Hot topics in leasehold21/11/16
Persistent non-payment of rent in shared ownership
Recent NHG data published indicated that shared ownership rent arrears are at 13.1%. This form of tenure is known to be higher risk for rent arrears, but the issue of persistent non-payment of rent by shared owners, often leading to discharge of arrears by the lender, has attracted less attention. This outcome will greatly impact on housing associations in the event of lender repossession in the future and claims under the MPC.
Proactive management of persistent arrears is therefore essential, and housing associations should incorporate into their policies and procedures early approaches to lenders regarding accounts of concern. These would take into consideration the Joint Guidance on Shared Ownership, and the supplementary Guidance on handling arrears and possession sales of shared ownership properties, published by the CML. NHF, HCA and BSA. In particular, entering into service level agreements with lenders can be a very effective tool.
‘Airbnb’ short term lets – a breach of lease covenants?
This was the issue the Upper Tribunal had to decide in Nemcova v Fairfield Rents Ltd  UKUT 303 (LC)
The lease in question contained a typical covenant on the part of the lessee not to:
“use the demised premises or permit them to be used for any illegal or immoral purpose or for any purpose whatsoever other than as a private residence.”
If the leaseholder advertises the flat for short term lettings and grants a series of such lettings, does this breach the above covenant?
It was accepted that the lessee had granted various short term lets and would do so for three months of the year. What was not agreed was whether this breached the covenant to use the property as a private residence.
On appeal to the Upper Tribunal, it was held that although the clause did not require the flat to be used as a private residence for only the lessee, there had to be a connection between the occupier and the residence such that the occupier would think of the flat as his or her residence. Someone staying in the flat for a weekend only would not consider the flat to be their ‘residence’.
Having reached that view, consistent with the decision of the FTT that the duration of the occupier’s occupation was material, the Upper Tribunal found that short terms lets for a night or weekend at a time cannot be consistent with the use of the flat as a ‘private residence’ and therefore breached the covenant.
Unless this issue is considered by the Court of Appeal, we now have binding precedent that a lease covenant to use a property as a ‘private residence’ is breached by short term Airbnb style lettings.
Fire doors in leasehold flats
Many of our clients continue to battle with how they can ensure that their leaseholders have fire resistant doors. This issue is of particular concern where the leasehold flats are within buildings which also house general needs tenants, where the doors may be compromising fire safety within the building.
The Regulatory Reform (Fire Safety) Order 2005 contains various obligations on those responsible for premises to secure fire safety. However, the obligations in question do not apply to premises occupied as a private dwelling (other than common parts) and, as a result, leaseholders do not have any personal obligations under the 2005 Order.
As a landlord, you are likely to be the “responsible person” under the 2005 Order in respect of the communal parts of the building. There is therefore a risk that the Fire and Rescue Authority could take enforcement action against you if appropriate preventative and protective measures are not taken. The Authority would, among other issues, consider whether the routes to emergency exits and the exits themselves are kept clear, and if occupiers can evacuate the premises as quickly as possible. A lack of fire retardant doors leading to communal areas could be considered to hinder that objective.
It is therefore important that as landlord you take steps to ensure that leaseholder’s doors are upgraded where possible. The first source to establish your powers as landlord will be the lease itself, with case law demonstrating that the extent to which enforcement action succeeds against a leaseholder is very much dependent on the specific lease terms.
It should, however, be remembered that replacement of a door to ensure that it is fire retardant will not amount to “repair”. As a result, if the door is within the leaseholder’s demise, they will not be obliged to carry out the work in question under their standard repairing covenant. Conversely, if the door is not within the leaseholder’s demise, the cost of replacing it will not be covered by the service charge if the relevant provisions relate only to repair.
Leases often contain a covenant by the leaseholder not to do or permit anything that may render the landlord’s insurance in respect of the building void or voidable, or cause the premium to be increased, but it will often be the case that the landlord will have a block insurance policy that remains unaffected by this issue.
You as landlord may not have control over the leaseholder’s door and the lease may not enable you to force the leaseholder to carry out the works. If so, that position is likely to be taken into account in assessing whether you should have taken steps to ensure that doors are fire safe in order to comply with your duties under the 2005 Order. As an additional practical step, we recommend writing to leaseholders to explain the risks of not having a fire retardant door and offering to replace the doors at the leaseholder’s cost, achieving a discount via your procurement processes.
While you will not have any enforcement powers if leaseholders do not accept your offer, the fact that you have taken steps to secure compliance should assist with resisting enforcement action and maintaining your reputation.
How Capsticks can help
We have a dedicated team of lawyers who deal with leasehold issues for the social housing sector and are happy to discuss these or any other leasehold topics that you may be experiencing.
For more information please contact Abi Condry, Clive Adams or Bridget Stark-Wills