Right to Buy
Residential Leases
Under The Housing Act 1985
Christopher Last
Thomas Frith
Legal Advisers
The Leasehold System
What is a lease?
A right to occupy a dwelling for a term,
with exclusive possession, at a rent
 A leasehold interest is a tenancy, an

owner-occupier under specific terms
The Leasehold System
The Lease
A document setting out the terms for the
occupation of the premises by the tenant
 A contractual agreement between the
parties
 Capable of assignment

The Leasehold System
Problems
Lack of understanding of the nature of the
tenancy
 Different perspectives of the parties
 Diminishing asset

Rights and Obligations
The contractual relationship
Specific terms in the lease
 Implied terms

Common law
 Statutory requirements

The Form of the Lease
Usual format is five parts plus
schedules
1.
2.
3.
4.
5.
Premises
Habendum
Reddendum
Covenants
Provisos
The Form of the Lease
Premises





Parties to the lease
Date on which tenancy starts
Price to be paid
Intention of parties to create a lease
Brief description of property (the demise)
Habendum

Length of tenancy
Reddendum

The rent
The Form of the Lease
Covenants – Lessee’s covenants:
To pay service charges
 Use and occupation
 Alterations
 Repairs to the interior

The Form of the Lease
Covenants - Landlord’s covenants:
Quiet enjoyment
 Repair and decoration
 Mutual enforcement

Provisos

Breaches of covenants, including nonpayment of rent can result in forfeiture and
possession
Statutory Controls
1954 Landlord and Tenant Act

Security of tenure for long leaseholders
1967 Leasehold Reform Act

Right to buy freeholds of houses
1972 Housing Finance Act

Right for tenants paying variable service charges to obtain
summary of costs
1974 Housing Act

Right to challenge service charge
1980 Housing Act


Right to buy
Local authorities exempt from service charge challenges
Statutory Controls
1985 Housing Act

Reasonableness requirement for service charges
1985 Landlord & Tenant Act


Tenants’ rights to information, consultation and
challenge
Local authorities no longer exempt
1987 Landlord and Tenant Act

Tenants’ rights to information on insurance
Statutory Controls
1993 Leasehold Reform Act




Collective enfranchisement and lease extension
Right to management audit
Codes of practice
Estate management scheme
1996 Housing Act



Two-stage forfeiture process
Determination of reasonableness of service
charges by LVT
Right to appoint a surveyor
2002 Leasehold Reform Act
Right to Buy Leases Statutory
Controls
• Housing Act 1985, Part V
• Numerous other statutes and statutory instruments
• Housing Act 1980 originated the right
• Housing and Building Control Act 1984, Part I
• Leasehold Reform, Housing and Urban
Development Act 1993,
Part II
• Housing Act 2004
Section 125 notice – contents
• Service Charges
• Reference period
• 5 years beginning not more than six
months after date of section 125 notice
• Estimate of average amount
• At current prices
Section 125 notice – contents
• Payable under each head in reference
period
• E.g. maintenance, insurance management
• Total figure shown
• Repairs
• Itemised works estimated
• At current prices for reference period and
total shown
Section 125 notice – contents
• Non-itemised works estimated at average
yearly amount
• At current prices for reference period
• Improvements
• Estimate of amounts for reference period
and total shown
• Capped at these figures
• Allowance for inflation
Section 125 notice – contents
Note: the right to mandatory loan
during first ten years. See Section
125A (2) (b) which makes
reference to Section 450A of the
Act.
Mandatory Loan under S. 450A
Housing Act 1985
Allows a leaseholder to request a loan
within 10 years from completion of the
purchase of the property under the RTB
legislation.
Details contained in Statutory
Instruments 1992/1708 and 2000/1963
Mandatory Loan under S. 450A
Housing Act 1985
Loan amount must exceed £1,500 less
any amount demanded within the same
accounting period.
In any case the loan amount must
exceed £500 but must not exceed
£20,000.
How To Claim The
Mandatory Loan Under S. 450A
The demand for a service charge should
contain a statement form the landlord
on whether in their opinion the
leaseholder is entitled to a loan.
Leaseholder request loan within 6
weeks.
Landlord sets out the terms and the
Leaseholder has 4 weeks to accept.
Mandatory Loan under
S. 450A Housing Act 1985
The landlord may allow the debt to
remain on the account.
The landlord also has a discretionary
power to grant loans in other
circumstances.
Any loan under S.450A can be
registered against the title to the
property as held by HM Land Registry.
Repayment Period of Loan
Three years, in respect of a loan of less than
£1,500
Five years, in respect of a loan of £1,500 or
above but less than £5,000
Ten years, in respect of a loan of £5,000 or
above
At the option of the borrower, a shorter
period
Interest rate is set as per Sch 16 to the HA 85
What is in the RTB Lease?
• A Right to Buy lease under the Act will look
like most other leases and will contain
covenants and rights granted to the
leaseholder in a form familiar with Leasehold
Practitioners
• Unlike most other leases the essential
covenants and the terms of the lease are
imposed under the provisions of Part 3 of
Schedule 6 of the Housing Act 1985
What is in the RTB Lease?
The following slides will detail the most
important implied covenants contained
in these leases
Implied covenants – schedule 6
• Ground rent
• Must not exceed £10 per year for the whole
term
• Paragraph 11
• Lease term
• The lease term is 125 years
• There are exceptions
• Paragraph 12
Implied covenants – schedule 6
• The commencement date for all leases in a
building may start on the same date
• Only the first secure tenant to exercise the
right to buy actually obtains 125 years
• If the landlord holds a head-lease for a
unexpired term of less than 125 years then
they can grant a lease for a term equivalent
to the term the landlord enjoys less 5 days
Implied covenants – schedule 6
• If the landlord holds a head-lease for
a unexpired term of less than 125 years
then they can grant a lease for a term
equivalent to the term the landlord
enjoys less 5 days
Implied covenants – schedule 6
Common use of premises and facilities
• Where a tenant has been able to use
facilities and premises as
part of their tenancy they will enjoy the same
rights once they
become a leaseholder
• Similar provision to Section 62 of the Law of
Property Act 1925
• Paragraph 13
Landlord’s Implied Covenants –
Paragraph 14
• Maintain the structure
• Maintain the structure and exterior of the
building and
make good any defects
• Keep in repair other property, which the
leaseholder has
rights to use
Landlord’s Implied Covenants –
Paragraph 14
Reinstate the building in the event of damage
or
destruction
• Maintain any services enjoyed by the
leaseholder to a
reasonable level and keep in repair any
installation in
respect of those services
Landlord’s Implied Covenants –
Paragraph 14
• Irvine v Moran [1991] 1 EGLR 261
• Sheffield City Council v Hazel St Clare Oliver
LRX/146/2007
• NOTE: The Act does not define what a
structure is.
We have to look to case law for a
workable definition
Landlord’s Implied Covenants –
Paragraph 14
• Irvine v Moran [1991] 1 EGLR 261
• The definition of the structure of a residential
building is not limited to those aspects of the building
that is load bearing
• External windows and doors fall within the
definition of structural
The windows in this instance were sash windows and
it was held that the cords for the sashes and the
window furniture could not be separated from the
structure
Landlord’s Implied Covenants –
Paragraph 14
• Sheffield City Council v Hazel St Clare Oliver
LRX/146/2007
• The case heard by the Lands Tribunal in 2008
• The RTB lease provided that the windows and
doors were part of the demise and repairable by the
leaseholder
• See Paragraph 14(2) of Part III of Schedule 6
referred to in a previous slide where the landlord is
under an obligation to maintain the structure of the
building
Landlord’s Implied Covenants –
Paragraph 14
• Sheffield City Council v Hazel St Clare Oliver
LRX/146/2007
• Any variation from the implied covenants under
Paragraph 14 may be approved by a County Court
• Paragraph 14 (4)
• Without a court order any variation from the
provisions of
Paragraph 14 is void
Landlord’s implied covenants
exceptions – paragraph 15
This paragraph applies where the landlord’s interest
is leasehold
• To pay any rent due under the lease and to
discharge its obligations
• The covenants implied by Paragraph 14 shall not
impose an obligation on the landlord which the
landlord is not entitled to perform under its lease
• Where the landlord’s lease provides for the superior
landlord to perform covenants similar to those
contained in Paragraph 14 the landlord shall use its
best endeavours to enforce those covenants
Covenants by the leaseholder –
paragraph 16
The leaseholder should keep the demised property in a
good state of repair
To pay service charges to the landlord for costs incurred
in meeting an obligation under Paragraph 14 subject to
any initial restrictions on the recovery of service charges
If the landlord does not insure the property the
leaseholder may be required to pay a reasonable
contribution as if the landlord was insuring the property
Avoidance of certain provisions –
paragraph 17
• Any lease provision restricting a
leaseholder’s right to sublet the
property in whole or in part is void
• Subject to restriction on disposals
within a national park
• Section 157
Avoidance of certain provisions –
paragraph 17
Contrast the provision in the previous slide with
a covenant found in a right to buy lease from a
large local authority
Subject to the provisions of Clauses 3(11) 3(14)
and 3(15) hereof not to sublet or otherwise part
with possession of any part as opposed to the
whole of the demised premises
Void Provisions – paragraph 19
Any provision that seeks to forfeit the
lease where the leaseholder seeks to
enforce the provisions of Schedule 6 is
void
Maple House
149 Tottenham Court Road
Tel: 020 7383 9800
Fax: 020 7383 9849
Email: info@lease-advice.org
Website: www.lease-advice.org