Deed of variation on lease-subletting

Loulou15061

I hope someone can provide some advice on this matter.

We are currently in the process of selling our flat to a buy to let investor. However, on inspection of the lease there is a clause that prohibits subletting so we now have to proceed with a deed of variation to the lease. This has been agreed on the principal that we pay the freeholder a £29,950 premium and £950 +VAT solicitors costs. We're more than happy to pay actual costs and even expected some amount of premium but this seems extortionate. Please can you advise on whether they can actually charge us this amount to simply make one amendment to the lease, and if not what our legal rights are to fight them on this.

TIA

Louise

loubel

They can ask for whatever they like as they have no obligation to agree at all. If the flat comes with a blanket ban on subletting then it doesn't sound like an appropriate property for a btl investor to buy!

Loulou15061

Thanks but we obviously didn't realise before we had already accepted the offer etc. So just wanted to know where we stand now.

loubel

Unfortunately you aren't in a good place to negotiate. You'll have to decide how much you want to secure this sale and whether it is worth paying for the variation. I'd suggest speaking to the agents to see whether the ban on subletting affects the valuation of the flat as it will put a lot of buyers off.

beedeedee

It may put off your current potential buyers, but others may be delighted that the flats are all owner occupied......
In fact, you could advertise that as a selling point.....!

SuzieSue

beedeedee wrote: »

It may put off your current potential buyers, but others may be delighted that the flats are all owner occupied......
In fact, you could advertise that as a selling point.....!

Yes, I would pay more for a flat in a block which did not allow sub-letting.

AdrianC

Loulou15061 wrote: »

Thanks but we obviously didn't realise before we had already accepted the offer etc. So just wanted to know where we stand now.

You have two choices.

Pay the freeholder.
Tell the buyer the sale's off.

Pick one.

Loulou15061

It is a bit more complicated than 'pick one'. We had a previous buyer pull out because they couldn't get their deposit together, we had already put an offer in on a house. We found this other buyer and proceeded (it was slow going) we are months on now and this clause has only just been spotted. Yes I know we should have been more aware but hindsight is a wonderful thing. Anyway, now 37 weeks pregnant and if we call off this sale we will lose the house we have been purchasing. We also can definitely not afford £30k, I'm shocked nobody else thinks this is a ridiculous amount for them to charge!

Anyway thanks for all the replies. Will be a busy week of decisions!

AdrianC

Loulou15061 wrote: »

It is a bit more complicated than 'pick one'.

No, it isn't, really.

The freeholder does not have to make this amendment. They could easily say "Sorry, but no - we are retaining that clause". They've chosen not to, and they've asked a price for doing that which - at a guess - reflects the increase in the value of the flat from allowing subletting, since it increases the number and range of potential buyers.

The issues you face surrounding which one of the choices to make might well be more complicated - but that doesn't affect the fact that they are the only two choices on the table.

eddddy

From a negotiating perspective - this is 'free money' for the freeholder.

So if you want to play hardball, you could say something to the freeholder like:

"We have an investment purchaser waiting to exchange. If you confirm within 7 days that you are prepared to accept a £3,000 premium for the lease variation, we will proceed. Otherwise we will re-market the property and find a potential owner occupier (and you will get £0 instead of £3k)."

(On landlord zone people are mentioning being asked for premiums of £2.5k, £4k and £6k. And complaining that those premiums are extortionate.)

Beware of the freeholder also introducing high annual fees for consents to let. (But these can be challenged through the LVT)