The Court of Appeal has had the latest say on shared ownership leaseholders' right to take over the management of their building - an area where the Law Commission has previously said the landscape is unclear.

The appeal in Avon Ground Rents Limited and Canary Gateway (Block A) RTM Company Ltd, stemmed from a dispute between the freeholder of a two-block development and tenants with shared ownership leases wanting to acquire the right to manage their block.

In a 2020 report for the government, the Law Commission said the current right of shared ownership leaseholders to claim the right to manage was unclear and that case law in relation to leaseholders who had not staircased to 100% was ‘conflicting’.

‘Staircasing’ is the mechanism by which a tenant, who initially bought a ‘share’ of the property (usually 25% to 75%), makes subsequent payments to increase their share and reduce rent payments.

The commission said the Commonhold and Leasehold Reform Act 2002 provides that a 'long lease' for the purposes of qualifying for the right to manage includes a shared ownership lease where the tenant's total share is 100%. However, a long lease can also be defined as one granted for a term exceeding 21 years. This would cover most shared ownership leases, the commission said.

In the present appeal, Lord Justice Newey said tenants with long shared ownership leases who have not staircased to 100% 'will still have an obvious interest in how the premises are managed, the more so since they will typically pay full service charges. That being so, parliament might have been expected to have intended them to be able to participate in management issues'.

Newey agreed that a tenant with a shared ownership lease granted for a term exceeding 21 years has a long lease within the meaning of section 76 of the act, regardless of whether the tenant has a 100% interest.

Lady Justice King and Lady Justice Elisabeth Laing, who also heard the appeal, agreed.

Right to manage is one of several areas of leasehold and commonhold reform that the government has been exploring. Responding to a written parliamentary question in March, housing minister Rachel Maclean said the government was committed to making it easier for leaseholders to take control of their building management.

 

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