Author: Sarah Jarvis

As with previous years in recent memory, 2025 promises to be an interesting year in the Social Housing sector. Here, Kevin Edwards, a partner in Sharratts’ development team, looks at some of the key matters predicted to impact sector over the coming 12 months.

Government implementing its Housing Policy/Spending Review

The Labour government has been in power for 6 months so should now be able to begin to ratchet up the implementation of its housing policy. The immediate re-implementation of mandatory local housing targets was a good start, which was further reinforced in the Labour budget by increasing the Affordable Housing Programme by £500m to £3.1bn and the commitment to a five-year rent settlement, along with the reduction in Right to Buy discounts from 21 November 2024.  This acts to begin to mend the present situation, now we also need to look to the future policy direction.

An announcement on the new government housing strategy is due in the spring of 2025, which is expected to set out details of new investment to success the current 2021-2026 AHP and all eyes will be on the Spending Review in this regard to see what the government proposes. A renewed focus on social rent is expected as a result of this.

Renters’ Rights Bill

There are a number of potential changes to be aware of in 2025 stemming from the Renters Rights Bill that will affect the sector, including:

Abolition of Section 21 ‘no-fault’ evictions:

This will result in evictions being undertaken by Section 8 only, meaning landlords and agents will need to give a valid reason and justify this either in arbitration or to the court. This process carries longer notice periods and a more complex legal process and is likely to result in more failed eviction claims, longer timescales for evictions and higher costs. This is anticipated to be brought into effect in summer 2025 so Landlords need to be prepared and have processes and timescales in place to deal with evictions under s8 instead.

Proposed abolition of fixed term tenancies:

When the proposed change is enacted all tenancies – given a transition period – will become periodic and not fixed. This means Assured Shorthold Tenancies will no longer. This will give tenants greater security and flexibility. It will allow them to provide only two months’ notice to end their tenancy at any time. However, Landlords will have less certainty and will be required to give at least four months’ notice before evicting a tenant for reasons such as rent arrears, anti-social behaviour, selling the property or the landlord or family moving back in. There are also new rules for providing a “written statement” of the terms of each tenancy, so regulations prescribing terms setting out tenants’ rights, which will have to be included in tenancy agreements, should be expected as well.

Rent controls:

Formal rent controls have been ruled out by government consistently, however the Bill will introduce measures to control rent inflation by:

Banning bidding wars – rent amounts will have to be advertised in advance (though how well this can be policed remains to be seen!).

Limiting rent increases – Rent can only be increased once a year and such increases cannot be contractual so can only be undertaken via the s13 procedure of the Housing Act 1988. Landlords will now also have to provide at least two months’ notice before implementing any increase. The new rent must also align with current market rates.

Allowing Tenants greater power to challenge excessive rent increases – Tenants have the right to appeal to the First-Tier tribunal but currently it is too much of a risk for Tenants to utilise (as the award can be backdated to the date of expiry of the s13 notice and can even be higher than that proposed by the Landlord in the first place!) so it is rarely undertaken.  There are changes proposed whereby:

• The Tribunal cannot award a rent higher than that originally proposed in the s13 notice;
• The new rent (once confirmed by the tribunal) will only take effect from the date of the Tribunal’s decision (i.e. NOT backdated); and
• The Tribunal will now have the power to defer the increase by up to two months where the Tenant is in financial hardship.

Of course, while the above are measures to be applauded in terms of protecting tenants, for registered providers this means the risk a change in rent (more specifically a lower rent than they expected) passes to them. The Tribunal aims to send out its written decision and reasons within 6 weeks of the hearing or written determination – there will also be a period beforehand while the hearing date is awaited. This means that a registered provider whose Tenant applies could go 2 months at a rent lower than it had planned for. On a case-by-case basis this may not be a lot, but it could have impacts if it happens on a wider scale – and could also lead to a snowball effect where more tenants see a rent increase having been challenged (especially if it is upheld). Providers will need to bear this new risk profile in mind.

Non-discrimination:

The Bill will make it an offence for landlords and agents to discriminate against those tenants’ claiming benefits or those who have children. The aim is to make sure there is equal access to housing for all applicants. This is unlikely to affect registered providers who already have a number of tenants within this group, but it is still to be borne in mind.

Request for Pets:

Tenants will be given a right to request permission to keep pets in their rented homes, not to be unreasonably refused. Landlords will only be allowed to refuse pet requests with a valid reason but will be allowed to insist on pet insurance.

Consultation on Community Benefit Societies (losing exempt status)

The Law Commission has undertaken a review of the Co-Operative and Community Benefit Societies Act 2014 and issued a consultation.   The consultation closed on 10 December 2024.  Among the proposals being considered are whether Community Benefit Societies (“CBS”) (which a large number of registered providers are) should lose their exempt charity status.  It is hoped that the registered providers will be exempt from these changes, but that remains to be seen.

The proposals are to be retrospective so if enacted all existing CBS would be required to comply.  This would, among other requirements (including more stringent restrictions on interest rates payable on investments, etc.) involve registering with the Charities Commission to retain charitable status.  This would make significant changes to the requirements when disposing of assets (including intra-group) where the Charity Commission consent may need to be obtained.   On a governance note, there may also be differing requirements when executing documentation in such matters.

Long-term rent settlement/rent convergence

Rent Settlement – The government closed its consultation on a new long-term rent settlement at the end of December. As part of the Autumn Budget, the government confirmed that the social rent cap would be raised by CPI plus 1% per year over the five-year period from 2026-27 to 2030-31. While higher rents support more housebuilding, the government is wary of making too high an increase as this would adversely affect tenants (and in turn would lead to a higher benefits bill for the government).

For the sector, calls have long been made for a longer-term settlement. Longer settlements offer greater security (as the future rents can be calculated and capitalised) and therefore encourage investment to the sector at a more beneficial rate therefore providing much more stability. The government response to the consultation is awaited, but many providers have argued for a longer 10-year settlement for this very reason, along with a higher level of government grant.

Rent Convergence – The term ‘Rent convergence’ will also be likely to be heard over the coming year. A number of providers (including the G15 group and the CIH itself) have argued for a rent convergence mechanism to be put in place if a longer-term settlement is not possible. Rent convergence allows rent for homes which rent falls below the national “rent standard” to be increased at a higher rate than the rent cap, so as to “catch-up” and bring them all in line. Convergence was scrapped in 2015 and the G15 estimates that some 67% of its members’ homes covered by the rent standard are below the full permitted rent and this has cost its members some £2bn in the intervening period. The argument for rent convergence is that this will alleviate some of the pain caused by the rent cap and shorter rent settlement. MHCLG recently appeared to rule out convergence in its rent settlement consultation paper, but it remains to be seen if this remains the case, and this mechanism will stay on the agenda for the sector in the short term.

Leasehold and Freehold Reform Act 2024

The Leasehold and Freehold Reform Act 2024 (“LFRA 2024”) received royal assent on 24 May 2024 and the remaining parliamentary stages of the bill were fast-tracked in the wash-up period before the 2024 general election but the provisions are yet be enacted via secondary legislation.

Key proposals are the establishment of Commonhold as the default tenure by the end of the parliament, and the abolition of new leasehold interests. The provisions for abolition of long leases are set out at paragraph 1 of the LFRA. Permitted leases are set out in Schedule 1 and include shared ownership leases and retirement leases. These provisions have yet to be brought into effect.

The Housing Minister, Matthew Pennycook, set out the proposed timescale to bring these into effect in a written statement to parliament on 21 November 2024[1]. In the second part of 2025 the government proposes to publish a new Leasehold and Commonhold Reform Bill. This will accompany a consultation on banning new leasehold flats and houses. This (along with reforms to ground rent and enfranchisement) will be awaited later this year.

Loss of First-Time Buyer relief for SDLT above £500k (5% on properties from £350k-£500k)

In September 2022, the threshold on which you don’t pay Stamp Duty Land Tax (“SDLT”) was raised to £425,000 for first time buyers – saving the average buyer some £2,500.  However, as of April 2025 the 0% threshold will drop back down to £300,000. First time buyers between the thresholds of £300,001 and £500,000 will pay a slightly reduced rate of 5% and will pay the full rate on anything above £500,000. This will impact the affordability for buyers in the market and have a negative effect on sales, post-April 2025 (though it will inevitably mean the usual rush prior to April to avoid the uplift).

Merger activity?

From 2012 to the 2023 there were some 70 housing association mergers and this continued into 2024.  Wreking Housing Group merged with, and because part of, the Housing Plus Group; and Grand Union and Longhurst merged to form the new provide ‘Amplius’.  Bromford and Flagship have already begun the countdown to merge in 2025 and it is extremely likely that more will follow as acquisition and maintenance costs, with increased management obligations, push more small and medium associations to look to consolidate.

Another interesting year to come

The recent increased focus on housing has been welcome (as has the cessation of the revolving door of Housing Ministers!). The government will of course need time to increase housebuilding levels to anywhere near those required to achieve the ambitious targets though it has already committed to a focus on social rented affordable accommodation, and the supply side reform of planning and increases to the Affordable Housing Programme are a good step in the right direction.

The enactment of the Leasehold and Freehold Reform Act (and further Leasehold and Commonhold reform) will certainly pose challenges and providers will need to utilise their advisers to navigate these and develop new processes for dealing with evictions under s8 following the abolition of s21 evictions.  However, with new housing policies, a spending review, legislation and a rent settlement conversation on the horizon, and housing experts predicting an upturn in the housing market this year, 2025 looks set to be another year of strong focus on housing, and social housing in particular, which after many years of feeling like an afterthought is really a nice position for the sector to be in!

KEVIN EDWARDS

PARTNER

[1] https://hansard.parliament.uk/commons/2024-11-21/debates/24112139000012/LeaseholdAndCommonholdReform

Following the recent appointment of Kevin Edwards Sharratts have further expanded their Development Team by appointing a new Partner to work within and strengthen its established Team. Ryan Campbell , has joined the Development Team to work primarily with the Firm’s existing RP and Developer client base and brings with him a wealth of specialist experience in the Affordable Housing Sector.

With over 10  years’ experience in new build development work in the Affordable Housing Sector, Ryan has an established reputation for guiding developer/land-owner and RP clients on the delivery of complex and large scale development and regeneration projects. After qualifying at Capsticks Ryan has been involved in numerous complicated schemes and transactions throughout the North West, the Midlands, London and across the South of the UK. Ryan also brings with him experience in the care sector assisting with the acquisition and redevelopment or renovation of private residential dwellings or institutions into care homes for public and privately traded companies in order to facilitate the use and occupation of facilities for specialist care for individuals with specialist care needs. Ryan further has brought his keen interest in developing and teaching others through his experience in training trainees, juniors along with clients and members of the Affordable Housing Sector through being a speaker for the delivery of a Chartered Institute of Housing accredited diploma for housing associations and developers

Ryan’ s experience will assist with the Firm’s continued growth plans and strengthen the existing services being offered to the firm’s impressive roster of clients – a list that includes a number of G15 Providers and other investors and partners working within the Affordable Housing Sector.

On joining Sharratts Ryan commented “I am delighted to be joining the team at Sharratts.  The firm is well known for its excellent client-led service and entirely Affordable Housing focussed work. The provision of affordable housing is an issue I am sure that is close to everyone’s hearts and I am overjoyed to be working with a team with such a great reputation and such enthusiasm for providing affordable homes in this country”

The long-awaited new form Shared Ownership model lease has finally been released via the updated Capital Funding Guide.  Not only are there changes to the Lease but the CFG has also been updated to reflect these and some minor changes to affordability and sustainability.

The CFG Affordability changes….

These are all minor and seek to clarify points which have been unclear in previous versions of the CFG.   Affordability assessment must now be carried out by a Mortgage Advisor with a suitable level of experience.  This was previously only an option.  It is now clear that when registering with the Help to Buy Agent that they only assess eligibility and not affordability.

Maximising shares is further clarified with the aim of a rate of 45% debt to income being the “standard.”  RP’s can clearly use their discretion if they feel in certain circumstances this is not sustainable for any applicant.

In relation to resales it makes it clear that shares can be sold at the existing level even where a buyer can afford more.  If they can afford a higher share, RP’s should facilitate where possible, bringing resales in line with new build sales.

Unsecured lending is not prohibited under the new model however, this would not benefit from the mortgagee protection provisions in the lease.  This is clearly aimed at people buying very low shares using finance from other sources (e.g. personal loan).  Such applicants would still be subject to the same affordability and sustainability criteria.

The New Model Lease:

Lease Term

Following much discussion and review of Leasehold regulations generally, new leases will be granted for a term of 990 years.   This will avoid future lending issues when lease extensions are required and also brings Shared Ownership in line with the private sale market.

Share Purchased

It has been well publicised that the minimum share will be reduced to 10%, at such a low initial share it will be even more important to ensure affordability and sustainability of long-term ownership.  Much debate has been held around this point and it will remain to be seen how many applicants qualify to buy at this level.

Resales

The resales (or alienation) clause has been amended to reflect the change from an 8 week nomination period to 4 weeks.  The reasoning is to prevent leaseholder from being “stuck” in the resale process and able to sell on the open market sooner.

Staircasing

The first major change to the lease is the introduction of 1% shares.  Traditional staircasing still exists in the “old” form however an additional Schedule has been introduced allowing owners to buy a 1% share each year for the first 15 years of ownership.  This right passes to new owners following a resale.  To minimise costs for the leaseholder the valuation is undertaken by the RP making

reference to the original valuation of the property and the HPI (House Prices Index).  Each party will also cover their own costs.  A memorandum will still be required to record each additional share and the corresponding decrease in the level of Specified Rent.

Repairs

The second major change relates to repairs.  Historically the Shared Ownership Lease has been a full repairing lease with all responsibility for repairs lying with the leaseholder. 

The new lease introduces an initial repair period which ends after 10 years or on final staircasing, whichever is first.  Costs are covered up to £500 in any year, any unspent amount from the previous year can roll over to the next.

Such repairs do not cover wear and tear, and anything covered by buildings insurance or the warranty. 

Transfer

The model house lease has always included a draft Transfer to be used on final staircasing (when the freehold title is transferred to the owner).  The new model requires this Transfer to specifically exclude the provisions of Section 121 Law of Property Act 1925 which brings this drafting in line with current lender requirements in relation to Estate Rent charges, such unacceptable rent charge provisions have caused lots of delays in recent years.  

Two tiers of Shared Ownership?

Whilst RP’s are able to use the new lease for all sales going forward there will be a considerable period where properties will be available for sale with both forms of lease (indefinitely if we include resales). 

RP’s will have to use the new lease on a plot sales which are grant funded under the 2021-2026 programme or in relation to section 106 units currently in planning. 

Its not often that legal updates can genuinely claim to be interesting, but in the case of the issue of ground rents, readers will be aware of the somewhat seismic shift in the leasehold landscape currently being played out.

The new news?

The Government has introduced the Leasehold Reform (Ground Rent) Bill (Bill) into the House of Lords.  The first reading took place on 12 May 2021 and the second reading is scheduled for 24 May 2021.  It could however be some time before the new Act is in force and effective.

The effect of the Bill is to confine ground rents on newly established long residential leases to one peppercorn per year – crucially meaning that they will cease to have any financial value.

Further, administration charges in relation to those peppercorn rents can no longer be charged.

Legal niceties…

The new rules will apply to leases of dwellings granted on or after commencement of the new Act (assuming it gets passed).  This would include a lease created by a variation of a lease that results in a deemed surrender and regrant – quite a common occurrence when managing properties within the social housing sector. 

The rules will not apply to leases granted where buyers and sellers entered into a legally binding contract in relation to the grant of the lease before commencement of the new Act.

Some leases will be excepted from the ground rent curb, including business leases, statutory lease extensions of houses and flats, community housing, and certain equity release financial products and  rent to buy arrangements.  Special rules also apply to shared ownership leases and certain leases that replace leases that were in place before the new Act coming into force.

A couple of key points and exceptions

Shared Ownership Leases – rent can be charged on the Landlord’s retained share (at any amount), but it cannot be charged on the whole.  This exception falls away on final staircasing (when the Landlord no longer owns/retains any share).

Informal lease extensions –  where parties agree to extend the term of an existing lease (a non-statutory or informal lease extension) this usually operates by way of Surrender and Re-grant of the existing lease.  The Bill allows an exception in these circumstances where the Landlord is permitted, in the new (re-granted) lease, to continue charging any Rent that appears in the original Lease that is being extended.

Have you been naughty?

A breach of the new rules is a civil offence with a financial penalty of between £500 and £5,000.  A new duty on trading standards authorities in England and Wales is to be introduced to ensure the new rules are adhered to.  Leaseholders will be able to recover unlawfully charged ground rents through the First-tier Tribunal.

Practicalities…

We don’t yet know when the Bill will commence, possibly this may not be until 2023/2024.   However, the provisions are worth considering when forward planning and it may be that in the meantime the changes start to become prevalent the market place in any event.  

Please contact us if you wish to discuss any particular aspect of the Bill in more detail.

Sarah Jarvis

sarahj@sharratts-london.co.uk

W: 01959 568017

M: 07901 332729

The Department for Communities and Local Government (DCLG) has launched a consultation on proposals for speeding up the process of negotiating and completing section 106 agreements. In particular, the consultation will discuss:

1. Whether a dispute resolution mechanism should be available where section 106 negotiations breach statutory or agreed timescales;
2. Whether an automatic or deemed section 106 agreement after set timescales would be workable in practice;
3. Which bodies or appointed persons should provide the dispute resolution service;
4. Whether section 106 dispute resolution be available for all types of planning application;
5. Whether any dispute mechanism should include the determination of the related planning application.

The consultation is also seeking views on whether the requirement to provide affordable housing contributions acts as a barrier to the provision of dedicated student accommodation. The government will consult further on any changes in relation to student accommodation should the responses to this consultation suggest that there is an issue.

The consultation applies to England only and closes on 19 March 2015.

Section 81 of the Coronavirus Act 2020 – Residential Tenancies

As mentioned in our previous article the Government passed a special legislation, namely the Coronavirus Act 2020, in light of the Coronavirus outbreak. In this article we will talk about what measures have been introduced to help protect residential tenants in this difficult and uncertain time.

Section 81 of the Coronavirus Act 2020 has put in place special measures for residential tenants who find themselves unable to comply with the obligations imposed on them by their tenancy agreement.

Restrictions on the Termination of Tenancies

The Coronavirus Act 2020 stipulates that from the 26 March 2020 until 30 September 2020, Landlords must give all tenants three months’ notice if they intend to serve any notice seeking possession or notice to quit.

The temporary measures apply to the possession of tenancies governed by the Rent Act 1977, the Housing At 1985 and the Housing Act 1988. If Court proceedings are necessary, Landlords will be able to apply to the Court after the three months’ notice.

Please note the Secretary of State now has the power to extend this period by up to a further three months should it wishes to do so.

Landlords wishing to serve notice on tenants ought to be aware that the change in the legislation is also reflected in the prescribed forms of Notice. Form 3 and Form 6A, also known as Section 8 and Section 21 Notice’s respectively, have been changed.

Landlords must use the current forms (accessible via the Government’s website: www.gov.uk/guidance/assured-tenancy-forms) until 30 September 2020.

Rent

It should be noted that the special measures do not alter a tenant’s obligation to pay rent, but rather delay enforcement of the obligation through the threat of Court proceedings.

This means a tenant is still liable to pay their rent, however the Courts and the Government are urging cooperation from Landlords to accept late payment of rent from their tenants, over a period of time (i.e. over instalments), during these uncertain times.

If a Landlord relies on the rent to pay their Buy to Let mortgage, the Government has provided Landlords with some additional help in that they are protected by a 3 month mortgage payment holiday. As with rent the obligation is not written off, but merely suspended and interest will continue to accrue.

Suspension of Possession Proceedings

From 27 March 2020, the Courts have suspended all ongoing housing possession cases. This means that neither cases currently in or about to go into the system can be progressed.

The suspension of housing possession actions will initially last for 90 days and applies to all possession actions brought under CPR Part 55.

This means, all hearings which were listed to be heard until the end of June will be vacated. County Court bailiffs have also ceased enforcement of possession orders which are already in force for the time being.

Please note the Coronavirus Act does not apply to all tenancies, for example, it may not apply to some student lettings, holiday lets or tenancies at low rent. It is worth noting that this Act is not retrospective, and therefore it does not apply to any notices which were validly served before its commencement. They will remain valid for the purpose of issuing future court proceedings. However, If Court proceedings are necessary, Landlords will not be able to issue proceedings until after the suspension is lifted.

Summary

The Coronavirus Act does not prevent Landlords from serving notice on tenants. However, Landlords must give at least three months’ notice under the Act. If the tenant has not vacated the property within the three months’ notice period, Landlords cannot commence Court proceedings until after the suspension has been lifted.

Section 82 of The Coronavirus Act 2020 came into effect last month and has introduced some special measures to protect tenants of commercial premises who are experiencing interruption to their businesses as a result of forced closures, restrictions on trade and social distancing.  

http://www.legislation.gov.uk/ukpga/2020/7/part/1/crossheading/business-tenancies-protection-from-forfeiture-etc/enacted 

The Act has placed restrictions on landlords’ rights to forfeit leases of commercial premises, where a tenant has failed to pay the rent due under the lease, whether the decision for non-payment relates to COVID-19 or not.

The introduction of these special measures apply to all tenants and lawful occupiers of commercial premises (whatever sector they operate in), whether the tenant is permitted to open for business or faces any restrictions on trade, and regardless of the tenant’s financial standing and resources.

The restrictions placed on landlords are to remain in place until 30 June 2020, though this period may be extended by the Government.

Although the restrictions in placed are aimed to limit what action a landlord can take during this period, the landlord’s right to forfeit for non-payment of rent is reinstated after the restrictions are lifted should rents remain unpaid on or after 1 July 2020.

In the meantime, we will have to wait until 30 June 2020 to have a clearer picture on what the future holds.

The Government announced its intentions to roll out a new housing scheme to give the next generation of homeowners the opportunity to take their first step on to the property ladder.

The scheme, known as First Homes, will see a proportion of new homes be made available at a 30% market discount rate, with those eligible being able to buy direct from the developer.

However, properties built under the scheme will retain the discount it was purchased with, meaning that buyers wanting to sell will have to sell at the same 30% market discount rate.

This requirement has raised some questions about how buyers using the scheme will fare when trying to progress up the property ladder on the open market and how the discount will be maintained on future sales.

The Government has not yet given an exact figure of how many homes would be built under the First Homes Scheme, nor where the scheme will be trialled.

It is mooted that the Government will introduce the First Homes scheme via the planning system, and most likely via s106 Agreements. If the scheme is integrated into a s106 Agreement, developers will have to deliver a number of units on each new development as First Homes.

These First Home requirements may (and almost certainly will) replace, in whole or in part, the currently common requirements to transfer a proportion of the new homes on a development to a Registered Provider for shared ownership, intermediate or social/ affordable rent.

The housing charity Shelter has voiced their concerns that rather than creating a route to affordable homes, the scheme will simply put the social homes currently being built at risk.

A consultation has been launched to consider the new scheme, and will run until 3rd April https://www.gov.uk/government/consultations/first-homes. By then we should have a clearer picture on what the future holds.

Estate Rentcharges – the hidden issues

The Rentcharges Act 1977 provided that all existing rentcharges are to be extinguished on 22 June 2037 and that no new rentcharges could be created.   The exception is an estate rentcharge.  

This article deals with current issues with estate rentcharges only and does not look at the other forms of rentcharge covered by the Rentcharges Act 1977.

The background 

Estate Rentcharges affect freehold properties and are occasionally used by developers.   

Estate rentcharges impose a charge on the land which can be enforced to secure the obligations (normally being the obligations to pay towards the upkeep and maintenance of private common areas of the Estate) and create obligations that are directly enforceable against any successors in title to the original purchaser without the need for the successor to enter into any direct agreement with the management company (or other owner of the rentcharge).  There is no scope or mechanism to challenge the amount of rentcharge due (other than to bring court proceedings).   

The current issues for homeowners and their lenders

Section 121 of the Law of Property Act 1925 (“LPA 1925”) implies two remedies which benefit the management company (or other owner of the rentcharge) unless they are expressly excluded.   These allow the rentcharge owner to take possession of a freehold house and lawfully exclude the owner from their house should the rentcharge monies remain unpaid for 40 days.  This causes great concern to lenders as this could make a property unsaleable which would mean that a lenders security, and ability to sell the property should the owner default on their mortgage, could be at risk.

The 2 remedies as set out in Section 121 LPA 1925 are set out below: 

1. A right to enter into possession of and hold the property or any part thereof, and to take the income from the property (section 121(3) LPA 1925).
2. A right to lease the property or any part thereof to a trustee (section 121(4) LPA 1925). 

This means that unlike forfeiture proceedings against a leaseholder following a breach of a lease there is no requirement for the rentcharge owner to serve any notice to the owner or any lender giving them a reasonable period of time to remedy the breach, nor is there a right for the owner to apply to the courts for relief and if the rentcharge does remain unpaid for 40 days, the rentcharge owner may take possession of the property or grant a lease of the property to a trustee which can be registered at the Land Registry, meaning the owner could be excluded from their property without any remedy other than to pay any outstanding rentcharge monies.  

Furthermore, the trustee can collect any income or mortgage sell or underlet the lease to raise the required funds to cover the amount owing and any additional costs incurred.  The lease will continue for the full term of years it has been granted for even if the rentcharge arrears are paid or the rentcharge is redeemed in full, unless surrendered by the rentcharge owner, which would not be done automatically and could be at the cost of an additional premium.  This was confirmed in the case of Roberts and others V  Lawton [2016].   

The right of re-entry and the granting of such a lease would be binding on any future purchasers together with any lenders in possession and therefore could significantly affect the value of the property and is therefore having an effect on the number of lenders willing to offer mortgages on properties which have these provisions included.

A compromise

When instructed by client’s acquiring a number of plots on a development that is subject to estate rentcharges one should always seek to limit or remove the remedies available to rentcharge owners pursuant to section 121 LPA entirely and to include wording that ensures that specifically both s121(3) and s121(4) LPA 1925 are excluded.

However where this is not possible or accepted by developers (generally because the form of transfer has been used on their private plot sales or on previous disposals) one should seek to include additional wording which would act as a compromise between the parties.

One compromise would be to include a provision that notice would required to be given, in particular to a lender etc., prior to any of the remedies under s121 being exercised.  This would allow lenders to remedy the breach and pay any rentcharges due without any risk to their security.

Another compromise would be to ensure that there is provision to provide that where the statutory remedy of the grant of a lease of the Property on trust as provided for in Section 121(4) LPA 1925 is exercised for non-payment of estate rentcharges the lease will be surrendered, without a premium, following the payment of all arrears together with legal costs and court costs of creating and surrendering the lease.  This would again give lenders the comfort that such a lease would not have a detrimental effect on their security and could be removed on payment of the outstanding monies.

Is reform afoot? 

The Government has promised legislative reform but since a consultation was opened in Autumn 2018 little progress has been made and the law remains unchanged.  Perhaps once the big “B” has occurred reform may be more forthcoming but the compromises set out above should assist in resisting the measures implied under section 121 LPA in the interim period.

A massive thank you to everyone who supported us in any way on our cycle ride from Brasted to Paris.  A special thanks goes to all of the 27 cyclists who cycled through at least three seasons of weather over the three days but remained cheerful throughout.

Three members of Team Sharratts have provided the following blog from the three days:

Thursday morning seemed to arrive from nowhere; cars pulled up in darkness into Sharratts unrecognisably quiet car park. Strangers with a common goal, with hidden shared anxieties and excitements silently unpacked their bags and bikes and prepared themselves for the three days to come.

With everyone ready we were told what to expect; 70 miles of both urban and country roads with hills a plenty. The rain wasn’t mentioned as a feature, but none the less it joined us anyway for almost the entirety of the day…. and we were off. Locals cheered support from cars as we left and headed down the A25, if they cheered to you personally you’ll likely remember what was said! 

17 Miles raced by and we were greeted in East Peckham for a welcome drink and snack. There were, at every stop, a tub of Jelly Babies.   Another welcome stop at the Bell and Jorrocks pub in Frittenden, that was 30 miles devoured and we pushed forward quickly to lunch.  The rain really hit in this window and by the time we arrived everyone was muddy, soaked and more than ready to warm up. The conditions clearly motivated the pack with riders arriving 45 mins before we were expected. The Tiger Inn was almost perfect, there was a roaring fire, a decent lunch and the best flapjack anyone could ask for. I think we all over ate, within a mile there were three of the highest grade hills of the tour; perhaps we should have saved that flapjack. Everyone climbed the hills at a pace suitable for them and raced into Dover.  The ferry was delayed, there was a Burger King at the terminal. We ate on the ferry, we should have eaten at Burger King… always eat at the Burger King. We arrived in Calais and saddled up for the final ride to the hotel. This was to be 5 miles, it was not five miles. The peloton disembarked the ferry and headed into the street lit French streets..5 miles passed, no hotel, 6 miles. No hotel..where is the hotel?!… There was a hotel.. Yes!! There was a hotel!!  I don’t think we’ve ever needed a shower and a rest more.

We were up before the sun on Friday ready to set off at first light.  Not long after leaving the hotel at 8am it was clear that Friday was going to be a tough day.  The wind was getting up and the rain was definitely on its way. 

The first 25 miles to the water stop were hilly to say the least and with the head wind it made that first stretch a tough one.  We refuelled at 25 miles and set off on the next stretch of 40 miles to get to our lunch destination.  That 40 miles was the hardest few hours of cycling we had all ever endured with ever the tour company saying they had never seen anything like it.  35mph winds and hard hitting driving rain meant that we couldn’t take in much scenery. A small town about 45 miles in was cobbled, which we are sure would have been lovely in the summer but wet cobbles and road bikes are not the best combination and a number of the team had a few cuts and bruises after slipping and sliding through the town.  This was followed by even harder rain (perhaps even hail) and a section of road where a local farmer had obviously been in and out of the fields with his tractor as about half a mile of the road was covered in mud and a number of us got to lunch looking a little worse for wear.  Just before lunch the sun did make an appearance and we were glad to get to the stop a little drier.  

Refuelled, we set off for the last 35 miles of the day with the wind still strong and the rain just about to come down on us again.  The rain meant that Friday was the day for the most punctures but everyone managed to fix them and get on their way quickly to avoid getting too cold standing in the rain.  We arrived in Amien just before 7pm all still smiling and looking forward to celebrating getting through a very tough 102 miles.  Needless to say it was not a late night and we were all apprehensive about what Saturday may throw at us.

We woke up on Saturday morning relieved to see that for the first time it was dry…unfortunately the wind was as present as ever.

Today we were on a tight schedule to get to Paris before it got dark, so we set off as soon as it started to get light.  The first 25 miles were relatively easy going, however after the first water stop the hills were back and the open fields provided no shelter from the 30 mph gusts of wind.

We had a welcome surprise water break after another 20 miles and we stopped long enough to eat another handful of jelly babies and get back on the road.  The next 25 miles was the best stretch of the whole experience with the pretty villages and old buildings providing plenty of shelter from the wind and allowing us to pick up some much needed speed. 

After a quick lunchbreak which consisted of the rawest burger I have ever been served we were back on the road for the final stretch which was good going until we reached the outskirts of Paris which was 15 miles of continuous stopping and starting for traffic lights.

We all regrouped at the entrance of Parc Monceau and cycled as a group the last 3 miles through Paris, round the Arc de Triomphe and down to the Eiffel Tower.  As we rounded the last corner a group of friends, family and colleagues were cheering us on which was amazing and topped off an already great experience.  We were all overjoyed and relieved to have made it….until we were informed we had to cycle another 5 miles back to our hotel!

Matt, Nicola and Kate

2nd October 2019