June 17, 2024

Sub-letting fees should not be more than £40, landlords are told (four times by the Land Tribunal)

Inevitably retirement flats are going to fall empty at some point, as the residents go into care or die, which leaves the owners’ heirs will the problem of what to do with them.

Selling up is often difficult, as values of retirement properties have crumbled as badly as small inner city flats.

Sometimes even more so: in North Oxford there is a one-bedroom property on the market for £15,000 and even this morning a Campaign against retirement leasehold exploitation reader spoke of a one-bedroom apartments in his block near Gosport, Hants, being sold for £33,000.

The alternative to selling is to rent the property out, which is a particular relief from the heavy service charges associated with retirement property.

In no time, up pops the landlord or the managing agent demanding a sub-letting fee for doing … well, almost nothing really, although it is important that the freeholder and managing agent know who is actually in the building.

Sub-letting fees vary, but charges of £100 – £135 are common, and then there are registration fees of around £75.

A more reasonably sum would be around £40, according to the Land Tribunal, which ruled on four appeal cases brought by landlords last February.

The cases provide important ammunition for leaseholders, or their heirs, who think being stung for a couple of hundred quid, on top of the other service charges, is excessive.

The case, which can be read in full here ( http://www.landstribunal.gov.uk/Aspx/view.aspx?id=823), was heard by George Bartlett, QC, president of the Upper Tribunal.

Two appeals were brought by our old friends Peverel, this time trading as Holding and Management (Solitaire) Ltd.

One concerned  a Barratt £123,295 flat in Essex, where the owner was being charged of £105 for this (as well as £75 for the preparation of a deed of covenant and £75 for registration).

The other a £104,500 Barratt flat in Reading, which was being rented out under an assured shorthold tenancy agreement for £750 per month. Solitaire wanted a £135 fee for consent and a notice fee of £75.

Another case, brought by Samnas Ltd, concerned a £122,000 flat in Banbury, Oxfordshire, where the company was after £105 , as well as £75 for registration of the sub-letting.

The last was in Milton Keynes and concerned a £166,000 property where Flambayor Ltd was after £135, and  £75 for the registration.

In all cases the leases made clear that the properties could not be rented out “without the prior written consent of the lessor and the management company, such consent not to be unreasonably withheld or delayed”.
The landlords argued that registering the sub-letting agreement involved considerable work, but the tribunal was having none of it:

Bartlett concluded:

The appellants seek to justify the consent fee in terms that apply to all consents, and they do so by setting out a list of work that, it is claimed, their agents do.  It looks to me to be a list of all the things that could conceivably be done in connection with the grant of consent rather than the things that would need to be done in a typical case or that were in fact done in the cases under consideration.

I am wholly unpersuaded by the appellant’s [Solitaire] assertion that it would have been necessary for an administrator to spend approximately two hours dealing with the application and the legal department about one hour.

In the absence of any information on the part of the appellant as to what was actually done, by whom and how long it took, I am not satisfied that a fee of £105 for the grant of consent in addition to fees for the covenant was justified or that consent could reasonably have been refused in the event that Mrs Norton [a flat owner] had refused to pay it.

The same goes in relation to Dr Rudnay [flat owner in the case brought by Samnas Ltd].  Doing the best I can on what is before me, I conclude that a fee greater than £40 plus VAT could not be justified, and I determine that this amount is payable.

In relation to the other two cases a fee of £135 was sought – higher than the £105 because, it was said, the consent was a retrospective one.  The appellants have done nothing to show that in these two cases extra costs were incurred.  I therefore determine that the amount payable in each case is £40 plus VAT.”

Leasehold Knowledge Partnership

The Leasehold Knowledge Partnership (www.leaseholdknowledge.com)
Is producing a new sublet agreement template, which seeks to provide benefits to all parties rather than just an income stream the landlord.

The landlord and the managing agent need to know who is living in the property. But the property’s leaseholder also has the right to know that the landlord will ensure the managing agent helps meet the needs of sublet tenants.

In many sites tenants move in without ever being told what the site rules are, and managing agents don’t know if they should contact the letting agent or the flat owner in the case of a problem.

LKP will report on the first pilot scheme for a new, low cost and fair system within the month.

In the meantime, please contact Sebastian O’Kelly on sok@leaseholdknowledge.com or 07808 328 230 regarding sub-letting issues.