A loophole giving residential tenants the right to enfranchise and buy

Many common law tenancies contain a little known or understood loophole that can cause a huge headache for Estate and landowning clients. Having personally come across this issue twice in the last year alone, below I have outlined what you need to know.

Estates and landowners regularly grant written common law tenancies ‘for life’ to tenants when they retire from a job on an Estate under a service contract. However, there appears to be a loophole that landowners should be aware of, especially now life expectancy is on the up.

A tenant under the Leasehold Reform Act 1967 of a house will qualify for the right to buy the freehold in the following circumstances:

  1. the lease must be of a house
  2. the lease must be a long lease, which is a lease granted for a term of more than 21 years (or a lease that terminates on death or on an ‘unknown date’ i.e. a tenancy for life).

However, if the tenancy fulfils certain requirements it is not considered a long tenancy. These requirements include:

  • termination notice is capable of being given at any time after the death/marriage/civil partnership of the tenant;
  • the length of the notice is no more than three months; and
  • the length of tenancy precludes assignment and subletting of the whole of the demised premises.

(The terms and conditions for the termination and notice provisions of common law tenancies already in place would need to be properly and professionally scrutinised to check these points)

  1. the tenant must have been the legal owner of the lease of the house for at least the two years immediately preceding the service of the notice requesting the right to buy and
  2. the tenancy was granted after 18 April 1980 (before this date only enfranchisement applies).

Common law tenancies drafted ‘for life’ tend to satisfy the right to buy test if a tenant is still in occupation after 21 years and the tenant obtains some decent legal advice on his or her rights.

Given that Estates and landowners regularly grant written common law tenancies ‘for life’ to tenants when they retire from their work on an Estate under a service contract, this is the loophole that Estates and landowners should be aware of.

In practice, this loophole is little-known. However, some tenants have taken advantage of it after receiving sound legal advice.