Changing a covenant in a lease on lease extension

mills112

My friend's flat has an onerous covenant that makes it extremely difficult to rent it out.  This is great in a way if you live there as owner occupier blocks are always going to be much better than ones where a lot of the properties are rented out in my experience as a landlord myself.

He is in the process of getting his lease extended and costs aside, I am wondering if there is any merit in asking if this covenant can be moderated to the usual, where consent from the landlord is required to sublet.  It does make it easier for other properties in the block to be sublet if they all start asking for this when they too come to extend their lease.

The freeholder are actually a group of leaseholders themselves but they have instructed a management company to manage the block.

On the condition that there is no costs required by the freeholder, except legal costs, do you think there is benefit to this?  Would my friend's flat be more valuable if it doesn't have the severe restriction on subletting?  Thoughts?

loubel

If the same covenant is in all of the leases then the freeholder may not have the freedom to remove it from just one without being in breach of their own covenants with the other leaseholders. You'd need to check the details in the lease.

sheramber

mills112 said:

My friend's flat has an onerous covenant that makes it extremely difficult to rent it out.  This is great in a way if you live there as owner occupier blocks are always going to be much better than ones where a lot of the properties are rented out in my experience as a landlord myself.

He is in the process of getting his lease extended and costs aside, I am wondering if there is any merit in asking if this covenant can be moderated to the usual, where consent from the landlord is required to sublet.  It does make it easier for other properties in the block to be sublet if they all start asking for this when they too come to extend their lease.

The freeholder are actually a group of leaseholders themselves but they have instructed a management company to manage the block.

On the condition that there is no costs required by the freeholder, except legal costs, do you think there is benefit to this?  Would my friend's flat be more valuable if it doesn't have the severe restriction on subletting?  Thoughts?

An owner occupier would.  probably pay more for  flat with a restriction about subletting.

Someone wanting to sublet will want to buy as cheaply as possible to benefit from their investment. 

mills112

loubel said:

If the same covenant is in all of the leases then the freeholder may not have the freedom to remove it from just one without being in breach of their own covenants with the other leaseholders. You'd need to check the details in the lease.

Good point!  Yes, it is in all the leases in the block as they were all issued at the same time with the same covenants in them, so in fact they are all due to be extended soon.

mills112

sheramber said:

mills112 said:

My friend's flat has an onerous covenant that makes it extremely difficult to rent it out.  This is great in a way if you live there as owner occupier blocks are always going to be much better than ones where a lot of the properties are rented out in my experience as a landlord myself.

He is in the process of getting his lease extended and costs aside, I am wondering if there is any merit in asking if this covenant can be moderated to the usual, where consent from the landlord is required to sublet.  It does make it easier for other properties in the block to be sublet if they all start asking for this when they too come to extend their lease.

The freeholder are actually a group of leaseholders themselves but they have instructed a management company to manage the block.

On the condition that there is no costs required by the freeholder, except legal costs, do you think there is benefit to this?  Would my friend's flat be more valuable if it doesn't have the severe restriction on subletting?  Thoughts?

An owner occupier would.  probably pay more for  flat with a restriction about subletting.

Someone wanting to sublet will want to buy as cheaply as possible to benefit from their investment. 

yeah, if I bought a place to live in and I saw that it was difficult to rent out, I would prefer that to one where there is no restriction.  Blocks that are mainly occupied by tenants are not a very nice place to live in.  Good point.