Sign on the dotted line…getting leasehold notices right

Sign on the dotted line…getting leasehold notices right

Professor James Driscoll looks at the practical effect of changes contained in the small, but powerful, Leasehold Reform (Amendment) Act 2014 (LR(A)A 2014).

Original news

Leasehold Reform (Amendment) Act 2014, LNB News 14/03/2014 65

Notices for participating in collective enfranchisement or extending a lease can be signed by someone acting on the tenant’s behalf from 13 May 2013. Solicitors and relatives will be able to sign such notices on a tenant’s behalf.

What is the background to the LR(A)A 2014?

Measured by its length, LR(A)A 2014 is very modest, occupying as it does, just two sections. However, the amendment it makes to the Leasehold Reform, Housing and Urban Development Act 1993 (LRHUDA 1993) will be far-reaching in its practical effects. LR(A)A 2014 received royal assent on 13 March 2014 and it will come into force on 13 May 2014. However, the amendment does not apply to Wales. As housing legislation is a devolved matter, similar legislation will need to be passed by the Welsh Assembly before this provision will apply to dwellings in Wales.

LR(A)A 2014 amends LRHUDA 1993, s 99(5)(a), which deals with notices given under LRHUDA 1993, s 13 (collective enfranchisement claims) or under LRHUDA 1993, s 42 (new lease claims). LR(A)A 2014 removes the requirement that these notices be ‘signed by each of the tenants, or (as the case may be) by the tenant, by whom it is given’.

What are the practical effects of the changes?

Personally signed

The effect of LRHUDA 1993, s 99(5)(a), before the amendment to LR(A)A 2014, was that section 13 and section 42 notices needed to be signed personally by the leaseholders. Where there were joint leaseholders to a lease, both needed to sign (LRHUDA 1993, s 5(4)(b)).

The original requirement that such notices be personally signed was no doubt well-intentioned. A leaseholder should only be bound to pay a premium and the landlord’s reasonable costs if she or he personally signed the notice in order to appreciate the financial consequences of the claim.

But, as many practitioners will confirm, some practical problems emerged over the years. Solicitors frequently sign legal documents for and on behalf of their clients. It is also possible for any person who chooses to do so to execute a power of attorney to appoint someone else to sign legal documents on their behalf. And collective enfranchisement cases, with numerous leaseholders, were another problem.

Powers of attorney

St Ermins Property Co v Tingay [2002] EWHC 1673 (Ch), [2002] 3 EGLR 53, raised the question of whether someone with authority under a power of attorney could sign a section 42 notice on behalf of a tenant. The leaseholder executed a power of attorney in favour of her son and her daughter-in-law. Later she entered a care home. She sought a new lease and her son signed the section 42 notice on her behalf. The landlord served a counter-notice denying the validity of the section 42 notice of claim on the basis of its signatory. The court held that the notice was invalid and it made the following comments:

‘As a general proposition things that can be done by an individual may be done either personally or by a duly authorised agent. That is true under the common law generally, and under statute. There are, however, exceptions: whatever anomalies this provision may produce, or however much of a trap it may be for tenants and their advisers, I cannot give s 99(5)(a) the meaning that it would have in isolation, and I must interpret it as requiring personal signature by the tenant, and not permitting signature on her behalf by anyone else, whether an ordinary agent or an attorney.’

One of the ironies of St Ermins is that on the death of leaseholder, notice can be given by their personal representatives (LRHUDA 1993, s 39(3A)).

Company signatories

Similar problems may arise where the leaseholder is a company. In City & Country Properties Ltd v Plowden Investments Ltd [2006] PLSCS 150 the leaseholder was a company and one director signed the section 42 notice on its behalf. It was held that the notice should have been executed by the company, therefore by two directors or one director and the company secretary, in accordance with the Companies Act 1985 (today the Companies Act 2006). As a result, the notice was invalid.

Similarly, in Hilmi and Associates Ltd v 20 Pembridge Villas Freehold Ltd [2010] EWCA Civ 314, [2010] 2 EGLR 41, one of the leaseholders who signed a collective enfranchisement notice under LRHUDA 1993, s 13 was a company. As the notice was not properly executed by the company it reduced the number of valid signatures below the required one-half needed to support the claim, making the section 13 notice invalid.

Enfranchisement claims

Another illustration of the practical problems caused by the original wording of LRHUDA 1993, s 99(5)(a), is Cascades and Quayside Ltd v Cascades Freehold Ltd [2007] EWCA Civ 1555, an enfranchisement claim. Despite the logistical problems of getting numerous leaseholders’ signatures for the section 13 notice to be valid, the participating leaseholders must personally sign the section 13 enfranchisement notice.

Going forward, once the LR(A)A 2014 change takes effect, leaseholders will no longer be required to sign section 42 or section 13 notices personally. This will be particularly helpful in the case of large enfranchisement claims involving many leaseholders, as it will enable one solicitor or other agent to sign the notice on behalf of all leaseholders, with their consent. Where a leaseholder has executed a power of attorney, notices will be able to be signed by the holder of the power or, with authority, the holder’s solicitor, and in the case of companies, a solicitor or other agent will be able to sign the notices on behalf of the company.

Professor James Driscoll is a solicitor, an author, an academic and a Judge, First-tier Tribunal (Property Chamber). He has practised law since 1975.

This interview was adapted for LexisPSL Property on 12 May 2014 from an article first published in Estates Gazette magazine.

Click here for a free trial of Lexis®PSL Property and click here for a free trial of the Estates Gazette Magazine. 

Interviewed by Guy Skelton.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

Don't miss out on this FREE Practice Note:

Mixed Use Devs Front Page

When a proposed mixed use development includes a residential element, a degree of caution should be exercised. A number of potential risks/issues arise. A number of these can, however, be avoided/reduced by careful ownership structuring at the outset. This note details the most common pitfalls and risks and sets out (including detailed diagrams) the best structures to minimize risk and safeguard viability in the most common scenarios. CLICK HERE FOR YOUR FREE DOWNLOAD!

Keywords: mixed use developments; right to manage; right to buy; right to extended lease; service charge issues; ownership structures.

Related Articles:
Latest Articles:
About the author: