The Freehold Company wants to enforce a new lease

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    The Freehold Company wants to enforce a new lease

    Hello..and I hope you can help me ...
    The Board of the Freehold Company ( the residents are shareholders & leaseholders) are proposing a new lease.
    Initially, they proposed to proceed to an 'amendment' as certain terms of the lease have been obsolete for more than 25 years.
    But now they have presented us with a 'new lease' and they are asking us to 'surrender' our leases. The new lease has premium 'nil' and many newly introduced terms, that are imbalanced and unfair. Importantly, they are introducing the idea of a 'superior landlord' that may belong to a group of companies.
    On the one hand, they are saying that it is our choice to sign this new lease but on the other hand they bluntly say that if we don't sign it we will be liable for a breach of our lease. These alleged breaches are omissions of the previous boards. Also, whenever a resident expresses a concern, the reply is that their actions will constitute a 'nuisance' to the company.
    The residents are elderly and vulnerable. The Board has said that whoever tries to talk to a resident about the new lease will be accused of 'harassment'. The Board said that the company is going to pay for the new lease and the rectifications of the breaches. The residents who will choose not to sign the new lease will be held accountable for the breaches of the lease and they will have to pay the expenses out of their own pocket.
    What they didn't say is that they are going to use the service charge money to pay for the new lease. The service charge budget never had a designated fund for a new lease. The reserve fund was designated for major works.
    I can't tell more things but in short voting the Board off, as things stand, is not an option.

    How does it make sense that we will have to surrender a lease that is worth thousands of pounds and then receive a piece of paper that says that it is let to us at no premium?
    If I read the terms well, it seems as if a superior landlord could terminate the lease easily and we wouldn't get any compensation as we have no financial interest invested. This prospect is scary.

    Could you please advise what we can do to safeguard our rights? Can they just do whatever they want?

    Thank you for your time in advance.

    #2
    You cannot be forced to agree to a new lease.

    Leaseholders have every right to express concerns about the proposals - and the "Freehold Company" should listen to, and address these concerns. Raising concerns does not count as a "nuisance" in the legal sense, which is what the company seems to be suggesting.

    Speaking to other residents about the new lease could potentially be considered to be harassment, but the freehold company does not decide that. If an individual resident does not want to discuss the new lease with someone, and that person continues to repeatedly try and get them to talk about it, it is only the individual leaseholder who may be able to claim that they are being harassed.

    The freehold company cannot use reserve funds for any purpose that the (current) leases don't allow. It is unlikely that the costs of bringing in new leases would be something that is allowed, but it is possible.

    The introduction of new leases is something that should only have been pushed forward after appropriate discussion, in accordance with the company's articles, and after being voted on by the shareholders. Even then, leaseholders who do not wish to surrender their current lease are not obliged to do so.

    If there are breaches of the current leases that have been overlooked in the past, it is possible that the company can start to enforce these now (although it may be the case that, if the breaches are minor and have been ignored for long enough, any attempt to legally enforce them now will fail).

    How much of this do you have in writing?
    If you have evidence of some of these claims, then the "freehold company", or at least the directors, are likely to be on very dodgy ground legally. If they sent out a letter containing threats that breaches that had previously been overlooked would be enforced if the new leases aren't signed, this is likely to be very close to blackmail (if it hasn't already crossed that line).

    Collect together all of the evidence that you have, find out how many other residents are concerned and able to contribute towards legal costs, and then seek professional legal advice - it sounds like you are going to need it.

    Oh, and I don't think that the amount of premium paid affects the value of a property, so that bit at least you shouldn't have to worry about.

    Comment


      #3
      Whilst a lot of what they are doing is wrong, surrendering a lease and replacing it at nil premium is generally a good thing, as long as there are other benefits. Being bale to do this when extending a lease is one of the touted benefits of initially buying out the freehold.

      I'd need to see the wording to understand the superior landlord bit. It may or may not be of real significance to you.

      Comment


        #4
        Dear Macromia and Leaseholder 64,
        Thank you for your comments.
        We have everything in writing - thank God.

        There are many points in the lease that sound alarming.
        In the current lease, we are called 'owners' and the property is demised to us. The new lease says that the Company is 'letting' it to us for the consideration and the terms in the lease. We are only entitled to 'hold and use' the property - for 999 years. This sounds as an extension to the lease we have now but why isn't there any reference to the current lease? There is a term that says that we don't have any rights, privileges and section 62 of the Landlord and Tenant act does not apply. There are other points that it is obvious that they are making sure that no one will ver be able to buy the freehold. It seems that they will be able to define which utility provider we will be using, too!!! The proposed lease seems like one for those who are short-term tenants - for example we would be in breach of the lease if we didn't clean the windows regularly or overload the floors.
        It seems that the lease talks about 'permitted use and occupation'???. The 'covenanter' is called 'the permitted occupier of the land and premises'.

        No benefits come with the 'nil' premium - in fact, benefits have been removed and they make sure that no resident will ever be able to challenge the mismanagement of the estate as they will be paying the landlord's legal expenses as well. I know this seems to be a standard term but it is unfair and imbalanced.

        If the premium is 'nil' and the new terms don't give us rights, in case of a termination of the lease, how would one determine the landlord's and the tenants interests?

        We are a RMC - why would the Board and the solicitor write a lease that allows the freehold to be owned by a 'superior landlord, which may belong to a group of companies'?

        The new lease also talks about VAT and Tax - I think the service charges are exempt from VAT and corporation tax.
        They talk about 'landlord's fixtures and fittings' being part of the property but they are not defined???
        They talk about interest 4% over the Bank of England base rate - I guess this is for those who don't pay the service charge.

        They say that if we don't sign the lease, the next owner will have to sign the lease. What if we lose a buyer because they will also think that this not an acceptable contract?

        Thanks.





        Comment


          #5
          You definitely need to seek professional legal advice, preferably from someone who understands both leasehold law and company law - because there may be issues with both that affect your particular case.

          It is not possible for contributors here to give more than very general comments because proper advice will require both your current lease and the proposed new lease to be carefully examined, with the pros and cons of both properly explained to you.
          It may be that some of the things that you consider to be unfavourable aren't really a problem (for instance, although your current lease might say that you own the property, the reality is that you only own the lease, and are therefore only leasing the property for the number of years that the lease states - if this is less than 999 years, you would be getting at least one benefit from the new lease).

          The value of your lease does not depend on the amount of the premium, and your lease cannot be "terminated", at least not without mutual agreement (that would take into account the value) or legal proceedings scubas forfeiture.

          I am curious about the situation in the freehold company, and how directors who seem to think they can force everyone to accept changes like this have managed to take control. I'm also curious about what they expect to personally gain from this.

          Comment


            #6
            The bit replacing demise is just an attempt to rewrite in modern language. The only place I'd expect to find a reference to the old lease is in the definition of the "consideration". (I might be a bit concerned if it wasn't defined.) As already pointed out, "owner" was either wrong in the original, or defined to have a meaning other than the normal legal meaning.

            The 1985 Act never had a section 62. In the 1954 Act, that section appears to have been completely repealed In the 1987, it is the short title, so excluding it makes no sense.

            Requiring you to clean the windows is a reasonable expectation in a long lease. Overloading the floors certainly needs to be covered by something; it might previously been covered by a requirement not to do anything that might harm the ability of your part of the building to support and protect the other parts. Cleaning the windows may be difficult to enforce. Overloading the floors is something that ought to enforced as a priority. Generally long leases have more details in their restrictions than short ones.

            Landlords fixtures and fittings are defined by established law, and they are not fixed for all time. Generally anything that you fix to the property becomes the property of the landlord.

            The benefit of the nil premium is that, normally, you would have to pay a five figure premium to extend the lease and you are not doing so.

            Most of what you are concerned about is likely to be the result of your not knowing how to read legal documents.

            Generally, if replacing a lease you should have an independent legal professional working for you to make sure your interests are protected, unless the change is very simple and obvious.

            Comment


              #7
              Thank you for your time and your advice.
              As it is a public forum, I can’t give more details.
              the current lease is 999 years, so there is no benefit at all. This is not an extension. A new Lease is granted, with no references to the current one.
              There is no mention about what the consideration is.
              The lease can be terminated if there is a fire or a disaster and the landlord doesnt have the funds to rebuild the properties. The properties are underinsured at the moment.


              Comment


                #8
                The lease will almost certainly not make provision for the reserve fund to be used to pay the legal costs of new leases.

                However whilst the behavior of your fellow directors is probably wrong for reason I outlined above there is a very real problem that needs to be resolved. That is your existing leases are not acceptable security to a lender. Some may grant mortgages with an indemnity policy, others wont. This will impact on your sale prospects.

                Because of recent press coverage on leasehold, practitioners are looking at leases terms more critically than before and your lease will be seen as a problem. Also the fact it is not in line with others will cause problems for all

                Maybe there is a time to be pragmatic and if ALL the residents agree to the leases and the funds are taken from the reserve no one is prejudiced and a real problem is solved

                You can win your argument and refuse to sign the new lease but I doubt this will be in your long term interest

                Comment


                  #9
                  Thank you sglacy. The recent press coverage for the lease terms is exactly why I am worried. The newly introduced terms are the ones that people are fighting against. I also feel blackmailed for alleged omissions / breaches that previous Boards did. There was no reason for a NEW lease with new and different terms to the one we have. A deed of variation would suffice.

                  Comment


                    #10
                    You definitely need advice from a specialist solicitor. I suggest that you ask other leaseholders to share the cost. The legal expenses are probably not allowable as service charge expenditure. I doubt that the reserve fund could be used for that purpose but you should check what happens to a reserve fund balance when the old lease comes to an end, it may well be transferred to the freeholder.

                    Comment


                      #11
                      Originally posted by sgclacy View Post
                      That is your existing leases are not acceptable security to a lender. Some may grant mortgages with an indemnity policy, others wont. This will impact on your sale prospects.

                      Because of recent press coverage on leasehold, practitioners are looking at leases terms more critically than before and your lease will be seen as a problem. Also the fact it is not in line with others will cause problems for all
                      What reason do you have for considering the OP's lease to not be "acceptable security" to a lender?
                      I see no reason to conclude that this problem exists for the current leases if all remain the same.

                      If some leases are changed this might lead to a problem, but if that is the case it is possible that there could potentially be a case made against the freehold company, and perhaps its directors, for any resulting losses. Perhaps not, but forcing through lease changes which don't have 100% agreement or a tribunal/court decision in their favour by getting enough changed voluntarily to make the remaining leases difficult to sell is definitely side-stepping the spirit of the law.


                      I fully agree with the suggestions that have been made that the OP might find that the new lease isn't as unfavourable as initially thought once an appropriate solicitor explains it - although at least some of the new clauses that are apparently being introduced do seem unfavourable, and potentially unfair (e.g. the clause allowing recovery of legal costs may well be used to prevent even reasonable challenges to service charges).

                      Comment


                        #12
                        Your group of leaseholders should take a draft copy of new lease and consult a solicitor specialising in Landlord & Tenant Act matters and get some comments on whether it is the terms are the same as a statutory 90 years lease extension.

                        Check if the new lease states the annual ground rent is a peppercorn throughout the 999 years .

                        Check the new lease states the Lessor is the current RMC

                        If you have any doubts pay for a consultation by the FPRA and get the lease reviewed by their solicitor.

                        FPRA website ( https://www.fpra.org.uk/ ) .



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