What to Sub-let our flat but have concerns about the managment (Solitaire) company.

Jungle_Jane_2

I have searched on here but couldn't find any answers to what I'm troubled about.

We have been living in our flat, which we own the leasehold of for over three years now and want to move to a house, because we are running out of room. Unfortunately we have lost around £20k in negative equity and have been advised to rent the flat out until either the prices improve or we have enough earned from the rental income to pay off the negative equity.

Anyway we are currently getting things organized and changing our mortgage for the flat to an interest only, buy-to-let mortgage. On the forms however it says that as a leaseholder we need permission from Solitaire management company, fair enough. Have requested the forms and am waiting for them to arrive (although they are taking their time over it). Don't mind paying the legal fees to get this done.

In the meantime I have been doing some research online on how long this process would take and instead find out that the company will charge £180-300 whenever they feel a new tenant has moved in, even though this might not be the case. Obviously we can't let the flat out without their permission but I'm concerned that letting them know that we wish to let it out will allow them to send these charges, whenever they feel like it.

I was wondering if anyone else has had this problem with Solitaire or any other property company in the past and is there a way to fight this charge? We still don't mind paying for the maintenance of the estate but charging an extra £180 plus whenever a new tenant moves in will effect our chances of canceling out the negative equity on the flat.

I have checked our lease to see if there is any mention of these charges in the paperwork and instead found "Not at anytime to assign or transfer or under-let (for a period in the case of a sub lease or underletting of more than two years)"

Can someone also explain what the above sentence means please? Legal jargon confuses me.

Thank you in advance for your help.

BitterAndTwisted

Getting your freeholder's permission and being charged notional fees for subletting might be the least of your problems. Please join a landlords association without delay. You need to educate yourselves of what it means to be a professional landlord and all of your responsibilities before you go ahead so that you can protect yourselves and your property. Have you done these yet? Are you aware of the tax implications?

Jowo_2

Your position seems precarious if a £180 admin fee is a big impact - what about letting agents fees, potential voids/rent arrears, repairs?

Have you really done your maths on this to determine if it is the actual solution for your negative equity? Including the impact of CGT?

Why can't you live there, cut your living expenses and increase your impact rather than exposing yourself to repossession if there are significant tenancy related issues?

BitterAndTwisted

The solution to being in debt is rarely to increase your borrowing and/or exposure. There are "professional tenants" out there who prey upon inexperienced landlords. Have you considered the impact on your situation of you never receive a single penny in rent and it takes you 6-9 months to evict your tenants?

Jowo_2

Again, I'm perplexed about why you are anxious about negative equity and see a tenant as the solution. As long as you can afford to stay in the property, and if you are confident the market will recover, why don't you stick it out?

A bad tenant will simply cause you to get the place repossessed - what if one of you loses their job and you can't afford the rent on the new place and are receiving no income on the other? Are you aware that you some means tested benefits are going to be impacted by your homeownership?

Lots of households are in negative equity but don't feel the 'loss' on a day to day basis - the value of the house is irrelevant to their standard of living or lifestyle.

You say you need to move to a bigger place but you can't seem to afford this - why don't you put your extra stuff into storage and make do until you can? I could perhaps understand this if you've just had a kid and lack a bedroom for them but not the switch from flat to house if its still just the two of you.

Richard_Webster

"Not at anytime to assign or transfer or under-let (for a period in the case of a sub lease or underletting of more than two years)"

I assume there is more to the clause because if that is all it said then the flat is not even sell able or mortgageable. How could anyone sell it under its if the lease cannot be transferred?

Does it go on to require consent from the landlord which he will not unreasonably withhold or to require that the buyer enters into a deed of covenant?

The bit in brackets suggests that the restriction will not apply to a letting for not more than 2 yaers - so to comply you simply make sure that your tenants do not have a fixed term for their Assured Shorthold Tenancy of more than 2 yaers - the standard period for an AST is 6 months.

It might well be that on a detailed reading of the lease you do not need Solitaire's consent. They can only make charges for consenting to underlet if the landlord has some discretion about the matter under the lease - if he has no power to stop underlettings then their consent is not required but you will need to notify them of your charge of address so that the service charge bills etc come to your new address.

adg1

Very strangely I have just had a conversation with a buy to let landlord (+20 properties) regarding this very same issue. He bought a few flats off plan from the original sales office on site when a new development was built. The managing agent have just written to him stating that for every new tenancy he has to provide the tenancy agreements and pay a £130+vat fee.

The original developer has indicated he shouldn't be paying any fees at all for this service as all they want are contact and some tenancy info for the new tenants. His solicitor has also indicated that there is no reason for this payment.

My old block of flats I lived in were managed by Solitaire (awful company too from what I remember). There were three rental investment flats in the block of 12 flats, none of which I ever heard of having fees associated. Indeed I lived in two flats there and the second landlord (my original neighbour certainly paid nothing to Solitaire. There were no fees I was aware of for the first owner either and I certainly had no contact with solitaire over my time there (short of residents meetings and complaints etc).

As far as the B2L landlord is concerned as long as his management company have the names of any new tenants and the contract dates there is nothing else they can ask for.

I hope that helps!

Jungle_Jane_2

Perhaps I should clarify our situation. We are not currently in any financial hardship. If it was not for the negative equity we could easily move, we have an ample deposit, but now we are faced with a £20k loss if we do decide to sell.

BitterAndTwisted wrote: »

Getting your freeholder's permission and being charged notional fees for subletting might be the least of your problems. Please join a landlords association without delay. You need to educate yourselves of what it means to be a professional landlord and all of your responsibilities before you go ahead so that you can protect yourselves and your property. Have you done these yet? Are you aware of the tax implications?

The issue with the fees is the principle more than the actual impact. Like adg1 rightly said, there is no justification for those fees. It is simply a case of Solitaire taking advantage of their position. We intend to use a letting agent to organise the letting, we have no ambition of becoming professional landlords nor turning a profit. My hubby has been advised (although not professionally) that tax does not have to be paid on the income if no profit is made from it. As any excess income will be going towards the negative equity, it may not be considered profit.

Jowo wrote: »

Why can't you live there, cut your living expenses and increase your impact rather than exposing yourself to repossession if there are significant tenancy related issues?

We have already cut our expenses as much as we reasonably can. We have already moved all but the essentials into storage in preparation for a move. We have been saving for a move for several years.

adg1 wrote: »

Very strangely I have just had a conversation with a buy to let landlord (+20 properties) regarding this very same issue. He bought a few flats off plan from the original sales office on site when a new development was built. The managing agent have just written to him stating that for every new tenancy he has to provide the tenancy agreements and pay a £130+vat fee.

The original developer has indicated he shouldn't be paying any fees at all for this service as all they want are contact and some tenancy info for the new tenants. His solicitor has also indicated that there is no reason for this payment.

My old block of flats I lived in were managed by Solitaire (awful company too from what I remember). There were three rental investment flats in the block of 12 flats, none of which I ever heard of having fees associated. Indeed I lived in two flats there and the second landlord (my original neighbour certainly paid nothing to Solitaire. There were no fees I was aware of for the first owner either and I certainly had no contact with solitaire over my time there (short of residents meetings and complaints etc).

As far as the B2L landlord is concerned as long as his management company have the names of any new tenants and the contract dates there is nothing else they can ask for.

I hope that helps!

Thanks for posting. Your story echoes several others I've heard relating to Solitaire.

Fire_Fox

adg1 wrote: »

Very strangely I have just had a conversation with a buy to let landlord (+20 properties) regarding this very same issue. He bought a few flats off plan from the original sales office on site when a new development was built. The managing agent have just written to him stating that for every new tenancy he has to provide the tenancy agreements and pay a £130+vat fee.

The original developer has indicated he shouldn't be paying any fees at all for this service as all they want are contact and some tenancy info for the new tenants. His solicitor has also indicated that there is no reason for this payment.

My old block of flats I lived in were managed by Solitaire (awful company too from what I remember). There were three rental investment flats in the block of 12 flats, none of which I ever heard of having fees associated. Indeed I lived in two flats there and the second landlord (my original neighbour certainly paid nothing to Solitaire. There were no fees I was aware of for the first owner either and I certainly had no contact with solitaire over my time there (short of residents meetings and complaints etc).

As far as the B2L landlord is concerned as long as his management company have the names of any new tenants and the contract dates there is nothing else they can ask for.

I hope that helps!

Whether the admin charge is allowed depends on what provision is made in the long lease, you can't generalise and say it does not happen at one block so cannot happen in another. Providing the long lease allows for it, a landlord or management company can quite legally levy on giving consent to sublet.

How much is charged is a different kettle of fish. Under the Commonhold and Leasehold Reform Act 2002 any admin charge must be "reasonable" and leaseholders can challenge the reasonableness at a Leasehold Valuation Tribunal. The first step is to write to Solitaire/ Peverel and ask which clause in the long lease allows for them to inspect the TA and an admin charge incurred. If there is such a clause the second stage is to request a breakdown of the £130 admin charge.

It is not usually a good idea to ignore the charges even if they are not lawful, as management companies supply a statement of accounts when a long lease is sold on and the new leaseholder will inherit the debts of their predecessor. You do not want to lose a buyer whilst you wrangle over whether the admin charge 'arrears' are allowable under the terms of the lease.

http://www.lease-advice.org/publications/documents/document.asp?item=14

Richard_Webster

Haven't had more detailed answer to my earlier post from OP - but if the lease allows lettings for no more than 2 years and no consent is required all this stuff about what Solitaire charge is irrelevant - they can simply be told to go jump because it is none of their business.

It is so important to see exactly what the lease says and not speculate and get answers from others who have dealt with Solitaire where their leases will probably have totally different wording.

If their consent is required in some way. then you may have to argue with them over the reasonableness or otherwise of their charges, but first things first, let's find out what the lease says.

BitterAndTwisted

Jungle_Jane wrote: »

We intend to use a letting agent to organise the letting, we have no ambition of becoming professional landlords nor turning a profit. My hubby has been advised (although not professionally) that tax does not have to be paid on the income if no profit is made from it. As any excess income will be going towards the negative equity, it may not be considered profit.

Please take professional advice on the tax implications as I suspect your husband has been misinformed.

As for the not becoming professional landlords bit: you will become professional landlords at exactly the moment a tenant signs a rental agreement for your property. Please do not rely on any agent to keep your a*ses out of the fire! Some agents know a lot less about the law and about how to protect your interests than I do, and I know close to diddly-squat. Join a landlords association. Some of them offer free/cheap legal advice to members which may turn out to be invaluable. The (modest) cost can be offset against profit on your tax-bill so it's win/win all round