The Court of Appeal decision could lead to price falls for leasehold properties.
Homeowners in leasehold flats could be prevented from making even minor changes to their property following a court ruling.
The Court of Appeal has ruled that leaseholders in England and Wales with certain clauses in their lease cannot carry out any structural changes to their home if another tenant in their building objects.
The restriction covers anything that involves cutting into a structure, ranging from significant modifications, such as knocking down a supporting wall or widening a doorway, to minor changes, including laying wooden flooring, putting in wi-fi points or event installing LED lights.
It is feared the ruling could impact the value of a large number of leasehold flats, as potential buyers would be put off from purchasing a property if they needed the permission of everyone in the block to carry out even minor alterations.
Alison Oates, an associate in Ashfords’ property litigation team, which was involved in the case, said many blocks of flats had dozens of tenants, so getting consent from everyone was likely to be a time-consuming and bureaucratic process, assuming that all of the leaseholders could even be contacted.
Why is this happening?
The ruling involved a case in which a leaseholder in Maida Vale, London, requested consent from the landlord, a freehold company in which all the tenants in the building held a share, to remove a structural wall in her property.
Another tenant objected, and the matter went to court to determine the meaning of two clauses in the lease, one of which prohibited cutting into any structure, and the other related to the landlord’s duty to uphold the terms of the lease.
The court found that under the ‘enforcement clause’ in the lease, the work could not go ahead because of the tenant’s objection.
The landlord has applied for the ruling to be challenged in the Supreme Court.
But if the ruling is upheld, it means leaseholders could apply for an injunction against their landlord to prevent them from granting a licence to their neighbours to carry out work.
Who does it affect?
It is not known how many people will be impacted by the ruling, but there are 2.9 million leasehold flats in England, and it is thought a significant number of these could be affected.
In order to fall under the scope of the ruling, a lease must contain a similar ‘enforcement clause’ to the one in the Maida Vale case.
If a lease does contain this clause, it means the leaseholder can have any structural alterations to their property, however minor, vetoed by other leaseholders.
Oates said: “There is an argument that this ruling gives litigious leaseholders enormous scope to be a thorn in the side of other leaseholders who want to renovate their properties, however cautiously and reasonably they are going about it.”
It also means certain leasehold properties could become stuck in a ‘home improvement time warp’, as landlords may shy away from granting permission for even simple work, such as installing LED lighting or wi-fi, for fear of opening themselves up to litigation.
What’s the background?
There are concerns that the ruling not only affects new applications for work, but could also impact work that has previously been carried out where the landlord did not obtain consent from all of the leaseholders before granting permission.
Oates says: “Technically these landlords are now in breach of their covenants to these other leaseholders and it remains to be seen if these leaseholders will take action against their landlord for this breach.”
Top 3 takeaways
- Homeowners in leasehold flats could be prevented from making even minor changes to their properties following a court ruling
- The Court of Appeal has ruled that leaseholders in England and Wales with certain clauses in their lease cannot carry out any structural changes to their property if another tenant in the building objects
- It is feared the ruling could impact the value of a large number of leasehold flats
You might also be interested in...
- Government plans to make ‘vast majority’ of new-build houses freehold
- 11 things to watch out for when buying a leasehold property
- Mortgage prisoners could be in line for thousands of pounds of redress
- 9 ways you can help your child on to the property ladder