Renting out a Leasehold

super9tv

Morning everyone!

I'm in the process of buying a ground floor flat and have just gotten back the leasehold agreement. Unfortunately, there is a clause in the lease that says you're not allowed to rent the property out.

At the moment, our intention for buying is that it'd be a first home, there's space to have a child, but ultimately move out in 5 years or so. Not having the ability to rent the property out seems to limit our options a little.

What I would like to know is... Is this clause very common? Has anyone had this experience? And has anyone ever been able to change their leasehold agreement in favour of being able to rent out the property?

Thanks!

elverson

Why can't you just sell it when you move out?

super9tv

I can, but say you ended up in negative equity... you wouldn't. It would be preferable at the point to then rent it out and move somewhere cheaper.

G_M

Fairly common but by no means all leaseholds.

What is the exact wording? Often it says 'without consent of the freeholder' or similar.

bouicca21

Rent out and move somewhere cheaper is a nice idea but totally impracticable. Rent received would be taxable, but there would still be a mortgage to pay, there are loads of legal requirements with which a landlord has to comply. Negative equity would impact capacity to pay either rent or mortgage on the new place.

super9tv

Thanks G_M. The wording is:

"Not to assign transfer or underlet or part with or share possessions of any part of the maisonette (as distinct from the whole) in any way whatsoever."

Good point bouicca21 - did not know that negative equity would impact a second mortgage and renting, but totally makes sense.

AdrianC

super9tv wrote: »

I'm in the process of buying a ground floor flat and have just gotten back the leasehold agreement. Unfortunately, there is a clause in the lease that says you're not allowed to rent the property out.

OK...

At the moment, our intention for buying is that it'd be a first home, there's space to have a child, but ultimately move out in 5 years or so.

So it's not a problem for you. Great.

Not having the ability to rent the property out seems to limit our options a little.

Only in that you can't rent it. But you don't plan to do that anyway. Would it even be a good choice for a rental property, restriction notwithstanding?

What I would like to know is... Is this clause very common?

Far from unknown.

Has anyone had this experience?

Yes, on a flat that was being purchased to let. The other two flats in the building were owned by the freeholder, and were let. The freeholder refused to amend the lease. We pulled out of the purchase. It sat on the market for months longer, at an ever-reducing price.

And has anyone ever been able to change their leasehold agreement in favour of being able to rent out the property?

Ask the freeholder. It's entirely down to them. Expect to pay all the legal fees for re-issuing the lease at the VERY least. You may well find they refuse outright. Such is their prerogative.

If you think it's going to be an issue, and they won't agree to change the lease, then don't buy this flat.

Person_one

super9tv wrote: »

Thanks G_M. The wording is:

"Not to assign transfer or underlet or part with or share possessions of any part of the maisonette (as distinct from the whole) in any way whatsoever."

Good point bouicca21 - did not know that negative equity would impact a second mortgage and renting, but totally makes sense.

That sounds like you can't sublet a part of the flat separated out from the rest of it, but you could rent out the whole of it.

davidmcn

Person_one wrote: »

That sounds like you can't sublet a part of the flat separated out from the rest of it, but you could rent out the whole of it.

Yes, it's a prohibition against subdividing the flat (or renting out bits of it). Unless there's another clause prohibiting subletting the whole of the flat then I don't see a problem.

OP - has your solicitor given you any advice about this, or just sent you the lease and left you to figure out by yourself what it all means?

G_M

super9tv wrote: »

Thanks G_M. The wording is:

"Not to assign transfer or underlet or part with or share possessions of any part of the maisonette (as distinct from the whole) in any way whatsoever."

Good point bouicca21 - did not know that negative equity would impact a second mortgage and renting, but totally makes sense.

As others have said, this does not prevet you letting the whole maisonette. It prevents you from letting part of the maisinette (ie dividing it up).

Unless there is another relavant clause, you are fine.