District Judge Nic Madge summarises the landlord and tenant changes that have arrived, and are still arriving, with the Commonhold and Leasehold Reform Act 2002

The Commonhold and Leasehold Reform Act 2002 makes major changes to the law which applies to long leaseholds.

The most revolutionary provision is the long-heralded introduction of commonhold.

That provision is not yet in force.

There is also a new right for long leaseholders of flats to manage their buildings collectively (sections 71 to 113).

That was brought into force on 30 September 2003.

The Act will also amend the Leasehold Reform, Housing and Urban Development Act 1993 (rights to collective enfranchisement and to new leases) and the Leasehold Reform Act 1967.

In addition, the Act makes a number of less well-publicised changes to the service charge provisions of the Landlord and Tenant Act 1985.

In particular it:

- Extends the definition of 'service charge', for the purposes of the 1985 Act, to include any charge which is required to be paid under the terms of the lease to cover the costs of improvements.

- Extends the jurisdiction of Leasehold Valuation Tribunals (LVTs), so that they can determine whether or not leaseholders are liable to pay service charges as well as the reasonableness of such charges.

- Makes a number of changes to the existing requirements in the Landlord and Tenant Acts 1985 and 1987, covering the accounting and safeguarding of service charge monies.

Under the Act, service charge funds have to be held in separate designated trust accounts for each property or group of service charge payers.

Leaseholders have a new right to withhold payment of further service charges if key requirements are not met.

- Introduces a new concept of 'administration charges' covering charges which are required to be paid under leases for approvals, for the provision of information, as a result of a failure to pay rent or other charges on time, or as a result of a breach of a covenant or condition of a lease.

It sets out a requirement that administration charges must be reasonable.

Lessees may challenge the liability to pay such charges, or their reasonableness, in LVTs.

- Replaces section 20 of the Landlord and Tenant Act 1985 (which provides that landlords must consult leaseholders before carrying out works costing more than a prescribed sum which are recoverable through service charges) with a revised section.

This extends the consultation requirements to include contracts for works or other services of more than 12 months' duration, but with a power to exempt, by regulations, specified types of contract or in specified circumstances.

It enables the consultation procedures to be prescribed by regulations and provides that LVTs, rather than county courts, may grant dispensation from the procedures in particular cases where they consider it reasonable to do so.

- Extends many statutory provisions which apply to long leaseholds to Crown land.

- Introduces a new requirement that ground rent is not payable unless it has been demanded by giving the tenant a prescribed notice, and prevents the application of any provisions of a lease relating to late or non-payment (for example, additional charges) if the rent is paid within 30 days of the demand being issued.

It also introduces additional restrictions on the commencement of forfeiture proceedings for breaches of covenants or conditions of a lease.

It modifies section 81 of the Housing Act 1996, to prohibit the commencement of forfeiture proceedings, including the issue of a notice under section 146 of the Law of Property Act 1925, in respect of non-payment of service charges or administration charges unless the charge has been agreed or admitted by the tenant, or a court or a LVT has determined that it is reasonable and due.

It also prohibits the commencement of forfeiture proceedings for other breaches unless a court or LVT has determined that a breach has occurred.

These changes will be introduced by a series of commencement orders.

The first tranche of provisions was brought into force on 30 September 2003 by the Commonhold and Leasehold Reform Act 2002 (Commencement No 2 and Savings) (England) Order 2003 (SI No 1986 (c82)).

That commencement order includes changes to the definition of service charges and rights to challenge these charges (sections 150 and 155), requests for insurance information from landlords (section 157), the application of various landlord and tenant provisions to Crown land (section 172) and the extension of the jurisdiction of LVTs (sections 163 and 173 to 176).

The new consultation requirements prior to carrying out works, the cost of which lessors wish to pass on through service charges (section 151), will come into force on the 31 October 2003.

Inevitably, the Act is supplemented by secondary legislation.

The Right to Manage (Prescribed Particulars and Forms) (England) Regulations 2003 (SI No 1988), prescribe the forms to be used by lessees seeking to exercise the right to manage.

The RTM (Memorandum and Articles of Association) (England) Regulations 2003 (SI No 2120), prescribe the form and content of the memorandum and articles of association of the right to manage companies.

The Leasehold Valuation Tribunals (Procedure) (England) Regulations 2003 (SI No 2099), regulate the procedure to be followed on applications to LVTs.

New fees are prescribed by the Fees Regulations 2003 (SI No 2098).

The Leasehold Valuation Tribunals (Service Charges, Insurance or Appointment of Managers Applications) (Revocation and Saving) (England) Order 2003 (SI No 2269), prescribes particulars to be contained in applications to LVTs under the service charge provisions of sections 19 and 20C of the Landlord and Tenant Act 1985.

The Service Charges (Consultation Requirements) (England) Regulations 2003 supplement, in considerable detail, the consultation requirements prior to carrying out works contained in the revised section 20 of the Landlord and Tenant Act 1985.

Nic Madge is a district judge and recorder and a contributor to Civil Procedure (The White Book).