The Impact of Covid-19 on Lease Extensions
For those involved, lease extension of flats can be stressful even under the very best of circumstances. When applying under the Leasehold Reform, Housing and Urban Development Act 1993 (LRHUDA 1993), various strict deadlines regarding the service of notices and counter notices, agreeing terms of acquisition, the completion of a new lease, and applications to the tribunal or the Court apply. What is more, the County Court case of Cowthorpe Road Freehold Limited v Wahedally has provided that notices need to be served in hard copy and ‘wet ink’ format, and actual service needs to be proved. With that in mind, the effect of a global pandemic adds another layer of uncertainty to an already daunting task.
For any party who falls foul of these deadlines, the consequences have the potential to be dire. For example, If a landlord does not serve a valid counter notice on a tenant who has served a Section 42 notice for a lease extension by the date specified in the tenant’s notice, then the landlord will lose the right to dispute the terms proposed in the notice and will be forced to accept the tenant’s proposed premium. Likewise, if terms for a lease extension have been agreed and a tenant fails to apply to the County Court for a vesting order within the prescribed timeframe, then the tenant’s initial notice is deemed to be withdrawn and the tenant is prevented from serving a new notice for 12 months. If the tenant has only just acquired the flat, then they would need to wait until they have been the registered owner for two years.
For leaseholders who will need to register the new lease on completion, further obstacles arise in that the Land Registry require original ‘wet ink’ leases to be submitted. Where landlords or their directors are isolating primarily overseas, this can mean it is quite a challenge for those adapting to working from home remotely, without an industrial sized printer in their living room. Another factor to consider is that the process does not provide for the parties to be able to extend the statutory deadlines by agreement. This means that even where both parties acknowledge the need for an extension to the process; it may not be binding. However the First Tier Tribunal has suspended face to face hearings until 29 May 2020 (which may well be subject to a further suspension) and County Courts are becoming increasingly overwhelmed by a burgeoning backlog and a shortage of staff. This is likely to cause considerable delays and may even increase the costs incurred by the parties.
The ALEP Protocol
At present, neither the Coronavirus Act 2020 nor the Health Protection (Coronavirus Restrictions) (England) Regulations 2020 include any provisions for extending the time limits under LRHUDA 1993. The Association of Leasehold Enfranchisement Practitioners (“ALEP”), of which Hamlins is a member, understood that during the current Covid-19 pandemic there is greater scope for disputes around service of notices as firms adapt to remote working practices. As a result, ALEP set out guidance and a new protocol for service of initial notices and counter-notices (“the Protocol”).
The Protocol provides for the following:
1. Parties should endeavour to agree that service of initial notices and counter-notices by email will be sufficient.
2. Parties should seek to agree a reasonable extension of time for the service of any counter-notices, if necessary.
3. Any agreements should be accompanied by a statement that the parties waive:
(i) the requirements as to service of section 13, 21, 42 and 45 notices; and
(ii) the time periods specified by sections 21 or 45 (as applicable).
Hamlins is adopting the Protocol to ensure matters progress for its clients. For any further information on the Protocol on how Hamlins can assist with your enfranchisement queries, please view the Hamlins’ Residential Property Litigation team here and contact Sarah Finch. Currently, our experience is that most firms are adopting the protocol and are generally being pragmatic and imaginative, with executed leases sometimes being sent to Partner’s home addresses for completion, and companies even appointing new Directors to increase the number of available signatories.
However it is important to remember that the protocol is not legally binding or enforceable at this stage and it is not clear how a Court would view the issue. In light of this, on 26 March 2020, ALEP wrote to the Lord Chancellor, Robert Buckland, to request that the statutory deadlines for filing applications to determine the terms of collective enfranchisement claims, lease extensions and right to manage be extended for a period of 3 months. In its letter, ALEP stated “The current situation within the leasehold sector has clearly demonstrated that the Tribunal system needs to be modernised and digitised. It is difficult at this moment to see any positives coming out of the crisis, but one may be a revamp of the Tribunal system (when time and resources allow) to ensure any future crises do not impact upon the statutory timeframes within the system.”. Perhaps this will be the light at the end of the tunnel?