July 2017

‘Just in time’ – time limits and leasehold enfranchisement

On its face, the procedure for applying to extend your Lease or to acquire the freehold to your Building under the Leasehold Reform Housing & Urban Development Act 1993 seems relatively straightforward:-

  1. The tenant starts the procedure by serving a Notice under Section 13 (enfranchisement) or under Section 42 (Lease Extension).
  2. The landlord responds by serving a Counter Notice under Section 21 or Section 45.
  3. The parties then seek to agree the terms of acquisition.
  4. If, after a period of two months from the date the Counter Notice was given, any terms remain in dispute either party can apply to the First Tier Tribunal Property Chamber (FTT) to determine the matters in issue.

In practice, at all stages there are traps and hurdles over the validity of Notices and fixed statutory timetables. The time periods cannot be extended and failure to comply has dire consequences.

In relation to the commencing Notice (leaving aside issues of complying with the requirements of its content) the tenant(s) will need to decide:

– on whom to serve the Notice;
– how to serve the Notice; and
– at what address to serve the Notice.

All Notices required or authorised to be served under the 1993 Act must be in writing. Whilst they may be sent by post and there is a statutory presumption of service of a Notice sent by post, this presumption can be rebutted by evidence to the contrary.

The date of service will be critical in determining the date to give in the Notice for the landlord to serve the Counter Notice.

In one reported case, that went all the way to the Court of Appeal, the issue was as to when the Notice was served: If it was the date contended for by the landlord, the Notice would be invalid as it did not provide the requisite full two months for the service of Counter Notice.

Similar issues with regard to the date of service will apply in respect of the Counter Notice.

Landlords who leave service of Counter Notices until the last moment can find to their regret that their Notice, having been served out of time, is invalid and the Court has no jurisdiction to extend the time for service and must, therefore, make an Order in the terms of the tenant’s Notice.

Once a valid Counter Notice is served, a further timetable kicks in. There is a two-month ‘negotiation’ period and a further period of 4 months (i.e. a total of 6 months from the date of service of the Counter Notice) for either party to apply to the First Tier Tribunal Property Chamber (FTT) to resolve any issues over price or terms.

The 1993 Act provides that any application must be made not later than the end of the period of 6 months beginning with the date on which the Counter Notice was given to the tenant and that such application must be started by sending or delivering to the FTT a Notice of Application.

In a recent Upper Tribunal Appeal, it was held that the posting of a correctly addressed (and sufficiently stamped) Notice of Application to the FTT is sufficient to start the proceedings (the relevant date is the date of posting) and this is so even if the Application Notice is delayed in the post or does not even arrive at the FTT!

The difficulty may well be as to how to prove that the Application was correctly addressed and sufficiently stamped and sent by the requisite date.

The prudent approach will therefore be to ensure that any application is sent well in time and issued by the Tribunal by the due date rather than relying upon adducing evidence to that effect.

Even at the stage when all the terms are agreed, there is no time to relax as a further time periods kick in.

If the enfranchisement is not completed or the Lease granted within 2 months of date on which all terms are agreed, either party may apply to the County Court for an Order and if such Application is not made within 2 months of that date (i.e. within 4 months of the date on which all terms are agreed) the Application itself is deemed withdrawn and the tenant or tenants cannot make further application for a period of 12 months from the deemed date of withdrawal, but still have a liability to pay the landlord’s legal and valuation statutory costs.

It is, therefore, good practice for the parties to record and agree when all the terms are agreed and to diarise forward.

Compliance with the relevant timetables is a critical aspect of the successful running and management of a claim for freehold enfranchisement or lease extension and specialist advisors should be instructed when you are pursuing such claims.