Late ground rent and subletting

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  • chuck990
    started a topic Late ground rent and subletting

    Late ground rent and subletting

    Hi,

    I've ended up in a bit of a bad situation which admittedly, is mostly my own fault. I would however appreciate any advice on how to best deal with things going forward. I'll write a full explanation below (it'll be reasonably long, but hopefully clarifies how I've gotten here), but also some TL;DR bullet points at the end.

    I bought a flat to live in a couple of years ago. The company I worked for then went bust 6 months later and I had to move to find work. I found myself as an accidental landlord renting out the flat while I lived elsewhere.
    I gained consent to let from my mortgage company and when I looked in the lease, what I saw was a clause saying I wasn't to underlet for more than 3 years without the Lessors's consent. I didn't intend for it to be a longterm thing, so didn't contact the freeholder about it. I went through an estate/letting agents and asked them to forward me any mail that arrived, and also set up 6 (or maybe 12?) months of Post office redirection (which will have ended before xmas). The letting agents/tenants were very obliging in forwarding mail.

    I re-mortgaged the property earlier this year to a proper BTL mortgage as I am now fairly certain I wont be returning. This involved extensive communications with the freeholder and payment of their fees (I thought these high, but couldn't really afford to wait and argue them) for a notice of transfer and a certificate of compliance (stating I was not in breach of the lease).

    In July, to the email address which I used to correspond about the re-mortgaging, I received a "Notice Before action" relating to unpaid ground rent for both January and July. I hadn't received either the January nor the July demands, neither any reminders etc. so this came as a shock. If I were more diligent, I might have noticed that I hadn't paid ground rent in over 6 months, but it's notexactly something I think about very often!
    sent a cheque to cover the ground rent, but disputed the admin charges, seeking their justification and also pointing out I hadn't received the notices and as such rent couldn't have been due (this is on the assumption that mail is being forwarded as it has been in the past...).

    I have since re-examined the lease looking for admin charges on ground rent arrears, but I noticed that I hadn't fully read the sub-letting clauses. The clause I had read before did indeed say not to underlet for more than 3 years without written consent, but it also says "PROVIDED ALWAYS that" and includes further terms, including "the Lessee shall immediately register full details of all and any occupier of the demised premises with the lessor or its agent".
    I therefore have two issues to deal with; the grount rent admin charges, and registering the under-let.

    Ground rent - as above, I have sent a cheque for the ground rent, but it hasnt been cashed. I sent an email explaining this, asking them to justify the addition of admin charges but have had no reply. It may be that they replied by post and I have asked the letting agent to check with the tenants for anything that arrives for me.

    Sub-let - The tenants are due to sign a new AST shortly anyway. My current thinking is to just present that AST as if it were the first. If possible I dont want the ground rent situation above to let them know the tenants are already there. They will almost definitely try to elicit some fee for underletting (though none appears due in the lease) and I think I am in a better place to argue this if not already in breach.

    TL;DR version:
    • Freeholder chasing me for ground rent from both Jan and July
    • Notices didn't reach me (either not forwarded by tenants, or not received at all)
    • The arrears should have been brought up during a remortgage this year (as I was in breach of the lease, they should not have allowed a disposition)
    • They have added admin fees which I dispute
    • Lease makes no provision for the fees (to my understanding)
    • Re-reading lease has highlighted that freeholder should have been made aware of tennants (they as yet are not aware it is sub-let)
    • Tenants are due to sign a new lease shortly.

    Hopefully the above makes sense. As I say at the start, it's largely a mess of my own making, but I've not set out to do anything wrong! Can anyone offer any advice?

  • eagle2
    replied
    I would make enquiries from other leaseholders whether or not they are being charged and if so, how much are they being charged and are they paying the sums demanded.

    Collectively, it may be worthwhile applying to the FTT.

    Leave a comment:


  • chuck990
    replied
    To my mind the fees are completely illegitimate, but how do I get them to accept that? I've threatened FTT, but if that's cost prohibitive then what next?

    Is the best option to pay under duress, make a note of it and try reclaim at a later ate alongside further unjust fees?

    Leave a comment:


  • andydd
    replied
    Yes..good point...pretty certain extra fees cant be charged..just trying to play devils advocate..I suspect the Fh will have to back down on everything.

    Leave a comment:


  • Macromia
    replied
    Originally posted by andydd View Post
    ...not sure if a fee can be charge for subletting if no mention in lease, although I have seen it argued that it can affect the insurance so a bit of extra admin is required by the FH.
    If a FH is allowed to charge managing fees (or is employing a managing agent and the lease allows their fees to be charged to leaseholders), any additional admin required due to subletting should be accounted for in the management fees - unless extra admin fees are specifically allowed for in the leases.

    Leave a comment:


  • andydd
    replied
    Ok..sounds like you are mostly winning ...not sure if a fee can be charge for subletting if no mention in lease, although I have seen it argued that it can affect the insurance so a bit of extra admin is required by the FH.

    Leave a comment:


  • chuck990
    replied
    Sorry, to recap:

    They tried to add extra charges for late ground rent. Managed to get them to drop it and ground rent paid.
    They then also wanted £95 for registration of a sublet (despite there being no requirement in the lease). They have now agreed to lower this to £48.


    Outstanding balance: £48

    Leave a comment:


  • andydd
    replied
    Sorry..can you recap and remind us...are you being charged Admin Fees for late payment or for permission to sublet (or both)?

    For any amount under a couple of hundred..its not worth the hassle of an FTT claim even if you are 100% confident.

    We cant say how likely a win is...

    An FTT is a no costs forum, the FTT cant force the FH to pay costs except in extreme circumstances but some FTTs ask them to pay your application fees, etc..its a bit hit n miss

    Again, its unlikely you would get any costs, FTT operates on same basis as the "small track" at county court.

    Maybe....you can always pay under protest..this allows you to fight it in the future if lots of charges build up and you then apply to FTT.

    Yes..FTT fees have increased and it can be uneconomical if the FTT dont order fees paid back (of course this doesnt apply if the FH starts the case first).

    If I were you Id pay all ground rent but not the admin charges...(I put my foot down about this issue with my FH...and now he doesnt dare charge me an admin charge).

    Leave a comment:


  • chuck990
    replied
    Latest update:

    In a previous email, they argued that:

    "We deem our standard fee of £95 to be reasonable when handling retrospective registrations where the terms or timeframes set out in the lease have been breached."

    This annoyed me greatly as I have not breached the timeframe. I sent details of the tenants before the contract was signed, and the day it was signed I sent them a signed copy.

    They also claimed:

    "Devolve is open to two interpretations; at one level it’s the transfer of a legal interest from one party to another, so a transfer of the interest that is held. The alternative meaning denotes the transfer to a lower level. The word is therefore open to two interpretations . The former would not require notice of the sub-letting to be given to the landlord, but the latter interpretation would."

    Which A) Is a load of garbage and B) Would fall foul of the contra preferentem rule.

    In their latest email they have stated:

    "However, as a gesture of goodwill and in order to bring the matter to a conclusion we are willing to reduce our registration to £48 (£40 plus vat)"


    My question is, do I suck it up and pay this amount (which I find objectionable as it is still a fee not called for in the lease), or do I apply to the FTT?
    How likely is a win at tribunal?
    How likely is it that the FTT would make the freeholder cover the costs incurred?
    If the FTT does award costs, could they also cover my time spent in dealing with this matter?
    Does paying this pave the way for them to charge more trumped up fees with greater impunity?
    I worry that - even if successful at the FTT - I may end up having paid more in fees to the tribunal than I save myself here.

    One thought I had was to send a cheque for a smaller amount, £20 for example, stating that it was a gesture of goodwill on my part.

    Leave a comment:


  • chuck990
    replied
    Originally posted by eagle2 View Post
    You state at #25...
    This was just as a result of googling at the time, I dont have references to hand. These will possibly have been in cases with other developments/different leases



    Leave a comment:


  • eagle2
    replied
    You state at #25 that the freeholder has been successful claiming sub-letting fees in the past which appears to be surprising. Can you please let us have more details eg links to the decisions or the case references?

    Leave a comment:


  • chuck990
    replied
    But as in the case above:

    "it is clear to the Tribunal that the contra preferentem rule applies so that any ambiguity in the wording of the leases should be construed in the lessee's favour. "

    There is a specific section in the lease (not that shown above) that states the sub-let must be registered, but makes no mention of a fee for doing so.
    This catch all statement, which specifies many things which would alter the ownership of the property/its title, but nothing about sub-letting, is not a clear and unambiguous justification of a charge and as such I dont think it can be used to imply one.
    The lease refers to registration of a sub-let elsewhere with no fee, as you say eagle2, if the intention was to charge for such, it would be stated.

    I have also pointed out to the freeholder that the fee is not reasonable - £45 has been stipulated by the upper tribunal, and they have admitted that the only work carried out was to enter the names of the tenants on their system which doesn't justify 2x this fee.

    Leave a comment:


  • eagle2
    replied
    A lease would normally refer specifically to a tenancy agreement or an underletting if that was the intention. If you apply to the FTT, I would water it down to an unreasonable charge. You are not in a position to prove what is intended by the freeholder and the FTT does not have the jurisdiction to consider matters which are misleading or fraudulent, only the question in this case of whether or not an administration charge is payable and if so, the amount payable.

    Leave a comment:


  • leaseholder64
    replied
    It's a misuse of devolution, but "other matter affecting the premises" could well include sub-letting.

    Leave a comment:


  • chuck990
    replied
    Hi all,

    They are now of course trying to charge for sublet registration despite no call for this in the lease.

    They have pointed to the below clause in an attempt to justify the fee:



    "Clause 26 of your lease is referring to a “devolution” a tenancy agreement would constitute a devolution and would therefore require registering and payment made."

    My response is thatthe clause pointed to states that fees are payable on any "devolution of or transfer of title" however to my knowledge "devolution" of a title is the automatic transfer of said title, examples include inheritance after a death. The AST which is now registered makes no provision for any transfer of ownership of the title. I therefore consider this clause irrelevant.

    Is anyone able to confirm that their claim is incorrect? I have suggested that the next step is the FTT, but they say "We are entirely satisfied with our interpretation of the lease and your legal requirements.".

    I would argue that their arguments are intentionally set to mislead and that they are therefore fraudulent, but is this a sensible thing to suggest to the FTT?

    Leave a comment:

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