the constitutional documents of the RTM company or state when and where those documents can be inspected and the cost of obtaining a copy.
The form for the NIP is prescribed by Statutory Instrument and there are no significant differences between the Welsh and English versions.
Section 79 of the 2002 Act states that no less than 14 days after service of the Notice Inviting Participation the RTM Company may serve a formal Notice of Claim on the landlord and any other parties to the lease, with a copy to each qualifying tenant.
The form for the Claim Notice is prescribed by Statutory Instrument.
The Welsh version contains tick boxes instead of ‘delete as applicable’ which appears in the English version.
On 1 July 2013 the words “leasehold valuation” were removed from the English version of the Claim Notice. The Welsh version remains the same.
By Section 84(1) of the 2002 Act any person given a Claim Notice may give a counter-notice in a form prescribed by Statutory Instrument.
On 1 July 2013 the words “leasehold valuation” were removed from the English version of the Counter Notice. The Welsh version remains the same.
By Sections 91 and 92 contractor and contract notices are to be served to ensure that contractors are aware of the RTM company and the RTM company of the existence of management contracts.
In England there is no prescribed form for contractor and contract notices but there is in Wales.
FLATS – COLLECTIVE ENFRANCHISEMENT AND LEASE EXTENSION
To buy the freehold of a building containing flats under the Leasehold Reform, Housing and Urban Development Act 1993 an initial notice must be served upon the relevant landlord.
Such a notice must meet the requirements of Section 13 of the Act.
To seek a lease extension of a flat an initial notice must be served on the competent landlord.
Such a notice must meet the requirements of Section 42 of the 1993 Act.
Notices served under Section 13 or Section 42, in respect of premises in England, are no longer required to be signed personally by the leaseholder and may be signed by or on behalf of the leaseholder.
This is the effect of the Leasehold Reform (Amendment) Act 2014, which came into force in England on 14 May 2014.
Notices served under Section 13 or Section 42 of the 1993 Act, in respect of premises in Wales, are also no longer required to be signed personally by the leaseholder. This change was brought about by Section 140 of the Housing (Wales) Act 2014 and the Housing which came into force on 1st December 2014
RIGHT TO BUY
By the Housing (Wales) Measure 2011 local authorities can apply to suspend the right to buy in their area for up to five years (extendable). The suspension depends on there being high pressure for housing. Local authorities can suspend in the whole of the area, or by category of housing. Rights to suspend have been granted to Swansea, Carmarthenshire and Flintshire councils. Anglesey (or Ynys Mon) Council and Denbighshire County Council have voted to request the Welsh Government to grant a five year suspension.
From 14 July 2015 in Wales only, the maximum discount for a council or housing association tenant to purchase their home under the Right to Buy and Right to Acquire changes from £16,000 to £8,000.
On 29th June 2016 the First Minister of Wales announced in the Welsh Assembly that the Right to Buy is to be abolished in Wales and that a Bill to achieve this would be introduced during 2017. On 13th March 2017 a Bill abolishing the Right to Buy and Associated Rights was introduced in the National Assembly for Wales.
The Bill provides for the Right to Buy, the Preserved Right to Buy, and the Right to Acquire for tenants of local authorities and registered social landlords to be abolished after a period of at least one year following Royal Assent.
The Right to Buy and Right to Acquire will end for new homes two months after Royal Assent.
Codes of Practice
Section 87 of the Leasehold Reform, Housing and Urban Development Act 1993 entitles the Secretary of State to approve any code of practice which appears to him to be designed to promote desirable practices in relation to any matter or matters directly or indirectly concerned with the management of residential property.
For Wales the functions of the Secretary of State lie with the Welsh Government.
In England the following codes are approved:
- The Service Charge Residential Management Code Third edition published by the Royal Institution of Chartered Surveyors (“RICS”) and brought into force on 1st June 2016 through the Approval of Code of Management Practice(Residential Management) (Service Charges) (England) Order ) 2016 ,SI 2016 No.518
- The Private Retirement Housing Code of Practice-England published by the Association of Retirement Housing Managers (“ARHM”) and brought into force on 1st June 2016 through The Approval of Code of Management Practice(Private Retirement Housing) (Service Charges) (England) Order ) 2016,SI 2016 No.505
The following codes are approved in Wales:
- The Service Charge Residential Management Code First edition published by the RICS and brought into force on 17th March 1997 through the Approval of Codes of Management Practice (Residential Property) Order ,SI 1996 No.2839
- The Code of Practice for Private Retirement Housing (Wales) published by the ARHM and brought into force on 2nd March 2007 through the Approval of Code of Practice(Private Retirement Housing) (Service Charges) (Wales) Order 2007,SI 2007 No.578