Late ground rent and subletting

[chuck990]

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?

[andydd]

GR is only payable if demands are sent..but all the landlord has to do is send them to your address...all the forwarding etc means it's a bit of a mess.

Extra admin fees are only payable IF the lease allows and IF you have been sent a proper Summary Of Rights - Admin Charges attached..again
.your forwarding situation confuses the issue.

the subletting is more serious as you could be in breach of the lease.

[leaseholder64]

Until a few years ago, your lease could have been forfeited if you didn't pay ground rent even without being asked. The formal notice was introduced to avoid dodgy freeholders deliberately not issuing notices then demanding large sums to avoid forfeiture. You would really have needed to be on top of scheduled expenses then, but even now, there is little excuse for not realising you were in default. I rather suspect the BtL landlords here don't take kindly to tenants who only pay following a formal demand, each month.

Some admin charges are payable under most leases for the costs incidental to forfeiture. There certainly will be costs in chasing a debt, although they should be only in double figures.

The fact that they are refusing to accept the payment is worrying as it suggests they know that accepting it will prevent forfeiture. How large is the ground rent (more or less than £350 owing)?

[chuck990]

Thanks for the responses.

The ground rent is £150 a year, (paid every 6 months). I found out yesterday looking at a bank statement that the ground rent cheque has been cashed which is good news! Though I have received no actual correspondence to state this.
Logging into my online account, it shows the credit of £150, but still admin charges of £96 outstanding. No risk of forfeiture here, but I don't want this £96 to sit outstanding until I try to sell etc.

I don't have an electronic copy of the lease, but will type out what I believe are the relevant clauses with respect to arrears when I get home from work.

I will also type out the full clause on subletting because I am more unclear on if/how they can justify charges here. It looks from the website as if this will be a £95 charge "to apply for, or register with us, your sublet agreement".

[Gordon999]

You can buy a copy of your lease from Land Registry

[leaseholder64]

The Land Registry copy will be just a scanned image. Sounds like the OP already has a paper copy.

[chuck990]

The Land Registry copy will be just a scanned image. Sounds like the OP already has a paper copy.

Indeed, I have a paper copy but no electronic version. I'll transcribe the bits that are useful rather than photocopying as its easier to copy/paste etc.

[chuck990]

Here are some extracts from the lease.

With respect to ground rent/admin charges:

Under “Agreements and Declarations”
IT IS HEREBY AGREED AND DECLARED as follows:
6.1 That if any rent hereby reserved or any part thereof shall be unpaid for thirty days next after the same shall have become due(whether the same shall have been lawfully demanded or not) or if any covenant by the lessee or condition herein contained shall not be performed or observed by the lessee then and in any such case it shall be lawful for the lessor or any person or persons authorised by it in that behalf at any time thereafter to re-enter the demised premises or any part thereof in the name of the whole and thereupon this demise shall absolutely determine but without prejudice to the right of action of the lessor in respect of any antecedent breach or non-observance by the lessee of the covenants or conditions herein contained PROVIDED ALWAYS that notice of contemplation of re-entry shall first be served on any mortgagee with an interest in the demised premises in respect of which details have previously been provided to the lessor and no re-entry shall be effected until the expiry of 28 days after the service of any such notice

In the Schedule “Covenants Enforceable by the Lessor”
1. To pay to the lessor or its authorised agent the rent hereinbefore reserved on the days and in the manner herein provided
2.1 To pay to the lessor or its authorised agent the lessee’s proportion of the service charge at the times and in the manner herein provided
2.2 To pay to the lessor or its authorised agent the lessee’s proportion of the insurance premium on demand
3. To pay at the rate of four per centum (4%) above Barclays Bank plc Base Rate from time to time on all sums payable by way of the rent service charges and insurance reserved under the terms of this lease which may be in arrear from the date 14 days after such payment shall be due until the date of actual payment
4. To pay all costs charges and expenses (including legal costs and fees payable to a surveyor) incurred by the lessor in or in contemplation of any proceedings or service of any valid notice under sections 146 and 147 of the law of property act 1925 including the reasonable costs charges and expenses aforesaid of and incidental to the inspection of the demised premises the drawing up of schedules or dilapidations and notices and any inspection to ascertain whether any notice has been complied with and such costs charges and expenses shall be paid whether or not forfeiture for any breach shall be avoided otherwise than be relief granted by the court
..
21. To comply in all respects at the lessees own cost with the provisions of any statute statuatory instrument order rule or regulation and of any order direction or requirement made or given by

and with respect to subletting:

In the Schedule “Covenants Enforceable by the Lessor”
25. Not at any time during the term to:
..

25.2 underlet the demised premises for a period in excess of three years without the prior written consent of the lessor or its agent (such consent not to be unreasonably delayed) PROVIDED ALWAYS that

25.2.1 any underletting shall be by means of an assured shorthold tenancy agreement or any other form of agreement which does not create any rights of tenancy for the tenant after the term of any such agreement shall have expired

25.2.2 the terms of this lease shall be incorporated in such underletting

25.2.3 the lessee shall immediately register full details of all and any occupier of the demised premises with the lessor or its agent

25.2.4 provide and replace where necessary a set of keys to the demised premises to te lessor or its agent for access

25.3 grant any underlease of the demised premises without the prior written consent of the lessor or its agents (such consent not to be unreasonably withheld or delayed)

[chuck990]

I have now received a response from the management company;

Thank you for your email. Please note that we have a 10 working day turnaround, due to the large volume of correspondence we receive daily.

Please find attached copies of both invoices that were issued in respect of the ground rent due on 1^st January 2018 and 1^st July 2018. Both invoices are valid in line with the requirements of Section 166 of the Commonhold and Leasehold Reform Act 2002.

As previously advised, it is the responsibility of the Leaseholder to ensure that the ground rent is paid in accordance with the terms of the lease. Your lease stipulates when the ground rent is due and for how much, and therefore you should be aware of when these payments fall due. We upheld our responsibilities within the lease by requesting the ground rent as required and further to this, we also sent 3 reminder letters as a courtesy. Please find copies of all three reminder letters sent.

As advised by my colleague, further to the three reminder letters, we also had to conduct an investigation on Land Registry to ascertain any other know addresses in order to continue pursuing the arrears. We incur a charge by doing so, administration work is considerably increased in the process and we send letters and emails to all addresses we have found.

The administration fees were added in in accordance with Section 158, Schedule 11 of the Commonhold and Leasehold Reform Act 2002. Here it states that we are within our rights to apply an administration charge “as part of or in addition to the rent which is payable […] in respect of a failure by the tenant to make a payment by the due date”.

I must stress that all statutory requirements were complied with and the onus falls on you to ensure that payments are made on time and in accordance with the lease. As a gesture of goodwill and to bring this matter to a close however, we have agreed to waive the £36 arrears charge on your account.

We look forward to receiving payment for the outstanding balance of £60 shortly.

I'm happy they've dropped the first charge, but the second (larger) one remains and I have two complaints about this:

1. They claim an investigation on land registry, I presume that means one of these, but if so, the fee is nowhere near £60, and I don't beleive they satisfy the requirements to carry out such a search. I am also fairly certain they haven't done it as I have had no letters to "all the addresses found" (there are at least 2 addresses they would find on such a search)

2. The have quoted from the definition of an admin fee within the Commonhold and Leasehold Reform Act claiming this gives them the right to add a fee... I very much disagree with this unless anyone can correct me?

These two points above seem to me to be deceptive at best; am I being unfair?

[andydd]

Yes they may have performed a land registry search whether it costs £60 is unlikely. . You could ask an FTT Court if it's unreasonable but it's not an excessive amount.

in any event I disagree with their 2nd assumption that they can charge admin fees...my understanding is that the CALRA they refer to simply provides a definition of an administration fee it doesn't mean it CAN be charged. ..to be chargeable there has to be some contractual provision. . i.e the lease has to allow such charges. ..this is a common confusion though and I've even seen some FTT courts not have a full understanding of it.

[andydd]

Just had a double check and yes I'm right s158 is clear that it is just "the meaning of an administration charge".. it is NOT a right to charge one.

I've prob got some case law somewhere that you can quote to them..I'll have a poke around.

[andydd]

They are wrong when they claim "Here it states that we are within our rights to apply an administration charge “as part of or in addition to the rent which is payable […] in respect of a failure by the tenant to make a payment by the due date”."

S158 does not say that. ..they've added the we have a right to charge bit...if you read the actual legislation doesn't say that at all.

https://www.legislation.gov.uk/ukpga...15/schedule/11

[andydd]

here ya go..there is prob better case law..but this one the judge is clear that for late payment fees to be charged...there must be specific wording in the lease.

https://decisions.lease-advice.org//...-6000/5359.pdf

[chuck990]

Thank you! The precedent from that will be really helpful.

Where they refer to the Commonhold and Leasehold Reform Act they are only quoting from the definition of what an admin charge is. It seems rather blaze to me to use that as justification
The lease contains no mention of admin charges so I'll reply with the relevant example and state that it's simply not due .
If they however refuse to remove it from the account what can I do? Do I need to apply to the tribunal? Do I need to pay and then apply?

[andydd]

Many freeholders and even some courts find it confusing..it's a pity that it isn't spelt out a bit clearer.

Did they send you this - http://www.legislation.gov.uk/uksi/2007/1258/made

Many freeholders forget it..without it you owe nothing. .although clearly it can easily be fixed by (re)sending it to you.

Id write back and pay what you owe for ground rent if you haven't already and be as reasonable as possible. Say you have consulted the law, point out the above etc and invite them to make an application to the FTT bit say if you are correct you will ask the FTT to award you costs etc.

some may say apply yourself however the fees etc are now quite high...I did my application whilst out of work so fees were low/none.

Have a browse at court and FTT cpr rules and ore action protocol...you want to be able to show a court/FTT (if it gets that's far) that you are the reasonable party with the law on your side and that you did everything possible to try and resvery it and avoid legal action.