2014 Leasehold Reform Act Comes Into Force

On 13th May 2014, the Leasehold Reform (Amendment) Act 2014 came into force. The Act, which received Royal Assent back on 13th March 2014 and is also sometimes called “the 2014 Act” was piloted through the Commons by David Nuttall, MP. This Act has been notable for its remarkably short length, as it totals just two lines.

The amendments to the Act are designed to sort out a technicality in the previous legislation which causes frustration to leaseholders. They will affect anyone who is thinking about applying to extend their lease or getting together as a group to extend the lease to a block of flats as a collective. It makes one very simple but critically important change to rules about how lease extension notices of claim or collective claims should be signed.

Under the Leasehold Reform, Housing and Urban Development Act 1993 (for simplicity known as the 1993 Act), the rules were that notices had to be signed in person by all of the tenants who were involved in applying to extend a lease. This requirement caused many real problems in practical terms. There was no provision in the 1993 Act for a notice to be signed on behalf of a tenant who was ill or physically unable to sign, or if a tenant did not have the mental capacity to sign even if a Power of Attorney had been granted. It was recognised that this state of affairs was unfair, and there were even discussions about challenges to it under human rights legislation.

Furthermore, the clause in the 1993 Act requiring everyone to sign caused huge delays in collective enfranchisement cases where dozens or hundreds of tenants each had to be contacted to sign the notice. The 2014 addresses these issues by allowing the formal legal notices to be signed on behalf of the tenants exercising the right to extend their lease. This means that in cases of mental impairment the person with power of attorney can sign, as can solicitors who have been instructed to act on behalf of tenants.

One of the most common reasons for a leasehold extension claim being rejected under the 1993 Act was because each tenant named on the notice had not signed it personally, a situation should be resolved now that the amendment has come into force. Also, any change which speeds up the process of serving the notices and fixing the valuation date is to the benefit of the tenants, especially at a time when the property market is improving.

Specialist leasehold extension solicitors, in threads on online discussion forms, have expressed the worry that the fact that a tenant is no longer required to sign in person could lead to an increase in fraud.

Some solicitors have already said that despite the 2014 Act come into effect, they will not accept a Notice which has not been signed by a tenant unless they have had proof that the person signing had the tenant’s permission to do so. Providing these extra documents of proof to the freeholder’s solicitor could add to the legal costs of the leaseholder, making the whole process just a little more expensive.

These changes only apply to leasehold extension in England, even though the original 1993 Act applied to Wales too. This is because leasehold extension matters have been devolved to the Welsh Assembly, who are looking at passing similar legislation which will then apply to properties in Wales only.

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