Freeholders and Sub-tenants

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    #16
    Thanks for your comments Lawcruncher,

    Regarding your first paragraph, I appreciate the further clarity on how a covenant of quiet enjoyment should be interpreted.

    Briefly regarding your second paragraph, the sub-tenants have been in occupation since 2004, so I wouldn't call it a short term underletting. Nothing has been raised with the leaseholder yet regarding this matter. Would it be unreasonable in your view to expect the covenant to be complied with?

    Comment


      #17
      Originally posted by Lawcruncher View Post
      As to the lease clause quoted, the tenant is in breach. I could comment at length on the suitability of the covenant overall, but will just say that it is wholly unreasonable to require a deed in the terms expressed if the underletting is for a short term.
      Is your issue with the such deeds in general, or with the failure to restrict it to those covenants (typically the ASB ones, and in particular, excluding service charge payments) that are relevant to the sub-tenant.

      There is, I believe, a common problem that sub-landlords use standard tenancy agreements that fail to reflect the restrictions (or even easements) in their own leases, resulting in a position where the freeholder can act against the sub-landlord but the sub-landlord can do nothing other than wait until section 21 is possible. Also, cutting out absentee landlords can make it much easier to deal with errant sub-tenants.

      ram seems to favour such terms for these reasons.

      Comment


        #18
        Originally posted by Lawcruncher View Post
        A covenant for quiet enjoyment is an agreement by the landlord that he will not physically interfere with the tenant's enjoyment of the property whoever is in occupation. Knocking on the door and asking nicely if you can check where a leak is coming from is not a breach of the covenant - nor is it a breach of the covenant to give notice before inspecting.

        As to the lease clause quoted, the tenant is in breach. I could comment at length on the suitability of the covenant overall, but will just say that it is wholly unreasonable to require a deed in the terms expressed if the underletting is for a short term.
        At what point is there a breach of the covenant for quiet enjoyment? There must come a time when the freeholder has requested access on a number of occasions and found no evidence of leaks that asking again must be considered to be unreasonable.

        If the tenant is in breach, what remedy is available to the freeholder? Assuming that is that the freeholder can prove the breach,

        Comment


          #19
          Originally posted by cday356 View Post
          Briefly regarding your second paragraph, the sub-tenants have been in occupation since 2004, so I wouldn't call it a short term underletting. Nothing has been raised with the leaseholder yet regarding this matter.
          A tenancy is regarded as short term if (a) it is periodic or (b) it is granted for a short term. If one short term tenancy follows another the aggregate is not regarded as amounting to a long term. What is considered short term depends on the context, but in any context a fixed term of three years or less has to be a short term.

          Originally posted by cday356 View Post
          Would it be unreasonable in your view to expect the covenant to be complied with?
          I can see a court finding that obtaining the deed of covenant is a condition of granting an underlease and if the tenant cannot procure the deed he ought not to do the underletting. An argument against that is that the requirement effectively prevents the sort of sub-letting which is not otherwise prohibited because no potential short-term sub-tenant aware of the implications of signing such a deed would sign it. Signing the deed would make the sub-tenant liable to observe all the covenants on the part of the tenant contained in the long lease including the covenant to pay rent and service charge and that has to be unreasonable - at least from the sub-tenant's persepective.

          For further observations on deeds of covenant see my next post.

          Comment


            #20
            Originally posted by leaseholder64 View Post
            Is your issue with the such deeds in general, or with the failure to restrict it to those covenants (typically the ASB ones, and in particular, excluding service charge payments) that are relevant to the sub-tenant.
            Concentrating on underletting:

            The requirement to obtain a deed in the case of long residential leases is comparatively recent. It was always much more prevalent in commercial leases, the requirement usually being to enter into the covenant in the licence to underlet. The reason is because the reversion of a property let at a rack rent for a short or medium term is much more valuable than the reversion of a property let for a long term and the landord is keener to see the tenant's covenants complied with to preserve the value of his investment.

            A standard provision would require the undertenant to comply with all covenants in the superior lease other than that to pay rent (and perhaps the insurance premium and any service charge). When approving new leases I would change the requirement so that the obligation was not to do anything which would be a breach of the superior lease. That gives the head landord (who already has a covenant from his tenant) the ability to stop undertenants doing things they should not rather than requiring them to do things the tenant should be doing. It also allows the tenant more freedom to negotiate terms with a prospective undertenant. If the tenant has an FRI lease any undertenant taking a short term will want hi lease on less onerous terms.

            The standard commercial clause found its way into long residential leases without modification - although in this case the saving for rent and other money payments is not included. As I said in my previous post, such clauses fetter the tenant's ability to underlet for a short term. Requiring some degree of privity of contract between head landlord and undertenant is not unreasonable, but it needs to be limited to what is reasonable.

            Originally posted by leaseholder64 View Post
            There is, I believe, a common problem that sub-landlords use standard tenancy agreements that fail to reflect the restrictions (or even easements) in their own leases, resulting in a position where the freeholder can act against the sub-landlord but the sub-landlord can do nothing other than wait until section 21 is possible. Also, cutting out absentee landlords can make it much easier to deal with errant sub-tenants
            The use of standard documents for short term underleases is not to be recommended. Ideally, the agreement should be drafted by someone who knows what he is doing and who has read the long lease. The problem with that is the likely expense. One reputable agency chain i acted for declined to provide tenancy agreements for leasehold properties. Letting agents (and indeed all non-lawyers) preparing any sort of legal document as part of their service should bear in mind that the law expects the same standard as it expects from lawyers.


            Comment


              #21
              Originally posted by eagle2 View Post
              At what point is there a breach of the covenant for quiet enjoyment? There must come a time when the freeholder has requested access on a number of occasions and found no evidence of leaks that asking again must be considered to be unreasonable.
              The wording of any clause allowing inspection cannot be taken literally, It is implicit that the right must be exercised reasonably. I think the point probably comes when the course of action would be regarded as wholly unreasonable and certainly when it amounts to what would be harassment or some other offence.

              Originally posted by eagle2 View Post
              If the tenant is in breach, what remedy is available to the freeholder?
              Three remedies are available for breach of covenant:

              Injunction. Not applicable as the court cannot order the tenant to do something which requires the co-operation of a third party.

              Forfeiture: I cannot see a court ordering forfeiture.

              Damages: Going to be nominal if the landlord has suffered no loss.



              Comment


                #22
                Hi Lawcruncher,

                Thank you greatly for your constructive comments, you have given me a lot to think about.

                In your view, does the sub-letting clause in our lease indeed give us the right to ask the sub-tenant to be liable for observing even the covenants to pay rent and service charges? I've seen other commenters on the forum often dismiss the idea that such a clause could be interpretted to include money payments, so I've always assumed the same.

                Regarding the leaseholder's failure to obtain a deed of covenant as a condition of granting his underlease, even if the court did determine that a breach had occurred on the one hand, could the court on the other hand also take the view that the breach had nevertheless been waived by virtue of how much time had passed since the breach?

                Wouldn't there be at least some remedy that the Freeholder could pursue to see that this subletting covenant is complied with? Would an order to comply with the terms of the lease or termination of the sub-letting not be relevant here as a remedy?

                *Edit: I have edited my post due to a misunderstanding on my part. Apologies for any confusion caused.
                Last edited by cday356; 16-06-2019, 23:08 PM. Reason: Have edited my post to account for a misunderstanding on my part. Apologies for any confusion caused.

                Comment


                  #23
                  I am not aware of any ruling which says that a covenant to pay rent is excluded from a requirement for an undertenant to observe the head lease covenants.The fact that the covenant to pay rent is often excluded suggests, but does not confirm, that it would be included.

                  Under the law of limitation, the right to sue for a breach of covenant cannot be exercised after 12 years have elapsed. Each time the tenancy is renewed there is a fresh breach which restarts the clock. However, the date 12 years after the breach is only a long stop after which action definitely cannot be taken. There is still a requirement to take action within a reasonable period. Given the nature of the breach I would say a reasonable period is quite short.

                  There is no action a landlord can take to require the breach to be remedied because the court cannot require the sub-tenant to enter into the deed.

                  The sub-tenancy cannot be unravelled because it was not granted in breach of covenant - the breach is not granting the sub.tenancy contrary to any covenant, but failing to obtain the deed. Even if the sub-tenancy was granted in breach, it would still be a lawful tenancy, though the breach would render the head lease liable to forfeiture. If a head lease is forfeited any sub-lease falls with it, but the chances of a ladlord forfeiting a long lease for which a full premium has been paid are remote.

                  Your real problem here is sorting out the damp. Whilst if you are in dispute with someone it is a good idea to investigate how many strings you have to your bow, I think that the absence of a deed of covenant where the sub-tenant as been in occupation since 2004 and you are deemed to have purchased with full knowledge of the breach is pretty much a non-starter.

                  Comment


                    #24
                    Many thanks for the explanation by Lawcruncher

                    My apologies to cday356 if I have caused any confusion, it just proves that you can always learn something no matter how many years you have been involved.

                    I still consider that you should give the leaseholder reasonable notice to gain access to his flat. I suggest that you need to be careful to have a valid reason, seeking to enter when there is no realistic chance of finding evidence of a leak could be considered to be unreasonable. On the other hand seeking to recreate the problem and identify the source could be regarded as reasonable. Presumably you consider that the leak comes from an overflow.

                    Comment


                      #25
                      Not sure if the point needs clarifying, but the fact that the terms of the tenancy require notice for an inspection does not mean that landlord and tenant cannot agree to dispense with the notice. A landlord is as free as anyone else to knock on the tenant's door and there is no reason why the agreement cannot be reached on the doorstep.If the occupant declines to allow access the landlord is best advised not to call again later, but to follow the procedure set out in the lease. Whether calling again amounts to harassment or some other offence, or a breach of the covenant for quiet enjoyment or is a derogation from grant has to depend on all the circumstances incuding how the landlord goes about things. If the problem is urgent and/or serious the landlord is entitled to take press his case so long as he remains professional.

                      Comment


                        #26
                        Lawcruncher - I am not disagreeing with you

                        I agree that it was reasonable for the freeholder to call and seek entry with the contractor and there could have been a simple agreement at the time. However, the leaseholder has now stated that he needs more notice than someone expecting access on the same day. That seems to be a reasonable request, unless there is a genuine emergency, considering that he does not reside at the property and he needs to make arrangements with his tenant. I am suggesting that the freeholder takes extra care considering the current relationship with the leaseholder in order to avoid a claim of harassment. Both parties seem to be questioning the motives of the other, so a carefully worded letter or email explaining the problem and the reasons for requiring access would assist the freeholder, who has agreed that communication in the past could have been better.

                        Comment


                          #27
                          Lawcruncher, thank you once again for your observations.

                          Comment


                            #28
                            Hi Eagle2,

                            No need for any apologies. Your comments on all points have been of great help.

                            For clarity, we have now written to the leaseholder twice giving him an open opportunity to suggest a date and time that is convenient for him. He has responded to both correspondences and refused to provide any date whatsoever and has instead said that he will not provide access unless we progress his lease extension and unless we take action on three other points as well. Only then, once these points have been addressed, will he consider providing access. Even if we started his lease extension, and addressed his other points in some way, that would take many months. I do not consider that timeframe reasonable, even if I considered those preconditions to be reasonable, which I do not think they are. Given the leaseholder's responses, there is no need for us to make any further informal requests as I believe we have his answer. Indeed, as you point out, we should be cautious to avoid a claim of harassment, so I think we should avoid communication as much as possible from now on. It seems our only option now is to take some manner of legal action.

                            We have also received a letter from the council invoking relevant legislation and obliging us to take action to investigate under health and safety at work legislation, and the inspector advises we are also obliged to take legal action (such as a court order) under the landlord and tenant act. He is well aware of all the circumstances, and agreed that all traces of the leak have probably dried up by now, but still believes we have a right and are obliged to investigate due to the risk of electrocution and danger to life under the circumstances that water is making contact with the electrics. So actually I'm not sure it's even an option for us to not investigate.

                            There are two possible causes for the leak as far as I have been advised (there could be others but I know next to nothing about such things!). One as you suggest could be the sink/bath overflow. The other could be significant water spillages in the bathroom area where water is seeping through gaps in the sealant/grouting. If it is either of these, we should be able to recreate the leak. In a way, we already know that the area around the base of the sink pedestal is not watertight because a previous leak in 2016 had been caused by a broken waste trap pipe belonging to the sink in the bathroom, and water that had collected on the bathroom floor around the sink pedestal came straight down into our commercial premises below. (Incredibly, before our plumber was allowed access to identify the cause in 2016, the subtenants claimed that they had inspected the bathroom themselves and could find no problems.) We know that the tenants, based on what they admitted to us, were undertaking a substantial amount of washing in the bathroom area at the time of this most recent water leak as well as the last in 2017. Perhaps hand washing of clothes etc. So the leak could very well have come from an overflow or water spillages around the base of the sink, bath etc.

                            We had an opportunity following the water leak in 2017 (so before this most recent water leak occurred) to be present when the leaseholder's plumber inspected the flat. Unlike our plumber in 2016, the leaseholder's plumber never ran water in any of the bathroom/kitchen areas. Therefore, I cannot see how he could have identified a leak from an overflow, and there was certainly no attempt to recreate the leak or to test sealant/grouting etc. Nor was there use of any water detection equipment. A plumber from the same company was called out by the leaseholder following this most recent incident. He did not even have access to the commercial unit below because the leaseholder did not inform us of the time of the plumber's arrival (early morning). The plumber arrived outside of our normal opening hours. So I question his investigations and any associated conclusions he may have come to. I am indeed very anxious that we will not find the source of the leaks, but given the above, I do remain hopeful that we might, once given access.

                            Comment


                              #29
                              Giving an extension will wipe the slate clean of previous breaches!

                              Comment


                                #30
                                Also worth pointing out that the leaseholder actually travelled down to inspect his flat in late May following our written request for access. We could have arranged for our contractor to come out on that day with the leaseholder present, but he never informed us that he would be there. So this is not about him needing more notice to make arrangements to be present and grant access. He just does not want us to investigate and by laying down various (unreasonable) preconditions is being careful not to explicitly articulate his intentions in so many words.

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