Lease restriction on renting

mills112

My friend is in the process of buying a flat, which has this clause in the Lease.

If he does rent the property out on AST, what is the consequence of breaking this Lease clause?

eddddy

In general, if a leaseholder (like your friend will be) breaches the lease - the freeholder can take enforcement action.

If your friend continues to breach the lease even when the freeholder tells them to stop, in theory, ultimately, the freeholder could forfeit the lease - i.e. repossess the the property, without paying any compensation to your friend.

But that would be a long process involving a court case.



Often the process might go like this...

• The freeholder writes to your friend telling them to stop breaching the lease - and your friend is charged an admin fee of £40 to £60 

• If your friend continues to breach the lease, the freeholder sends a second letter - and your friend is charged another £40 to £60

• If your friend continues to breach the lease, the freeholder instructs a solicitor who reads the lease and sends a letter to your friend warning of legal action - and your friend has to pay the solicitor's fee - maybe £500 to £2000

• If your friend continues to breach the lease, the solicitor starts the legal process to forfeit the lease (repossess the property) - your friend continues to be responsible for the solicitor's fees - maybe thousands more

• Then a court case - with more legal fees payable by your friend

Typically, a process like this might start because a neighbour complains to the freeholder - maybe because the tenants are a nuisance, or maybe just because they have a vendetta against your friend...

mills112

eddddy said:

In general, if a leaseholder (like your friend will be) breaches the lease - the freeholder can take enforcement action.

If your friend continues to breach the lease even when the freeholder tells them to stop, in theory, ultimately, the freeholder could forfeit the lease - i.e. repossess the the property, without paying any compensation to your friend.

But that would be a long process involving a court case.



Often the process might go like this...

• The freeholder writes to your friend telling them to stop breaching the lease - and your friend is charged an admin fee of £40 to £60 

• If your friend continues to breach the lease, the freeholder sends a second letter - and your friend is charged another £40 to £60

• If your friend continues to breach the lease, the freeholder instructs a solicitor who reads the lease and sends a letter to your friend warning of legal action - and your friend has to pay the solicitor's fee - maybe £500 to £2000

• If your friend continues to breach the lease, the solicitor starts the legal process to forfeit the lease (repossess the property) - your friend continues to be responsible for the solicitor's fees - maybe thousands more

• Then a court case - with more legal fees payable by your friend

Typically, a process like this might start because a neighbour complains to the freeholder - maybe because the tenants are a nuisance, or maybe just because they have a vendetta against your friend...

thanks for the comprehensive reply.  very helpful.

poseidon1

mills112 said:

My friend is in the process of buying a flat, which has this clause in the Lease.

If he does rent the property out on AST, what is the consequence of breaking this Lease clause?

AST tenancies are 1 year renewable arrangements.

As such they do not breach a clause which prevents assignment/subletting ' for a period exceeding three years'.

Therefore  (as regards that clause of the lease ) your friend has nothing to worry about if they wish  to ultimately let the property on ASTs.

They may have a whole  lot of other issues to concern themselves as a fledgling landlord, not least being tax and forthcoming renters protection legislation. They would be wise to acquaint themselves with the web of fiscal compliance and landlord's duties and obligations they will be taking on.

mills112

poseidon1 said:

mills112 said:

My friend is in the process of buying a flat, which has this clause in the Lease.

If he does rent the property out on AST, what is the consequence of breaking this Lease clause?

AST tenancies are 1 year renewable arrangements.

As such they do not breach a clause which prevents assignment/subletting ' for a period exceeding three years'.

Therefore  (as regards that clause of the lease ) your friend has nothing to worry about if they wish  to ultimately let the property on ASTs.

They may have a whole  lot of other issues to concern themselves as a fledgling landlord, not least being tax and forthcoming renters protection legislation. They would be wise to acquaint themselves with the web of fiscal compliance and landlord's duties and obligations they will be taking on.

but I read that clause to mean that you can not rent the property out for more than 3 years without the legal agreement with the freeholder's solicitors.  His conveyancer has told him 

"You will see that you are not to assign or sublet for a period exceeding 3 years"

He sold a buy to let recently so he is aware of renting out issues.

user1977

Yes, but he won't be signing up to a 3+ year AST.

Yorkie1

There doesn't appear to be a minimum duration for "part with possession of" though. Would an AST be captured by that definition?

mills112

user1977 said:

Yes, but he won't be signing up to a 3+ year AST.

poseidon1 does have a point and under his interpretation, you could renew the AST annually and so it would be deemed that you haven't rented the property out for more than 3 years, but whether that clause mean parting with the property for more than 3 consecutive years, so to prevent people who are not renting out short term but plan to move back in.

so I am guessing the 3 years time limit is to prevent someone buying the property as an investment and not as their own home so they could rent it out temporarily but not permamently.

sheramber

poseidon1 said:

mills112 said:

My friend is in the process of buying a flat, which has this clause in the Lease.

If he does rent the property out on AST, what is the consequence of breaking this Lease clause?

AST tenancies are 1 year renewable arrangements.

As such they do not breach a clause which prevents assignment/subletting ' for a period exceeding three years'.

Therefore  (as regards that clause of the lease ) your friend has nothing to worry about if they wish  to ultimately let the property on ASTs.

They may have a whole  lot of other issues to concern themselves as a fledgling landlord, not least being tax and forthcoming renters protection legislation. They would be wise to acquaint themselves with the web of fiscal compliance and landlord's duties and obligations they will be taking on.

What about the ‘or part’ that follows 3 years?