There has been a lot of legal commentary recently about the Leasehold and Freehold Bill, in particular leasehold reform (which is long overdue in my view).

I have always struggled to understand why certain advisors felt it was appropriate to recommend a leasehold house to a house builder.  It made no sense then and makes little sense now.

One of the main reasons this was done was to deal with enforcement of positive covenants - such as to pay a fair share towards the upkeep of private roads or communal gardens.   It is a quirk of English and Welsh law that positive covenants (ie a covenant to pay) are not enforceable against successors.   Leasehold positive covenants is an exception to this, hence why leasehold houses were sometimes used as a way around this.

However there are alternative structures such as deeds of covenant or rentcharges.  Rentcharges in particular are commonly used on commercial developments to allow freehold owners to contribute towards common estate services on multi-let private commercial estates.  

There was one particular provision in the bill that caught my eye, and may be relevant to commercial developers and investors.   One of the main aims of the bill is:

  • ensure a rentcharge owner is not able to take possession or grant a lease on a freehold property where the rentcharge remains unpaid for a short period of time.

There is a provision in the Rentcharges Act that allows owners of rentcharges to take possession of land to recover unpaid rentcharges.  This provision is always contentious in commercial negotiations and is regularly “switched off”,  so statutory amendments to remove this will come as no surprise to the industry.  It does not prevent a successor for being sued for unpaid rentcharge arrears if they do not contribute their fair share towards common costs however.

The bill will be good news for home owners in England and Wales (if and when enacted) but it will also help to add some clarity to commercial properties and service charge recovery.