Unreasonable Landlord's fees on Licence to Assign

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  • Unreasonable Landlord's fees on Licence to Assign

    Hi Group,

    This is a situation I've faced many times, although usually it is not worth the challenge where the fees are "pushing the boundary".

    However, I have recently applied to a Landlord for Licence to Assign. I won't name the firm (although perhaps there should be a mechanism for publicising firms who charge extortionate amounts) but they are one of these City of London (EC4) firms who have a larger opinion of themselves than is merited.

    I have been advised that Surveyors' fees will be £950 + VAT, Solicitors' fees £850 + VAT, and if a rent deposit deed is required, a further £850 + VAT in legal fees.

    Essentially we are talking over £3,100 in fees, for what is likely to involve a 4 page Licence to Assign, and something similar for the Rent Deposit Deed.

    Even applying the Court Service's guideline hourly rates (which by the way are for contentious work) for a Grade A fee earner in the City of London (£396 p/h), we are essentially saying that producing two short documents and perhaps discussing a few amendments will take the said solicitor 4 hours and 20 minutes.

    The reality is that the solicitor will spend nowhere near that amount of time, and the routine work involved in drafting and engrossing will be done by the secretary or a trainee. In fact, on a straightforward non-contentious matter such as this, a trainee or junior assistant can quite feasibly deal with the work, and his or her hourly rate should be significantly lower.

    I know that the current system does not entitle a third party to insist on a Remuneration Certificate, and assessment is not (as far as I am aware) an option in non-contentious matters, so where next? If the Landlord's solicitor is obviously overcharging, can this be deemed to constitute a fine or premium?

    Any practical solutions here? One for the solicitors, I think, but any informed comment is welcome!

    Tanel.

  • #2
    The level of fees proposed is wholly disproportionate to the service rendered.

    Think what sort of a holiday you can get for £3,100.

    Comment


    • #3
      This is not a new problem, as you know. The logic should be [but isn't!] that whoever is liable to pay a solicitor's fees (whether it's that solicitor's client or otherwise) ought to have the right to challenge the fees under a Remuneration Certificate. I've already had a go at the Law Society and the Law Commission about the obvious inequity.
      JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
      1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
      2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
      3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
      4. *- Contact info: click on my name (blue-highlight link).

      Comment


      • #4
        Originally posted by jeffrey View Post
        This is not a new problem, as you know. The logic should be [but isn't!] that whoever is liable to pay a solicitor's fees (whether it's that solicitor's client or otherwise) ought to have the right to challenge the fees under a Remuneration Certificate. I've already had a go at the Law Society and the Law Commission about the obvious inequity.
        Yes, an age old problem indeed. I have considered starting a petition on this, although I think it would have real value if solicitors supported it and it could be put forward to the Law Society, rather than one of those general petitions to the PM/Goverment.

        The only problem there is that there are of course some solicitors who are benefitting from the inequity, although I would hazard a guess and say that the number of solicitors who have been on the wrong end of extortionately high fees when applying for licence to assign is much greater than those who are charging them. If only they could be galvanised into action, the Law Society might change the rule.

        I take it then Jeffrey that you've not found a way around the problem :-(

        Comment


        • #5
          This is also a problem that I have come up with when clients are assigning leases. My client recently had to pay a similar cost to assign a £10k per annum lease. In their instance the surveyors costs were not too unreasonable, but the City solicitors were!

          What really hurt was the assignment collapsed at the eleventh hour.

          Until enough people get hurt, rather than businesses who will grumble, but pay up I can't see anything changing unfortunately. It would be interesting if the law society placed a cap on the fee's of the amount originally charged to the landlord. Surely they are not paying these levels?

          David

          Comment


          • #6
            What's "originally charged to the landlord"? Tenant almost always has to pay L's fees, whether on grant of new lease or anything else later.

            Note the Cost of Leases Act 1958. This abolished any implied rule that T has legal obligation to pay L's fees [cheers!] but then provided that the parties can nevertheless agree that T has to pay (as part of the negotiated contractual terms) which simply returns the position to the implied rule [boo!]
            JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
            1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
            2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
            3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
            4. *- Contact info: click on my name (blue-highlight link).

            Comment


            • #7
              None of my clients have paid landlords legal fees, unless it is related to superior lease etc.

              I am perhaps spoilt as my largest client who I do the bulk of my work is a subsidiary of a Blue Chip company, and our starting position when acquiring any property is that we do not pay landlords legal fees.

              As yet no landlord has challenged that, perhaps that is due to my clients superior covenant rather than my negotiation!

              David

              Comment


              • #8
                Jeffrey, what you say is correct, but note of course that the Costs of Leases Act 1958 applies only to the "costs of the lease" i.e. costs of granting the lease. Notwithstanding your other point regarding the parties "being able to agree otherwise" (read - "the Landlord being able to pressure the tenant into paying the costs"), I don't think that Act would apply in any event in the case of Landlord's fees on an assignment.

                David, you are certainly very fortunate. Of course you're fortunate to have such a client in any event, never mind this extra little bonus of not having to argue over landlord's fees! I do hope though that you would be one of the solicitors to support reform in this area rather than one of those who prefer the status quo...

                Comment


                • #9
                  It is a fact of life that many landlords' solicitors and agents regard tenants as milch cows.

                  Comment


                  • #10
                    Originally posted by Tanel View Post
                    Jeffrey, what you say is correct, but note of course that the Costs of Leases Act 1958 applies only to the "costs of the lease" i.e. costs of granting the lease. Notwithstanding your other point regarding the parties "being able to agree otherwise" (read - "the Landlord being able to pressure the tenant into paying the costs"), I don't think that Act would apply in any event in the case of Landlord's fees on an assignment.

                    David, you are certainly very fortunate. Of course you're fortunate to have such a client in any event, never mind this extra little bonus of not having to argue over landlord's fees! I do hope though that you would be one of the solicitors to support reform in this area rather than one of those who prefer the status quo...
                    Not a solicitor but a Surveyor!

                    David

                    Comment


                    • #11
                      Originally posted by davidjpowell View Post
                      Not a solicitor but a Surveyor!

                      David
                      I forgive you :-) - but I'd hope you'd support the principle in any event.

                      Just to update this, I've been looking at the Landlord and Tenant Act 1927 again.

                      Section 19(1)(a) does indeed say (in respect of the "proviso" that consent should not be unreasonably withheld):

                      "... but this proviso does not preclude the right of the landlord to require payment of a reasonable sum in respect of any legal or other expenses incurred in connection with such licence or consent;"

                      Note the word "reasonable". Therefore if fees are unreasonable, you have a prima facie unreasonable withholding of consent.

                      A small comfort for the tenant who is faced with losing a buyer unless he acts quickly. My one saving grace here is that I have two clients wishing to transfer to one of them, so they might be prepared to wait it out and, dare I say, take the challenge all the way if necessary.

                      Has anyone here actually experienced the procedure for obtaining a declaration of unreasonably withholding consent? What was your experience? How long did it take?

                      On a separate note, I've also consider the Code of Conduct 2007. Perhaps Rule 10.02 will help to a point:-

                      "When negotiating the payment of your client's costs by another firm's client or a third party, you must give sufficient time and information for the amount of your costs to be agreed or assessed."

                      Of course the Landlord's solicitors will argue that they have give sufficient information by stating in clear terms what their fees will be. However, the counterargument would be that they have not provided enough time and hourly rate information to explain how those figures have been arrived at.

                      One could also look to Rule 10.01:-

                      "You must not use your position to take unfair advantage of anyone either for your own benefit or for another person's benefit."

                      That does exactly what it says on the tin, and if a Landlord's solicitor is using the fact the tenant is at the mercy of the Landlord in terms of needing the consent and needing it quickly in order to inflate fees, then I think you've got a clear breach here.

                      Of course, these are small comforts in the absence of a clear rule allowing the paying party to challenge the bill, but maybe they are starting points.

                      Comment


                      • #12
                        UPDATE

                        Clients spoke direct to the Landlord's surveyors. They complained that the fees were excessive.

                        Surveyors agreed to reduce fees to £750 + VAT (because they have nothing to do in any case!) and Solicitors down from £1,700 + VAT to £1,450 + VAT.

                        Overall a saving of around £530, but fees are still way too high in my book.

                        Anyway, clients were advised of the possible legal challenge but just want to get on and do the deal. I'm happy that the client is "happy", but once again real justice is denied.

                        Shall we start this petition? Any thoughts on the best way to do this?

                        Comment


                        • #13
                          In a recession solicitors and surveyors are charging as much as the market will stand. Mind you when you're a tenant it's nigh impossible to have any influence on landlord's solicitor's fees.
                          The advice I give should not be construed as a definitive answer, and is without prejudice or liability. You are advised to consult a specialist solicitor or other person of equal legal standing.

                          Comment


                          • #14
                            Update...

                            This just gets better [ironic smile].

                            I'm now dealing with a Landlord's solicitors in W1K who are asking for £2,500 + VAT for a Licence to Underlet.

                            This is arguably even more straightforward than a Licence to Assign and in terms of pure solicitors' fees (without surveyors' fees or Landlord's own "admin" fees) is the highest I've seen yet.

                            Where does this end?

                            Comment


                            • #15
                              nowhere

                              Have a client who is paying £2.5k legal costs for a surrender and re-grant of an identical lease (re-grant to a different party). Rent is about £4k pa from memory.

                              Argued the toss with landlords (City) solicitor to no effect. Landlord is MOD who are a nightmare to deal with.

                              Comment

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