Personal representatives get green light for a lease extension
The Leasehold Reform, Housing and Urban Development Act 1993 enables qualifying tenants of flats to purchase extended leases at peppercorn rents. And, if a leaseholder who qualifies dies before making an application, the legislation provides that his or her personal representatives can exercise the right to claim an extended lease for a period of up to two years after the grant of probate or letters of administration.
Does this mean that executors or administrators are barred from extending leases if they allow more than two years to elapse before making a claim? At first sight, it would seem so. Section 42(4A) provides that “a notice under this section may not be given by the personal representatives of a tenant later than two years after the grant of probate or letters of administration”.
Taken at face value, this would mean that personal representatives with short unexpired leasehold terms on their hands could find themselves in difficulty. Unless they act quickly, they may have to pay handsomely to extend the lease so that they can sell the deceased’s property or obtain a reasonable price for it. But in Villarosa v Ryan [2018] EWHC 1914 (Ch); [2018] PLSCS 137 the court ruled that it would be wrong to construe section 42(4A) in isolation.
The Leasehold Reform, Housing and Urban Development Act 1993 enables qualifying tenants of flats to purchase extended leases at peppercorn rents. And, if a leaseholder who qualifies dies before making an application, the legislation provides that his or her personal representatives can exercise the right to claim an extended lease for a period of up to two years after the grant of probate or letters of administration.
Does this mean that executors or administrators are barred from extending leases if they allow more than two years to elapse before making a claim? At first sight, it would seem so. Section 42(4A) provides that “a notice under this section may not be given by the personal representatives of a tenant later than two years after the grant of probate or letters of administration”.
Taken at face value, this would mean that personal representatives with short unexpired leasehold terms on their hands could find themselves in difficulty. Unless they act quickly, they may have to pay handsomely to extend the lease so that they can sell the deceased’s property or obtain a reasonable price for it. But in Villarosa v Ryan [2018] EWHC 1914 (Ch); [2018] PLSCS 137 the court ruled that it would be wrong to construe section 42(4A) in isolation.
The judge noted that the relevant provisions were added to the 1993 Act by section 132 of the Commonhold and Leasehold Reform Act 2002. And, after considering the history of the amendments, and a statement by the minister responsible for steering the legislation through the House of Commons, Morgan J, decided that parliament had not intended to place personal representatives in a worse position than other tenants, or to impose rules in the 1993 Act that differ from those in the Leasehold Reform Act 1967 (which enables tenants to extend leases of houses).
Therefore, the two-year cut-off period imposed by section 42(4A) applies only to the exercise of the special rights granted to personal representatives in section 39(3A). It does not apply when personal representatives can rely on section 39(2) of the 1993 Act, which enables tenants of flats to extend their leases after two years’ ownership.
The landlord deployed another argument in the hope of circumventing the rules. Qualifying tenants are entitled to serve notice of their claim for a lease extension and then assign the benefit of their notice to a buyer.
But section 43(3) of the 1993 Act provides that if a tenant’s lease “is assigned without the benefit of the notice, the notice shall …. be deemed to have been withdrawn”. And in this case, the executors executed a TR1 in favour of a buyer on 6 April 2016, served a section 42 notice on 6 June 2016 and assigned the benefit of it to their buyer on the following day.
Even so, the judge decided that the claim was valid. Section 43(3) does not say that a tenant cannot contract to sell, or execute a TR1 and accept payment of the purchase price, before serving a section 42 notice.
It simply prevents a lease from being assigned without the benefit of such notice and a lease is “assigned” when legal title passes to the assignee. The buyer did not perfect her title by registration until 27 June 2016. And so, thanks to the decision in Brown & Root Ltd v Sun Alliance Ltd [2001] Ch 733, the lease and the notice had not been separated from each other.
Allyson Colby, property law consultant
