Various bits of interest…

On 21 November, the Housing Minister Matt Pennycook released a written statement on the Government’s plans on Leasehold and Commonhold reform, with an outline timetable. Points to note are that regulations implementing key parts of the Leasehold and Freehold Reform Act 2024 have proved more difficult than first thought, because of deficiencies in the Act that would produce unwanted consequences and will require primary legislation to rectify. An example given is that shared ownership leaseholders would not have a right to a 990 year lease extension in some circumstances, or that increasing the threshold for non-residential floorspace to 50% for Right to Manage would enable freeholders to control RTM companies. These flaws also extend to the crucial valuation measures for extension and enfranchisement (currently under judicial review in any event).

So, the bits of the L&FRA which can be switched on without more will be in spring of 2025, including removing the two year rule on seeking a lease extension, operation and costs of RTM applications in spring 2025. There is an imminent consultation on the detail of the ban on insurance remuneration for freeholders and agents.

In 2025, there will be also be consultations on the detail of measures on service charge challenges and legal costs. There will be aslo be a consultation on the valuation rates for extension and enfranchisement in summer 2025, pending secondary and primary legislation on this. There will also be a consultation implementing the consumer protections on estate charges.

A draft Leasehold and Commonhold Reform Bill is intended to be published next year, with a white paper on commonhold early in the year. And then:

Alongside setting out our plans for a comprehensive new legal framework for commonhold, we will take decisive first steps to making commonhold the default tenure by the end of the parliament. To that end, we will consult next year on the best approach to banning new leasehold flats so this can work effectively alongside a robust ban on leasehold houses. We will seek input from industry and consumers on other fundamental points such as potential exemptions for legitimate use and how to minimise disruption to housing supply. We will also engage on the conversion of existing flats to commonhold.

The Draft Bill will also consider a number of vital reforms to the existing leasehold system. The government remains firmly committed to its manifesto commitment to tackle unregulated and unaffordable ground rents, and we will deliver this in legislation. We will remove the disproportionate and draconian threat of forfeiture as a means of ensuring compliance with a lease agreement. And we will consult on new reforms to the section 20 ‘major works’ procedure that leaseholders must go through when they face large bills for such works.

There have been predictable shrieks of outrage at what appears to be a further delay to the L&FA provisions being implemented, but the L&FA was rushed, to say the least, and ended up in wash up at the end of the last government. Actually implementing it so that it works, and will endure, is another matter altogether. Dealing with landmines left in primary legislation takes time. But the statement makes clear that wide-ranging and significant reform is still the agenda.

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I cannot let the retirement of John Gallagher, principal housing solicitor at Shelter, pass without saying something here, although I know John will squirm at the very idea. John has been, quite simply, the very heart of housing law from the start. He played a large part in inventing what a housing law practice looked like from the beginning, then creating a legal arm for Shelter, and then advancing the idea of significant and strategic litigation. He has been behind more legislative amendments than you could shake a stick at, should you choose to shake a stick at legislative amendments, and has spent his career in the interests of access to justice and defending the rights of tenants. He is, of course, the consummate authority on the law. Defending Possession Proceedings – the sacred text for housing lawyers – is only one of his works. Above all, John is kindness and generosity personified, with his time, with his knowledge and in his encouragement of others. There is also a wicked sense of humour in there, not well hidden.

John is a hugely modest and self-deprecating man, so I am going to make him very uncomfortable by saying – completely truthfully – that housing law was constructed by John, the rest of us merely practice within what he built. His retirement is richly deserved. Who knows what it will bring…

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Lastly, a quick note on a European Court of Human Rights judgment. SCARDACCIONE v. ITALY – 9968/14 (Article 1 of Protocol No. 1 – Protection of property : First Section Committee) (2024) ECHR 848

Ms S had bought a property in 2004 intending to live in it. The property had a sitting tenant. Ms S had brought possession proceedings and been granted a possession order, but the eviction warrant had been repeatedly delayed because the tenant stated he fell under regulations introduced by Italy in 2007, which delayed evictions for tenants below an income level – initially for 8 months then extended by further regulations up to June 2014. Ms S finally got possession in November 2014, but in the meantime had had to pay a tax penalty for not occupying the property as her residence within 18 months of purchase, and pay the tenant to finally leave.

Ms S applied to the ECtHR, arguing that a) the prolonged inability to recover possession, and b) the tax penalty amoutned to a breach of Article 1 Protocol 1 rights.

The ECtHR agreed. There had been previous ECtHR judgments on similar Italian regulations. Here

Even though specific requirements had been put in place for the selection of potential beneficiaries (see paragraph 15 above), the procedural safeguards proved to be ineffective in this specific case. Indeed, a different burden of proof applied: while tenants had only to submit a declaration stating that they met the legal requirements to be granted the suspension, owners were obliged to prove either that those requirements were not met, or that they themselves met the same requirements, or that they were in a position of “supervening need” (necessità sopraggiunta). This mechanism therefore transferred the aim of a social measure (protecting those in low-income categories from being evicted without safeguards) onto the shoulders of private owners. In the present case, the evidence submitted by the applicant was considered insufficient to prove that the tenant had another apartment at his disposal. Only at a later stage, when the tenant submitted the relevant income declaration, the District Court found that the tenant had benefited from the suspension even though he did not meet the income requirements.

So the suspension of eviction for, effectively, five years, was an unjustified breach.

On the tax penalty, the ECtHR found that was also an A1 P1 breach

28.  The Court notes that the loss of tax benefits and the penalty imposed on the applicant amounted to an interference with her possessions. No issue arises as to the lawfulness or the legitimate aim of those measures (see paragraph 18 above). As for proportionality, the Court observes that, although the applicant was aware that the apartment was occupied by the previous tenant, she was equally aware of public authorities’ obligation to protect private owners from unlawful occupation. The Court notes that the applicant has shown a high degree of diligence, starting negotiations with the tenant before the purchase and offering him a sum of money to vacate the premises before the statutory time-limit for establishing her residence had expired. Those efforts being unsuccessful, she brought eviction proceedings, which lasted more than three years before she obtained an order for the tenant to vacate the premises. That order could not be enforced for almost five years owing to the legislative suspension of eviction proceedings, during which the applicant had no effective remedy to accelerate the proceedings or otherwise recover her possessions. The proceedings lasted eight years in total without being able to restore the applicant’s proprietary rights. To take possession of her apartment, she had to pay the tenant EUR 4,000 on her own initiative.

29.  In conclusion, the Court observes that the applicant not only suffered from the loss of tax benefits, which per se could have been considered proportionate, but also received a penalty for having been unable to establish her residence in the apartment within the time-limit prescribed by law, and, given the public authorities’ prolonged inaction, chose to pay a not insignificant sum to the tenant to convince him to leave her apartment. These circumstances, taken as whole, placed a disproportionate burden on the applicant.

In short, because the state had effectively prevented Ms S from recovering possession for 8 years, the tax penalty for not occupying within 18 months (and the additional costs she faced) were disproportionately landed on Ms S and were an A1 P1 breach.

One of the reason this caught my eye was thinking about the new mandatory ground 6A in the Renters’ Rights Bill, which enables a landlord to get a possession order where the landlord is subject to a banning order, a local authority prohibition order, or a license is breached due to overcrowding, etc..

At first sight, this looks like imposing eviction on the tenants as the result of the landlord’s (bad or potentially appalling) conduct. And there is some truth in that. But the broader point – with the removal of section 21 – is that one can’t proportionately make the landlord subject to criminal offence and penalties, while at the same time removing any ability for the landlord to stop committing the offence, so that they would be faced with further prosecution, civil penalties and rent repayment applications.

While there certainly are other measures that could take the place of evicting the tenants in some circumstances – interim and final management orders by the local authority, for example – the point is there has to be an ‘out’ by way of statute, not at the discretion of the local authority in deciding to step in (there are very limited circumstances in which seeking an IMO is mandatory on the LA). Unless these other measures were made mandatory, they are not an answer to the broader human rights point at stake. And I suspect that councils would be very unhappy to find that they had to apply for IMOs in those circumstances (even assuming that an IMO was appropriate).

From that perspective, Ground 6A is necessary. Even bad landlords have human rights.

That said, Ground 6A has been improved immeasurably by the Govt amendment giving the Court discretion to award compensation to the tenant when making a possession order on this ground. I can see that discretion being used with a degree of enthusiasm.