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Section 77 (Tenants Qualifying for Right to a Management Audit)

Summary

1. This section follows on from Section 76 giving further details about which types of tenants (including Leaseholders) are ‘qualifying tenants’ and therefore are eligible to have a management audit carried out on their behalf to examine Landlord manages the common parts of the building and/or estate where they own property.

2. In order to be a qualifying tenant a Leaseholder must both:

i. Have a long lease, other than a ‘business lease’.

ii. Have a lease which requires them to pay a Service Charge.

What is a long lease?

1. Under Section 77 four types of lease count as a long lease:

i. Leases granted for a period of more than 21 years.

ii. Leases which are for a shorter fixed term, but have a perpetual renewal clause which means that when the fixed term expires a new fixed term is automatically granted. These types of leases are most commonly associated with social housing: secure tenancies and assured tenancies from local authorities and housing associations.

iii. A lease granted under the Right to Buy, Right to Acquire or Rent to Mortgage schemes.

iv. Shared Ownership leases, where leaseholders possess a part share in the lease and pay rent on the remaining share.

Other rules about who counts as a ‘qualifying tenant’

1. Section 77 states that no dwelling can have more than one qualifying tenant and explains how this rule applies in a number of different situations:

i. If a dwelling has a ‘superior lessee’ and an ‘under lessee’ then the superior lessee cannot be a qualifying tenant. A superior lessee is a person or organisation who leases a property and then sublets it to someone else, who is then known as an under lessee. This is commonly happens with Shared Ownership leases granted by Housing Associations which leases a flat from a developer then sublets to a Shared Owner. It is the under lessee who typically pays the Service Charge (to the superior lessee who normally in turn pays it to the landlord) and accordingly the law gives the under lessee the right to carry out a management audit as they are one the paying it.

ii. Joint Leaseholders of a property count as a single qualifying tenant.

iii. A single leaseholder can count as more than one qualifying tenant if they hold a lease or leases for two or more dwellings in a ‘relevant premises’. See our guide to Section 76 of the Leasehold Reform, Housing and Urban Development Act 1993 for a definition of what relevant premises means.

iv. Where there are two or persons who could count as the qualifying tenant in respect of a dwelling, any of those person may sign the notice which is required to be sent before a management audit can be carried out. See our guide to Section 80 of the Leasehold Reform, Housing and Urban Development Act 1993 for more information about this notice.

Click on the link to read more about the Leasehold Reform, Housing and Urban Development Act 1993