Under certain conditions, your long-term lease might be considered an “Assured Tenancy” – which means anything but assurance for you.
Residential long leasehold properties are becoming increasingly popular, both with buyers and developers. While such an arrangement can be promising, it is possible that your long-term lease could be classified as an Assured Tenancy or an Assured Shorthold Tenancy under the Housing Act 1988. If that’s that case, it can create a big problem for you, both in terms of security and saleability.
Under clause 3A of Schedule 1 of the Housing Act 1988, any residential tenancy (which includes long leases) entered into, after 1st April 1990, where the ground rent exceeds £250 (or £1,000 in Greater London) will be classified as an Assured Tenancy (which now includes Assured Shorthold Tenancies) regardless of the length of the term.
If the residential lease is classified as an Assured Tenancy or an Assured Shorthold Tenancy, it means that the freehold owner/landlord (usually the developer) may have an easier (and quicker) route to bring the long lease to an end and remove the leaseholder from the property.
Most residential long leaseholds give the freehold owner/landlord (usually the developer) a right to “forfeit” (bring the long leasehold to an end) should the leasehold owner fail to pay the rent or the ground rent for a period of 21 days after it has become due.
The Court normally has the power to grant relief in these circumstances, cancelling the freehold owner/landlord’s attempt to forfeit, so long as the arrears of rent or ground rent are paid off by the leasehold owner. However, the problem is that the power to grant relief does not apply to Assured Tenancies or Assured Shorthold Tenancies.
When an Assured Tenancy or an Assured Shorthold Tenancy exists (for example, where the ground rent exceeds £250 (or £1,000 in Greater London)) then the Court has no choice: it must terminate the leasehold and give possession back to the freehold owner/landlord where there is at least 2 months’ rent or ground rent unpaid (Ground 8 from Schedule 2, Part 1 of the Housing Act 1988 is a mandatory ground for possession).
Some mortgage banks are questioning whether a leasehold with a high ground rent or escalator clause is acceptable security for a mortgage – and therefore they may start to refuse to lend.
The use of a properly qualified lawyer in your conveyancing transaction is therefore extremely important – especially where you are looking at purchasing a long leasehold property to live in yourself.
If you need assistance in buying a long leasehold property, please contact our Conveyancing Department on 01283 743964 to obtain a no-obligation free quotation for our services. Find out more about our Conveyancing services.
Astle Paterson, Clay House,
5 Horninglow Street, Burton upon Trent
Staffordshire DE14 1NG
Tel . 01283 531366
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