Example right to buy lease

This section sets out basic information such as the physical extent of the flat and the wider estate and/or building of which it forms part. A plan showing the location of the building and the flat should be attached. The commencement date and term, in years, of the lease are also laid out here, as well as other key information such as the purchase price (value) of the flat and the RTB discount.

Clause 1

Along with leasehold ownership of the flat, you are granted certain rights which are mentioned in the First Schedule; other rights are reserved to the council and these are mentioned in the Second Schedule. The main structural parts of the building of which the flat form part are excluded from the lease.

The lease is for a term of 125 years from a commencement date which is the date the first lease was granted in the building. The ground rent is £10 per annum which is a fixed amount and cannot be exceeded. In addition, you will pay a service charge which is described in Clause 5 as well as further rent which the council reasonably expends on insuring the building. The insurance contribution is described as rent, although legally it is regarded as a service charge.

Clause 2

The lease does not include any sewers, etc, which are located on the council’s adjoining land, although under the provisions of the First Schedule you are granted the right to use these facilities insofar as they pass through other parts of the building.

Clause 3

This Clause contains the tenant’s covenants/obligations with the council. You must observe all of these:

1. To pay the rent, service charge and insurance rent specified in clauses 1 and 5. If this is not paid within 14 days of the period specified, interest is payable at 4% above the base rate of the Co-operative Bank PLC or of such other bank as the council may specify. Please be aware that although the insurance contribution is described as a rent payment, legally it is a service charge as defined by Section 18 of the Landlord and Tenant Act 1985.
2. To pay all rates or other taxes imposed on the flat. At present, your only payments, apart from those provided for in the lease, will be council tax, water rates and other outgoings, but if the law should change and some other form of tax or rate is imposed on property owners, it would be your responsibility to pay this tax or rate.
3. This sub-clause specifies those parts of the flat for which you are responsible and which have to be kept in good and substantial repair by you. These are primarily related to the internal parts of the property. These include the maintenance of the sanitary apparatus [3(a)(8)] and the radiators, tanks, pipes and drains etc [3(a)(9)].
4. To make good and repair any defects within 3 months (or sooner if required) of receiving notice from the council.
5. The council have the right to inspect the flat on 48 hours' prior written notice between 8am and 6pm, and if they find that the property requires repairs they can require you to carry those out.
6. The council have the right to enter the flat on 48 hours' prior written notice (except in an emergency), between 8am and 6pm, to carry out repairs to the council’s adjoining property or other parts of the building and for other reasons specified in this sub-clause. They must do no unnecessary damage and make good any damage that is caused.
7. If the tenant fails to keep the property in repair the council have the right to enter the property to carry out such repairs and to recover the costs from the tenant. These costs must be paid within 14 days of the demand.
8. A leaseholder of any other flat in the building is also given the right to enter your flat on 48 hours' prior written notice to carry out necessary repairs at reasonable times provided he or she makes good any damage caused. By Clause 3 of the First Schedule you are granted a similar right to enter neighbouring leasehold flats to carry out necessary work. Be aware that this right of entry does not apply to flats let on secure tenancies (council tenancies).
9. The flat is to be used only for residential purposes. The lease restricts your ability to create two or more separate tenancies within the flat. You are entitled under the lease to sublet the whole of the property. However, the restriction on subletting part of the flat is at odds with Paragraph 17 of Schedule 6 of the Housing Act 1985, which states, amongst other things: A provision of the lease, or of an agreement collateral to it, is void in so far as it purports to prohibit or restrict the assignment of the lease or the subletting, wholly or in part, of the dwelling-house.
10. At the end of the lease term to give up the lease.
11. (a) If you sell or otherwise dispose of the flat within five years of the date of the lease you will have to pay the amount of the discount to the council reduced by one-fifth for each complete year which elapses between the date of the lease and the date of disposal.
    (b) This sub-clause defines those acts which amount to a disposal within the terms of Clause 11(a) (please note that an under-lease of the property for a term of more than 21 years may amount to a disposal). By way of example, if you transferred the lease to yourself and a relative or friend, that would amount to a disposal requiring repayment of the discount. There are certain disposals and transfers that do not require the repayment of the discount, such as a transfer to a beneficiary under a will or a transfer ordered by a court following a family breakdown.
12. The council’s right in certain circumstances to require payment of the discount amounts to a charge on the flat and a notice on the title will be entered by the Land Registry that the property was purchased under the provisions of the Housing Act 1985 so that any purchaser will know the council may be entitled to require payment of part or all of the discount.
13. If the leaseholder wishes to dispose of the flat within the first 10 years they are under an obligation to first offer the property to the council for the market price as agreed between the council and the leaseholder or as determined by the district valuer. A restriction detailing this provision should be registered against the flat by the Land Registry.
14. The tenant is responsible for and must pay the council for any damage caused to the flat or other parts of the building or estate by any other person for whom the tenant is responsible, such as a family member or visitor.
15. If the flat is sublet the tenant must enter into an agreement with the council that he or she will observe the terms of the lease for which there will be a fee payable to the council for the preparation of this document. The document will be a deed of covenant.
16. To provide notice to the council within one month of transferring the flat, subletting or obtaining a mortgage. A reasonable fee is payable for receipting each notice.
17. You must not bring onto the property anything which may cause a danger, nuisance, annoyance or disturbance to the council or other owners/occupiers of neighbouring and adjoining properties, this includes acts or items that in the opinion of the council amount to racial harassment. This clause also refers to inflammable or combustible material. You must not do anything which might cause an increase in the insurance premium or give the insurance company the right to refuse cover.
18. You must not have in the flat any calor gas, paraffin or other inflammable fuel or liquid, without the council’s written consent. If, for example, you have a portable calor gas stove you should obtain the council’s permission to use it in the flat.
19. You are required to comply with all planning and other statutory regulations. You must supply a copy to the council of any notices that you receive and to join in with the council in making any representations in respect of any such notice. Any representations will be at the leaseholder’s expense.
20. You are required to pay the council’s legal costs if they have to serve notices prior to forfeiting the lease as well as for any other notices or schedules that they have to prepare. The reference to Sections 146/147 Law of Property Act 1925 are to legal provisions which entitle a landlord to repossess the property if you have breached the terms of the lease or are in arrears of services charges. Under this clause you are also required to pay the costs of the council in preparing and serving repair notices as well as the costs of granting consents or licences. An example of when a consent or licence is required could be where you wish to undertake an alteration to the property.
21. No structural alterations can be made to the building unless you have obtained the prior written consent of the council.
22. You must not erect an exterior television aerial nor exhibit posters, etc, either on the exterior of the property or in the windows.
23. You must not use the property for any illegal or immoral purpose. The tenant must not hold an auction at the premises. An example of an illegal purpose would be using the property to cultivate illegal plants, using the property to deal stolen goods or illegal drugs. An immoral purpose is generally held to mean using the property as a brothel or for the purposes of prostitution.
24. You must cover the floors of the flat with reasonable materials to minimise noise to other parts of the building.
25. You must allow the council to inspect the flat within 6 months of the end of the lease.

Clause 4

You covenant with the lessees of other flats in the building to observe the provisions of Clause 3. The purpose of this clause is to give a right to flat owners to take legal proceedings directly against other flat owners if there are breaches by that flat owner of the covenants in his or her lease. Alternatively, you can ask the council to enforce the provisions of the other leases, for which you will have to pay the council’s costs.

Clause 5

This clause details the expenses which can be recovered by the council through the service charge as well as how they are calculated and payment collected. The flat owner is responsible for payment of all expenses incurred by the council which relate solely to the flat as well as a proportionate part of the council’s expenses incurred on the repair, maintenance and renewal of the building, the provision of services for the building and the estate.

The amount of the service charge will be calculated on an annual basis and the council must provide you with a certificate for its financial year (1 April to 31 March in the following year) containing a summary of their expenses and outgoings. On receipt of the certificate you must pay the amount of the service charge within 14 days. You will be credited for any payments that have been made during the financial year and any surplus will be carried forward to the following year.

Sub-Clause (e)

You must pay the service yearly in advance on the 1st day of April.

Sub-Clause (f)

Provides for the calculation of the service charge as follows:

1. The expenses incurred by the council in respect of the matters set out in the Third Schedule Part 1 are added together, divided by the total rateable value of all dwellings and other rateable parts in the building and then multiplied by the rateable value of your property (the building element).
2. The expenses incurred by the council in respect of the matters set out in the Third Schedule Part 2 are aggregated, divided by the total of the rateable value of all residential units on the estate and then multiplied by the rateable value of your property (the estate element).
3. You must pay a fair and reasonable proportion of the council’s management expenses incurred under the Third Schedule part 3 (the management element).
4. Then the building, estate and management elements are added together to any expenditure incurred under the provisions of clause 5(3)(e)(ii).

The council is entitled to change the method by which the service charge is calculated. If the rateable value method is abolished, then, instead of using this, the service charge will be based on the floor area of the property. Some charges are calculated on a borough wide basis.

Sub-Clause (g)

The council has the power to create a reserve fund so that, for example, they can set aside money for periodic redecoration of the outside of the building. On the sale of your property you will not be entitled to any part of the reserve fund so that the purchaser will have the benefit of whatever you have paid on account towards future expenditure.

Clause 6

This clause provides that the covenants by you will remain in full force even though the council may be aware of some breach but do not take any action to enforce the lease. Therefore the council would have the right to take proceedings to enforce the terms of the lease, but if they chose not to do so, the tenant cannot then argue that they have given up their right to do so at some future time.

Clause 7

This clause contains the council’s covenants with you.

1. Provided you pay the rent, which includes service charges, and observe the other covenants the council will allow you to enjoy the property without interruption from the council or any person who claims under them.
2. The council agrees to insure the property in the joint names of the tenant and the council for the full reinstatement value and also to insure the remainder of the building in their own name.
3. If the property or the building is destroyed or damaged by an insured risk the council will use the insurance money on rebuilding or repairing the building. If the building is damaged beyond repair then the insurance money will belong to the council and the tenant in the proportion which the values of their respective interests in the building bear to one another. For example, if your property is one of three flats in the building you would expect to receive one-third of the insurance money if the building could not be repaired. However under the provisions of Paragraph 14 (3) of Schedule 6 of the Housing Act 1985 the landlord is under an obligation to reinstate the building in the event of destruction. Below is the full text of Paragraph 14 (3). There is an implied covenant that the landlord shall rebuild or reinstate the dwelling-house and the building in which it is situated in the case of destruction or damage by fire, tempest, flood or any other cause against the risk of which it is normal practice to insure.
4. If the property has been damaged or destroyed so as to be unfit for use and the insurance money is payable the rent will be suspended either until the property again becomes fit for use or until expiry of such period for which the council receives insurance monies equivalent to the rent due, whichever is the shorter.
5. The council agrees to repair the structure of the building and the other items specified in this clause but not works for which the tenant is responsible under Clauses 3(3). Clause 8, below, states that the council is not liable if it cannot do the work for reasons beyond its control.
6. The council further agrees to provide certain services so far as reasonably practicable, for which the tenant pays a service charge.
7. The council agrees that any leases granted for 21 years or more of any dwelling in the building will be in similar terms as this lease wherever reasonable and practicable.
8. The council will, if requested by the tenant, take steps to enforce the covenants in the leases of other dwellings in the building. This is subject to the tenant indemnifying (agreeing to pay) the council for its costs associated with enforcing the breach.

Clause 8

This clause provides that the council will not be liable to the tenant for breach of its obligations under the lease in certain circumstances. In particular, you will note that if, for example, they cannot provide services as a result of labour disputes, bad weather conditions or mechanical breakdown they will not be liable.

Clause 9

This clause provides that if the rent is unpaid for 14 days or you have not observed your covenants in the lease the council can re-enter the property, evict the tenant and forfeit the lease. However, both as a matter of practice and in law, the council must take proceedings for possession before a person can be evicted and, as stated above, the court has power to give relief against forfeiture of the lease provided the tenant remedies the breaches of covenant.

Clause 10

1. Any notice by the landlord can be sent to the flat by post or in person.
2. The leaseholder can serve a notice on the council addressed to the Head of Law by post or in person.
3. The lease is granted by the council as freeholder and does not affect its other powers as a local authority.
4. This sub clause allows the use of words to be interpreted in a way to avoid mistakes relevant to plural, singular, masculine and plural. In a practical sense joint owners of the property shall be regarded as single leaseholders and jointly liable to perform the obligations under the lease.
5. Any references to an Act of Parliament shall include any subsequent amendments to that Act of Parliament.
6. This is a Stamp Duty Land Tax certificate confirming that the purchase is not linked to another for tax purposes.
7. This certifies that there is no other agreement within the lease that creates another lease.
8. This clause takes effect if there is no stamp duty payable on the purchase. If there is stamp duty payable then this clause is crossed out.

The First Schedule

This details the rights granted to you, which are necessary for you to use and enjoy the flat. For example, you are given the right to use the various services, right of access through the other parts of the building and rights of way over the estate. The Schedule also grants a right to enter other leasehold flats in the building if access is required to undertake repairs to the leaseholder’s flat.

The Second Schedule

This specifies the exceptions and reservations from the lease. These are rights reserved by the council for themselves and other occupiers of the building and estate in terms similar to those given to the leaseholder by the First Schedule.

The Third Schedule

This specifies the building, estate and management element of the services provided by the council towards the cost of which you contribute under Clause 5 through the service charge. Please read this clause carefully so that you understand the costs to which you have to make a contribution. The council should have provided you with an estimate of the likely annual service charge but it is most important to appreciate that, in addition to your mortgage, council tax, water rates and rent, you may have a substantial liability for the provision of services by the council. The cost will vary from year to year, for example, it will be substantially higher in years when the council is redecorating the building or has to carry out structural repairs.