The conundrum of owning a lease from an Ecclesiastical Landlord

Section 31 of The Leasehold Reform Act 1967 [for houses] requires in the case of Ecclesiastical Landlords that: “The sanction of the Church commissioners is required as to the contents of any conveyance of extended lease to be granted by  any ecclesiastical landlord and as to valuation and certain other matters under the 1967 Act.

Section 96 of The Leasehold Reform, Housing & Urban development Act 1993 [for flats] has a similar sanction: “As with the 1967 Act, detailed provision is made for the Church Commissioners to sanction the contents of any conveyance or lease under the 1993 Act, and as to price. The Church commissioners are entitled to appear to be heard in any proceedings involving ecclesiastical land.”

It then adds:-  “There is no right to acquire to acquire any interest in, or a new lease of, property that is within the precincts of a cathedral church.”

So as can be seen, in the case of houses, there is no such exemption.

The only way for a flat to obtain an extended lease or freehold (i.e.: collectively – although this would be highly unlikely to succeed as all of the participating flats will need to qualify as a ‘house’ – see paragraph following)  is if the flat can reasonably pass the test as a ‘house.’

To qualify as a ‘house’ – the property does not have to have 4 vertical walls per se, it just has to be a house with no other property under / oversailing. Those houses where there are parts of other properties that under / oversail – then the test is the degree of whether the under/ over sail is a Material Part (of the subject house in question, not the other property that under/ over sails) as determined in Malekshad.

However, as much as a ‘flat’ could qualify as a ‘house’ if it is deemed that the under / oversail is not a material part and thus require the Church to sell the freehold; the next potential dilemma on the horizon is the view of the Law Commission as to its final recommendation to government on leasehold reform.

One of the main changes it proposes is a new regime in that there would no longer be “houses” and “flats”  but a single category of “residential units” covering both.

Logic has it that if the s 96 exemption is retained, then it would include houses as well unless the Law Commission  looks carefully at the s 96 exemption and proposes to government it be abolished when it makes its final recommendations next year.

With this concern in mind, I have put clients of mine who own a head lease on 78 flats in a cathedral close in direct touch with the Law Commission and they will now discuss with them s96 over the coming months as it develops its final recommendations for reform in the particular area.

In the meantime, any houses or flats in a cathedral precinct that could pass the test as a ‘house’ may be best to press on and serve notice under the 1967 Act if there are also other more pressing reasons to move forwards such as:

  • Minimise the premium payable by serving notice at the bottom of the market cycle [Brexit],
  • Avoid potential additional marriage value becoming payable if the leases say were to slip shortly under 80 years; and of course
  • Hedge against the Law Commission not recommending to government abolition of the s96 exemption.