Charge from Management company for Licence to underlet

vtochevska

Hi everyone,

I own a leasehold flat and have recently enquired with the management company about a permission to rent it out. My lease states that I require permission from the freeholder and they are entitled to send a surveyor to inspect the property before issuing a permission, and charge no more than 4 guineas (it's from 1955), which today is equivalent to about £150. 

The management company responded that I need a licence to underlet and have to pay £500 charge + solicitors' fees. 

I read extensively on the subject and saw that this doesn't seem like a reasonable admin charge for a Licence to Underlet.

My response to them is below: 

"Dear ...

I haven’t been able to reach you to discuss, therefore I wanted to follow up on the below emails regarding a consent to rent my property out. 

The Landlord & Tenant Act 1927 section 19(1) provides that the landlords consent should not be unreasonably refused for subletting and the charge for permission should be reasonable.  Having done extensive research and compared with other properties on the street which are currently rented out, the fee mentioned in your email is unreasonable considering the work involved in preparing a License to Underlet, as well as other similar cases which have gone to Tribunal. I would like to kindly as for a breakdown of the costs included, as well as a summary of leaseholders’ rights and obligations.

My reasons to believe the fee is unreasonable and therefore unpayable are below:

1. I have attached the wording from my lease which states that to obtain permission to rent out, the freeholder is entitled to inspect the property for a fee of no more than 4 Guineas, which is currently equivalent to around £150. 

2. In 2012, a tribunal decided that £40 was a reasonable fee for consent to let in 3 cases

See: http://landschamber.decisions.tribunals.gov.uk//Aspx/view.aspx?id=823

 (I have attached the document) 

 3. If the company insists on collecting this fee, I will be forced to challenge it at a tribunal.I am happy to pay for a survey as I was planning on surveying the property and obtaining all necessary certificates, in order to ensure the flat is safe and in perfect rentable condition. Additionally, I will provide you with the Tenancy agreement and tenants’ details when the time comes.

 Thank you and I am looking forward to your timely response."

Today they came back to me with the below:

"Dear...

I am the solicitor for the freeholders.

I have dealt with the completion of 3 licences to sub-let in (my street) in the past 12 months or so, one within the past month.  These have all been on the same agreed basis of the payment of a premium of £500 and surveyors/managing agents’ costs of £250 plus vat and legal fees of £1,250 plus vat. Those are the reasonable terms upon which consent will be given.

The provisions you have referred to are not apposite."


Can you help please, this seem quite excessive and I've never heard or read about such fees before.

Thank you all for your input.

eddddy

My understanding is... If the lease says the fee for granting consent is 4 guineas, then that's all the freeholder can charge you - i.e. £4.20. It doesn't have to be adjusted for inflation.

Just like if the lease specifies the ground rent is £2 for 125 years - that's exactly the amount due every year for 125 years. You don't have to adjust it for inflation.

If the fee is unreasonable (and £4.20 probably is unreasonable), the freeholder can apply to a tribunal to get it varied - but until the tribunal makes a decision, it stays at £4.20.


Leaving that aside:

• They mention a premium (which is very different from an administration charge) - why do they think a premium is payable?

• I would ask for a breakdown of the £250 administration fee - what exactly will they be doing for that fee?

• Why do they feel it's reasonable to instruct a solicitor for this? (with a £1250 fee)

• Other freeholders do not need to instruct solicitors for giving consent to let. Why is their situation different?
• 
  
• Even then, they seem to imply that they have instructed solicitors on 3 occasions in the past 12 months in relation to subletting. So surely they have all the legal advice they require. What further legal advice can they possibly need?

And finally say that asking for an unreasonable fee to grant consent is the same as unreasonably withholding consent, which is breaking the law. Section 19 (1) Landlord and Tenant act 1927.

See: https://www.legislation.gov.uk/ukpga/Geo5/17-18/36/section/19

vtochevska said:

"Dear...

I am the solicitor for the freeholders.

I have dealt with the completion of 3 licences to sub-let in (my street) in the past 12 months or so, one within the past month.  These have all been on the same agreed basis of the payment of a premium of £500 and surveyors/managing agents’ costs of £250 plus vat and legal fees of £1,250 plus vat. Those are the reasonable terms upon which consent will be given.

The provisions you have referred to are not apposite."

Or put another way, "I've suckered 3 other people into paying me £1250 in the last 12 months, so I'd like it if you payed me £1250 as well."


In your position, I'd reply directly to the freeholder - not via their solicitor.  You don't want to give them an excuse to charge you solicitor's bills - and part of your argument is that they don't need a solicitor anyway, so you'd be weakening your argument, if you deal with their solicitor.

eddddy

.... and be careful if you're thinking of paying and then challenging at a tribunal.

You can challenge administration charges (i.e. the £250 and £1250), but I doubt that you can challenge a premium (£500).


But make sure that the solicitor's fee is clearly charged to you as a "leasehold administration charge".  If the solicitor tries to call it something else, you might not be able to challenge it at a tribunal.

vtochevska

Thanks so much eddddy, you helped me a lot when I was buying this place last year, who knew I’d be back here asking for help. The flat has 937 year lease and £5 ground rent so they’re trying to make their money from this. 

Thanks for letting me know about the £4.20 I didn’t know that but it makes sense, considering the ground rent hasn’t changed. 

The £250 + VAT is for a surveyor which they arrogantly added after I responded with the wording of the lease

I started my email to them quoting The Landlord & Tenant Act 1927 section 19(1), about unreasonable refusal, which he ignored. He also ignored my request for breakdown of fees. 

Thanks for your advise about getting back to the freeholder directly, this is a very good point. 

What is worrying is that they don’t call it an administration charge but a Premium, which they can argue isn’t the same. Administration charges have been determined previously by the Tribbnal to be between £40 and £100. They still need to provide a breakdown. 

I also know that if I ask for a breakdown of fees and a summary of leaseholders rights and obligations (which I have) and they don’t provide that, this gives me some rights. 

I was planning on applying with the Tribunal tomorrow, do I have to pay the fee in order to challenge that?

The tricky part is I have just remortgaged and it’s a residential mortgage, I need to wait until December to ask for permission to rent out from the bank. So I don’t need it straight away. I don’t want the freeholders / solicitors to tell the bank, is this possible?

Not sure what is best to do at this point. 

vtochevska

I could possibly reply to them, reiterating that this is an unreasonable refusal, and advising them that if and when I decide to rent the flat out I will be challenging this at a tribunal. 

Hopefully in a few months something could change… 

(I know that most people on the street haven’t even asked for permission so this is even more frustrating)

NameUnavailable

I would quote the terms of your lease and if they don't agree then unfortunately you need to take it to Tribunal.