Buy-to-let a leasehold flat

wxy

I am interested in buying a leasehold flat to rent out as an investment, but have just found out the following from the vendor this morning
“technically the lease does not allow subletting. However, over the
period of time that I have lived here (15 years), at least five of the seven flats
have been rented out at some time or other. To my knowledge, this has
never caused a problem.”

This rings alarm bells in my head of course, as I do not want to buy a property to let out if it is not allowed... That said, I am very interested in it, and wouldn’t mind speaking to the freeholder’s solicitors (the freeholder does not use managing agents) to see if this clause can be relaxed.

Does anyone have any experience in this type of situation? I know that the whole leasehold thing has its problems, but as a lot of converted flats are leasehold in England and Wales, I would be willing to go with it if the subletting clause can be relaxed.

Thanks

££sc££

would worry me - freeholder could enforce the clause at anytime even if had turned blind eye previously. could you go ahead with sale on condition current leaseholder arranges for lease to be varied to give consent to subletting. obviously enquiring first if freeholder is likely to agree

Fire_Fox

Technically there is a covenant in the long lease which is a legally binding contract. Just because others in the building breach the lease doesn't give you carte blanche to - I have heard of restrictive covenants on both tenants and pets being enforced when tenants cause problems and the agent got fed up of fielding complaints. I have complained here about breaches of the long lease because tenants were propping security and fire doors open and making the corridors stink of cannabis.

Only go ahead with the written consent of the freeholder: you cannot directly request this because you have no contract with them, your solicitor needs to communicate this to the vendor's solicitor.

wxy

Thank you guys! I have spoken to the agent to say that I will only be interested in buying the flat if the current leaseholder obtains a deed of variation to the lease agreement re the clause.

Not going to hold my breath!

G_M

wxy wrote: »

Thank you guys! I have spoken to the agent to say that I will only be interested in buying the flat if the current leaseholder obtains a deed of variation to the lease agreement re the clause.

Not going to hold my breath!

There's no way this will happen.

It would involve varying the leases of ALL the lease holders in the block, which would require all their agreements, costs, time etc.

Legally perfectly possible. In practice......:rotfl:

Fire_Fox

wxy wrote: »

Thank you guys! I have spoken to the agent to say that I will only be interested in buying the flat if the current leaseholder obtains a deed of variation to the lease agreement re the clause.

Not going to hold my breath!

Do you know what the actual wording of the covenant is?

wxy

I don't know the exact wording unfortunately - will find out tomorrow. I do appreciate that this is unlikely to be resolved easily... So I'm going to carry on looking at other places unless I hear from the agent otherwise.

Thanks everyone!

Fire_Fox

Not necessarily: some covenants say no subletting without consent which you may have to pay for. Consent is not the same as a deed of variation.

wxy

Can a deed of variation be made for one Lease Agreement, but not the other flats in the block (thankfully there are only 7, as it’s a period conversion)? Does anyone know how much it would typically cost? The vendor is considering doing this, as of course she may not want to rule out BTL buyers altogether (except the brave ones who may take the view that the clause is unenforceable).
I am also looking into possible insurance/indemnity for this particular restrictive covenant (waiting on the exact wording of the clause at the moment) in case that would work.
Thanks again!

Fire_Fox

wxy wrote: »

Can a deed of variation be made for one Lease Agreement, but not the other flats in the block (thankfully there are only 7, as it’s a period conversion)? Does anyone know how much it would typically cost? The vendor is considering doing this, as of course she may not want to rule out BTL buyers altogether (except the brave ones who may take the view that the clause is unenforceable).
I am also looking into possible insurance/indemnity for this particular restrictive covenant (waiting on the exact wording of the clause at the moment) in case that would work.
Thanks again!

Depends what it says in the long leases and the head lease, you cannot enforce a deed of variation unless the long lease is considered defective. It's really not a route you want to go down IMO, it's pricey and complex with no guarantee of a positive result, and perfectly straightforward to ask the freeholder for consent to let. http://www.lease-advice.org/publications/

I highly doubt you will find indemnity because you would not simply be breaching the long lease but also the terms of the buildings insurance and possibly indirectly the terms of your mortgage, by risking the freeholder taking action or the place not being properly insured!! :eek: In any case what losses are you insuring against, having to evict your tenant and losing a few months rent? Also consider the impact on your neighbours of deliberately breaching the covenants in the long lease. Lastly consider that you need to give the freeholder an address at which to send invoices and serve notices on you so they will find out you are not living at the flat.

Does your conveyancer specialise in leasehold disputes and variations? If not you might consider switching to a different solicitor.