Leasehold Reform (Ground Rent) Bill [HL]

Written evidence submitted by Christopher Jessel (LRGRB01)

LEASEHOLD REFORM (GROUND RENT) BILL

· The Bill should exclude the operation of the Law of Property Act 1925 s. 153

1 I am a retired solicitor formerly a partner with Farrer & Co LLP. I practiced in property law. Both during my years of practice and since I have had several legal textbooks published on aspects of property. My most recent, and most relevant to the Bill, is Positive Covenants and Leasehold Land (Wildy, Simmonds & Hill Publishing 2019). The particular issue was discussed in an article in the Conveyancer and Property Lawyer [2017] 81 Conv p 132 republished as chapter 9 of the book.

2 The problem relates to the Law of Property Act 1925 section 153.  That section, which re-enacted one in the Conveyancing Act 1881, provides that if a lease has been granted for over 300 years (such as a 999 year lease) at a nil or nominal rent then the leaseholder may have the right to enlarge the lease to a freehold.  It is capable of applying as much to a flat as to a house or other land.

3 In the case of a leasehold house that might not matter but for a flat it would.  The problem is that positive covenants (such as obliging the flat owner to maintain or decorate the flat or to pay a service charge) do not bind a person who acquires a freehold from the person who gave the original covenant.  The effect is that if a lease is granted containing such a covenant, and the lessee then, under s. 153, enlarges the lease of the flat to a freehold and then sells the flat, the former landlord or maintenance company will not be able to enforce the positive covenants against the new owner or any successor. 

4 Section 153 does not apply if the lease is liable to be determined by re-entry for condition broken, that is if the lease contains a forfeiture clause.  Most modern leases do contain such a clause but it will not be implied.  Sometimes where the lessees of a block exercise their right of collective enfranchisement and then grant themselves 999 year leases they may decide they do not want to include forfeiture clauses.  (There is no parallel to a forfeiture clause in commonhold and they may be advised to replicate commonhold as far as possible within a leasehold structure.) 

5 The simplest solution would be to provide that s 153 shall not apply to any leases covered by the Bill granted after it becomes law.  There is a precedent in the Education Act 2002 Schedule 7 para 10(1).

December 2021