This case is a great result for shared ownership leaseholders who have not stair-cased up to 100%. It has provided some much needed clarity regarding the rights of such leaseholders to extend their leases, join in with freehold purchases as well as take part in the Right to Manage (RTM) RTM allows qualifying leaseholders to take control of managing their building.
What happened in this case?
The Avon case is a RTM case that started its litigation journey at the First-Tier Tribunal (FTT). Two blocks attempted to take over the RTM from their freeholder, Avon Ground Rents Limited.
They hit a stumbling block when the freeholder argued that 12 shared ownership leaseholders (with less than 100%) did not qualify for the RTM as they were not considered as having 'long leases' which the legislation requires. This argument was rejected by the FTT.
The freeholder’s appeal to the Upper Tribunal was unsuccessful and the Court of Appeal agreed with the decisions of both Tribunals and decided in the leaseholders favour.
Avon’s sole issue for appeal in the Court of Appeal was whether a shared ownership lease could qualify as a 'long lease' if the leaseholder did not own 100% of the lease.
What does the law say?
Currently in order for a leaseholder to qualify to take part in the RTM they must satisfy the criteria set out in the Commonhold and Leasehold Reform Act 2002.
In a nutshell they must have a 'long lease'; commonly this includes a lease granted for a term exceeding 21 years.
Importantly here though Section 76 of the 2002 Act also states a 'long lease' is one where a shared ownership leaseholder has stair-cased up to 100%. For many years it has largely been considered that those who do not have 100% do not qualify.
The wording in Section 76 mirrors the same provisions in the Leasehold Reform Housing and Urban Development Act 1993 which deals with lease extensions and collective enfranchisement (freehold purchases) for leaseholders of flats.
Given that many people opt for shared ownership as a form of affordable housing it is not surprising that this legislation affects tens of thousands of home owners. So, you can see why this is a big case for leaseholders and some good news.
You would have to be living in a cave to have missed out on the recent debates and media attention concerning the leasehold system and Michael Gove’s recent rant about abolishing leaseholder all together.
What does this decision mean for leaseholders?
If you are a shared ownership leaseholder who has not stair-cased to 100% but you do have a lease which was granted in excess of 21 years you will qualify to take part in the RTM. It is expected that this decision will extend to leaseholders’ rights under the 1993 Act.
The Court of Appeal concluded that the various paragraphs in s76 represented a "series of gateways”. Therefore, as soon as you satisfy one of the paragraphs you are through and there is no requirement to meet the others.