Reasonable notice to underlet fee

joeainsworth

Good evening all

I recently received a letter from a company who are the leaseholders for a flat I own and that I let out.

They have stated that my lease requires me to let them know if I am letting my property. I checked and this is correct.

I must apply for a "Notice of Underletting" for which they are charging £138.
The tenant must also enter into a "Deed of Convent" at a further cost of £168.

I have found an article that states subletting fees must be reasonable as demonstrated in a Lands Tribunal ruling.

What would a reasonable fee be for each charge?

I also noticed this clause in the lease but didn't quite understand whether this was applicable or not. I wondered if anybody had any understanding of this?

Not at any time during the Term hereby granted to underlet or permit the unit to be underlet except upon terms that the underlessee shall be liable to pay throughout the term of the underlease not less than the aggregate of the rents provided that this restriction shall not apply to an underletting as an assured shorthold tenancy not exceeding three (3) years

Thanks in advance

da_rule

The clause may be relevant.

What are the ‘rents’ under your lease? Is this the ground rent, insurance rent and service charge? If so, then provided you are charging at least this amount in rent then the restriction will not apply. Also, it will not apply to AST’s if less than 3 years.

So, under this clause there appears to be no need to obtain consent, but that doesn’t mean that there aren’t other clauses that make this necessary.

joeainsworth

Thanks so much for your prompt reply.

What are the ‘rents’ under your lease? Is this the ground rent, insurance rent and service charge? If so, then provided you are charging at least this amount in rent then the restriction will not apply. Also, it will not apply to AST’s if less than 3 years.

I am required to pay twice yearly ground rent which includes buildings insurance and a monthly management company/service charge fee. Obviously the tenant just pays a monthly rent for the property. The tenants pays in excess of these fees each month. I'm not sure if this answers your question?

I had actually omitted some other clauses which completes the section on underletting.

Again, I'm not sure on the terminology. Clause 9a suggests no underletting at all whereas 10b suggests its okay?

9a) Not to underlet or part with or share possession of any part of the Premises (as distinct from the whole) in any way whatsoever.

9b) Not to underlet or part with or share possession of the Parking Space as a whole except to a person or company who is a tenant of a Unit in the Building under a lease in the form of this Lease or a tenancy in the form of an assured shorthold tenancy.

10a) Not to assign underlet or part with possession of the Premises as a whole without first procuring that the assignee or underlessee enters into a direct covenant contained in a deed of covenant in the form of the draft set out in the Tenth Schedule with the Landlord to observe and perform the covenants and conditions on the part of the Lessee herein contained

10b) Not at any time during the Term hereby granted to underlet or permit the unit to be underlet except upon terms that the underlessee shall be liable to pay throughout the term of the underlease not less than the aggregate of the rents provided that this restriction shall not apply to an underletting as an assured shorthold tenancy not exceeding three (3) years

11) To cause to be inserted in every underlease or tenancy (whether mediate or immediate) except such as is referred to in the proviso to paragraphs 9 and 10 of the Schedule a covenant by the underlessee with the Landlord and the with the Lessee to observe and perform all the covenants and conditions in this Lease contained (except for the covenants for the payment of the Rents) with a condition permittting re-entry in the case of any breach of any of the said covenants or conditions (except as aforesaid).

da_rule

9 deals with underletting of part of the property whereas 10 deals with underletting the whole of the property.

There is a need for you to enter into the deed of covenant, however there is no mention that permission is actually required (as long as you satisfy 10b, which you seemingly do). Therefore I would go back to them and say that, having reviewed your lease you only need the deed of covenant. Obviously, this is going to get expensive and time consuming if you have to do this for every tenant etc.

eddddy

joeainsworth wrote: »

I have found an article that states subletting fees must be reasonable as demonstrated in a Lands Tribunal ruling.

What would a reasonable fee be for each charge?

It's the Commonhold and Leasehold Reform Act 2002 that says Administration Charges (including subletting fees) must be 'reasonable'.

In 2012, some leaseholders took their freeholders to the Upper Tribunal, on the basis that the freeholders' fees for consent to let were unreasonable.

In those specific cases, the tribunal decided that a fee of £40 should be payable, as that was reasonable.

See: http://landschamber.decisions.tribunals.gov.uk//Aspx/view.aspx?id=823 (and download the the document).

You can refer your freeholders to that, if you want.

But... your freeholders might (or might not) be doing more work than the freeholders in those cases.

If you want, you could ask them for a breakdown of how they arrive at their fees.

joeainsworth

da_rule wrote: »

9 deals with underletting of part of the property whereas 10 deals with underletting the whole of the property.

There is a need for you to enter into the deed of covenant, however there is no mention that permission is actually required (as long as you satisfy 10b, which you seemingly do). Therefore I would go back to them and say that, having reviewed your lease you only need the deed of covenant. Obviously, this is going to get expensive and time consuming if you have to do this for every tenant etc.

There is one more clause which I omitted. My apologies.
I think this might cover the requirement that permission is required?

12) Upon every underletting of the Premises and upon every assignment or transfer theereof and upon the creation of every mortgage or charge thereon and upon the grant of probate or letters of administration effecting the term hereby granted and upon the devolution of any such term under any assent or other instrument or otherwise howsoever or by any Order of the Court including (for the avoidance of doubt but without prejudice to the generality of the foregoing) upon all such transactions are referred to in the proviso to paragraphs 9 and 10 of this Schedule within one month thereafter to give the Landlord or its solicitors notice in writing of such underletting assignment transfer charge grant assent or order with a certified copy therefor and of the name and place or places of abode of such underlessee or underlesses or the person or persons in whom the term hereby granted shall have become vested or to whom it shall have become charged or mortgaged as aforesaid and to pay to the Landlord 0.05% of the value of the transaction (but not less than thirty five pound) together with VAT on such sum for the registration of every such notice.