Notice of underletting not being given - what is the appropriate action / remedy?

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  • Notice of underletting not being given - what is the appropriate action / remedy?

    I own a freehold block of flats. Leases require that upon every underletting of the demised premises the leaseholder must within one month give notice in writing to the Freeholder or their solicitors, including full particulars, and pay the landlord a fee for registration of the notice. I've never really enforced it although a couple of new BTL owners have provided notice shortly after purchase on the advice of their solicitors.

    I've been having problems with one of the investment property owners who is making life unnecessarily difficult - regular ground rent arrears, abuse, etc.. - so I have decided to start exercising the clause. I have raised it with this leaseholder in the past and he said he needed to get legal advice and that was where we left it (about four years ago).

    Is there an appropriate action or remedy for his not having complied with this clause in the past? Any suggestions regarding going forward?

  • Lorimer
    replied
    The right to use the forfeiture route does not kick in unless the amount owed is £350 or more and/or the amount owed has been outstanding for 3 years or more. This amount owed can be comprised of ground rent alone or ground rent AND service charge.

    In your situation (with a lessee owned management company in day to day control of the service charges) you are not likely to know about any service charge debt unless the management company informs you. The management company could and should be informing you of any long-term or large service charge debts.

    In tripartite leases (such as the ones that you must have) it is normally stated that the management company owes a duty of care to the lessees AND the freeholder. Also, it is normally stated that if the management company fails to fulfil its obligations or becomes dissolved that the freeholder will take over the management of the development. It is under these headings that the freeholder can take action against the management company for failing to fulfil its obligations ....

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  • leaseholder64
    replied
    Please read the notice that you sent out with the ground rent demands. Unless the ground rent is extortionate, you won't reach the level of debt that allows forfeiture in one year, so it has to be allowed to accumulate.

    I don't think you can add interest unless the lease provides for it.

    What it lost is the right to forfeit, not the right to the money.

    The right to forfeit is re-instated the next year in which they default.

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  • Hooper
    replied
    Crikey. Thanks.

    Out of interest, if a lessee does not pay ground rent in a particular year when it was requested, must you stop requesting subsequent payments and seek forfeiture? Can you not add it to the following annual bill with interest? Is the lessee liable for all reasonable legal costs of seeking forfeiture? If so, must they then pay those costs before demanding the next ground rent demand otherwise freeholder forfeits right to them?

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  • Lorimer
    replied
    Originally posted by Hooper View Post
    So by accepting ground rent in January I waived my forfeiture rights up to that point but not in respect of breaches after that point. Does that sound about right?

    Obviously I'll be needing to instruct a solicitor shortly...
    Sounds about right, yes. And now that you have explained that there is a lessee owned management company responsible for the day to day management of the development, your solicitor may also advise action against the lessee owned management company for failing to fulfil its obligation to monitor lessee covenants ...

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  • Hooper
    replied
    So I have just read this in relation to waiver.
    • Breaches are either 'once and for all' (such as arrears of rent) or 'continuing' (such as failure to keep the premises in repair). Where a landlord acts in such a way as to elect to treat the lease as continuing, this will absolutely waive once and for all breaches, but will only waive continuing breaches up to the date of waiver. If the breach continues the following day a fresh right to forfeit will arise.
    I take it that this is continuing as it is his responsibility to notify again upon each new tenancy, so each time he does not do so he is in newly in breach. So by accepting ground rent in January I waived my forfeiture rights up to that point but not in respect of breaches after that point. Does that sound about right?

    Obviously I'll be needing to instruct a solicitor shortly...

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  • Hooper
    replied
    I'm not sure that there is really much point in transferring to a management co since obligations such as maintenance and insurance are the responsibility of a management wholly company owned by the leaseholders (one share each) - so not a lot to do vis a vis my remaining interest (unless I am mistaken!). I basically collect ground rent and note changes of interests. Only one of the freeholds (this one) requires notification of under-letting.

    I do have a written admission that the property is a buy to let and that the owner has never lived there and I immediately requested a list of underlettings to date. But yes, I have demanded ground rent since.

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  • Lorimer
    replied
    Breaches of the lease, such as failure to pay the service charge or ground rent rarely end up in a flat actually being forfeited. It is the threat of forfeiture that is sometimes required to enforce compliance with the terms of the lease though.

    Continuing to demand or receive ground rent or service charges once a breach has occurred has the effect of providing waiver. I could go into the ins and outs of forfeiture - such as the need to first get an admission or determination of the breach etc. but from what you have described, it might be better if you consider handing over the freeholds you still own to a managing agent - whose core business it is to manage all the lease covenants.

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  • Hooper
    replied
    Yes - I did wonder whether I'd possibly waived my rights.

    I first discovered he was not living there when he missed his third consecutive ground rent. He complained that I should have known he had never lived there (not sure how) and so had never seen the demands; at which point I pointed out the obligation to give notice of under letting and asked him to comply. He said he'd seek legal advice as he did not understand such matters - but that was four or five years ago. I own four or five freeholds left over form developments and it is not my core business so my mind was on other things. I have demanded and they have eventually paid ground rent every year since.

    If there is a forfeiture clause, have you any idea what is involved? I can't imagine that it actually comes to forfeiture!

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  • Lorimer
    replied
    If you know nothing, then assuming that the lease contains a forfeiture clause, I would pass the matter onto a leasehold law specialist.

    I would ask this solicitor to check whether or not you have 'waived' your right to forfeiture - since you state that you have already communicated with the miscreant investment property owners and (presumably) demanded/accepted ground rent and service charge payments from them since discovering their breach(es) of the lease. If said leasehold law specialist determines that you have not waived your forfeiture rights, then the solicitor can take on the entire matter for you (at the expense of the miscreant investment property owners).

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