Underletting & "Registration Fee"

elhoba

Hi there,
I'm looking for advice on the underletting clause in the lease for my leasehold flat which we rent out. Consent is not needed to sublet, but we are simply required to notify the landlord of "every" underletting and pay a "reasonable registration fee". The agent working on behalf of the landlord would like to charge the registration fee on an annual basis to capture any new tenancy and any tenancy renewal. I dispute notifying and paying for the tenancy renewal, as if I have the same tenant in situ operating under the same tenancy agreement, then to my mind this is the same instance of underletting - and I am not required to make a new notification and pay a new fee according to the lease. If I have a new tenant, then I would notify them (and pay the registration fee) as this is a new instance of underletting. The lease does not state any timeframe for a 'registration', so it comes down to the definition of "every" underletting.
Has anyone come across this please or have any advice?
Many thanks!

G_M

Really need to see the full wording in the lease.

But I suspect you are right. You notify and pay each time a new tenancy is created. f a tenant stays for 5 years, you notify and pay once in that period.

elhoba

Thank you for your help. The wording is:

To give to the Landlord and the Management Company notice of every dealing with or underletting or transmission of the legal estate in the Demised Premises including all mortgages or legal charges of the Demised Premises within twenty one days after the same shall occur and to pay to each of the Landlord and the Management Company such reasonable registration fees (including Value Added Tax) as the Landlord and the Management Company respectively shall from time to time determine.

bowlhead99

A fee each year to capture 'every new tenancy' just in case there is one, seems extreme. Do you mean they are just charging a flat fee once at the beginning or end of year regardless, knowing that you intend to be a landlord for the whole period, or are they still dealing with it on a 'each notification' basis?

The lease says they need to register your underlettings and will charge a reasonable registration fee to do so. If you have not entered into any new tenancy agreements, just allowed an existing agreement to roll month to month as provided for in that agreement or by statute (e.g. at end of the minimium period of an AST), then there is no additional underletting to register.

As you say, if there is no renewal and it is the same agreement, you have nothing to notify to them even if, as GM suggests, the agreement remains in place for five years.

However, if you tell your tenant that you do not want to keep the same agreement, and they or you want to sign them up for a new AST certain of 12 months or 6 months or whatever, and you re-sign new contract documentation, then that feels like something new. For example, last year on change of tenant your freeholder might have recorded in their big black book that you hold their lease and have sublet to Mr Smith for a period ending no earlier than April 2018. If around a month from now you agree with Mr Smith that you will document a tenancy arrangement which can't end earlier than March 2019, that is something that the freeholder might be interested in knowing because their register of facts is now out of date. I would not be surprised if they wanted some nominal fee to update their documentation in that circumstance.

So it may depend on what you mean by 'renewing' every year. Do you mean to sign a new contract, or modification of old contract? Or are you just letting the people stay on beyond the minimum term and calling it 'renewing' if they choose not to leave and you choose to let them?

elhoba

Thank you for your reply and advice! My tenant signed a tenancy agreement a few years back and it auto-renews - i.e. we just roll on with no update to documentation, which is why I don't view it as a new instance of underletting...we remain under the same TA as before. If I had a new tenant come in or new/updated TA for the current tenant, then I agree that would be a new instance of underletting as it pertains to a new agreement entirely.

The agent working on behalf of the landlord are using this as a money making scheme - they tried to charge back in 2013 and when I questioned it, they apologised, confirmed that there was nothing preventing us from sub-letting, removed the "subletting" charge from our account and told me they would not pursue it further. 5 years goes by and now they've decided to try again - when I raised what happened in 2013, they decided to call it something different; "registration" and were adamant that this was something very different to "consent to let" and the "licence to sublet" they had attempted to charge for previously. On reading the lease I agreed to pay the "registration fee" of £120 and then they sent me a "Licence to Sublet" confirming they had given consent to let and introducing a whole new set of terms in addition to the lease - most of which contradicted the lease. So I challenged it as the very same thing they had agreed in 2013 that they shouldn't be charging for, and told them that I didn't accept the terms. They then write back apologising again and advising:

"...would like to apologise for the wording of our registered document and have amended the document accordingly. A new formal registered document will be issued accordingly."

and

"...write to you annually to ensure our records are correct. Any subsequent lettings, including renewed agreed tenancies, will be subject to a new request for a Formal Registered Subletting Document."

Basically, they want to charge it annually - the "licence" they've taken back had an expiry date of one calendar year. I assume they are doing this to ensure that if a tenancy changes, that they are not losing out on the registration fee. But as they state, they also want to charge if my tenant renews...I've told them I don't accept this, as should the current tenant remain in situ, this does not constitute another underletting (under the current TA). I've also reiterated again that I do not need to make any request - the lease states that I need to notify, not request some form of consent, which is what they continue to imply.

If this was all so important, they could have sorted it all out in 2013 when they first raised it. It strikes me as money for old rope. I have no issue with complying with the lease, but I am fed up of being manipulated by them, particularly when they cannot get their facts straight or their own house in order.

bowlhead99

From the wording of the lease, you have to give them notice every time AFTER you underlet the premises, convey the estate to someone else, get a mortgage, secure a charge etc. The fact you have it on a long leasehold doesn't mean you can do things without letting them know. And you accept that.

And you also accept that they can levy a reasonable charge for registering the information and keeping their records up to date. Each time you do something that changes the rights or charges about how/who has the right to occupy or secure a debt on the property etc, they have to stop what they are doing and get their records up to date, and they may want to do whatever necessary to do that - e.g. get a solicitor to help get the facts right, and access their safety deposit box where they keep all their secure records etc etc.

But none of that means that they need to provide you with terms of a licence for subletting, nor provide you a new licence each year. Licence to print money is right! You agreed to allowing them to charge you reasonable fees plus vat to register the new facts (not to write a new licence or sublet 'agreement' which is why you successfully pushed back on that before). If there is no new tenancy there is no new underletting nor new other thing to be notified within 21 days and nothing for them to register ; quite simply, there is no need to register a new charge or new tenancy when the old tenancy is still going and your mortgage or registered charge hasn't changed.

* - I am not a lawyer etc.

mfawcett1950

I have a number of flats in a block which I sublet.
The head lease has a clause in the Tenants (i.e. me) covenants section which states:
“To give to the Landlord and the Management Company notice of every dealing with or underletting or transmission of the legal estate in the Demised Premises... within 21 days after the same shall occur and to pay to each of the Landlord and the Management Company such reasonable registration fees (but not being less than £50) and any VAT properly chargeable thereon... .”


There is no obligation that I can see for me to ask for permission to sublet, to provide my own or my tenants' details or to provide copies of my tenancy agreements although I do not have an issue with the last two items and have been doing so.


I have never given any notices to either the landlord, their agent or the Management Company.


Since 2011 the agent has been writing every year to request details of my tenancies, copies of the tenancy agreements and a fee of £120 in each instance. After receiving the information and my fee they have issued a Licence to Sublet for 12 months for each property. These Licences contain the statements that:
“THE COMPANY HEREBY GIVES its licence and consent to the leaseholder to sublet the property in return for the sum of £120...”.
“AND WHEREAS the leaseholder has requested that the company grant a licence to sublet the property on an assured shorthold tenancy agreement ...”.
I have categorically never made any such request for permission to let my properties. This is a complete fabrication on agent's part.


I have one tenant who has occupied a flat continuously for 10 years and I have been trying to argue with the agent that to keep charging fees every year is unreasonable and have refused to pay them.
I now realise this argument won't hold up as they have signed a succession of AST's. The landlord's solicitor has now written to me claiming breach of contract and claiming the fees and costs.


I have told them I am going to the FTT to get a reduction in the fees on the following basis:

I am arguing that I am being charged a fee to be given permission and a Licence which I have not requested, are unnecessary and not required under the head lease. I am not sure what work is involved in “registering” a notice but I am sure that writing letters every year and drawing up Licence agreements is much more involved.
As I have never given any notices they cannot charge me fees for registering same.
Half of the fee is supposed to be paid to the Management Company but I have it in writing that the agent does not pass the fees on.
The FTT has already ruled in Rudney v Samnas that a fee of £40 + VAT is reasonable for registering a sublet.


If anyone has any thoughts or advice I would be grateful to receive them.

SmashedAvacado

you are right - your clause does not require you to gain permission from the landlord, you just need to tell them. A registration fee of around £35 to £50 is probably reasonable but not much more. You don't need to sign anything creating legal obligations.

mfawcett1950

Thanks for your confirmation and advice about fees.

ihshaikh

@elhoba

are you then paying 120 every time you rent your flat to a new tenant? I thought there was a legal max to what is considered reasonable - circa GBP40/50....

https://www.leaseholdknowledge.com/sub-letting-fees-should-not-be-more-than-40-landlords-are-told-four-times-by-the-land-tribunal

eddddy

ihshaikh wrote: »

@elhoba

are you then paying 120 every time you rent your flat to a new tenant? I thought there was a legal max to what is considered reasonable - circa GBP40/50....

https://www.leaseholdknowledge.com/sub-letting-fees-should-not-be-more-than-40-landlords-are-told-four-times-by-the-land-tribunal

elhoba hasn't logged in since Feb 2018 - so might not see your question.

FWIW, I think the article you link to is a bit misleading. And the Tribunal didn't say this:

ihshaikh wrote: »

I thought there was a legal max to what is considered reasonable - circa GBP40/50....

The law says that the fee charged must be 'reasonable' - i.e. reflect the work that the freeholder has to do.

In the specific cases at the Tribunal, the Tribunal said £40 was a reasonable fee for the amount of work being done. (i.e. about £50 per hour.)


So if a different freeholder can demonstrate that they have to do 3 hours work to register a tenancy (for example), the Tribunal would probably agree that a fee of £150 would be reasonable.