License to Alter Premium Query

[jazzythumper]

We previously extended our leasehold flat with a kitchen extension and separate summerhouse, we had the amount that this would increase the value of our flat valued by a chartered surveyor and paid a premium that was approximately 1/3 of the value for the license to alter to be granted.

We now would like to do a further small extension to the summerhouse and these works have been valued at increasing the value of our leasehold by £15k, our freeholder is trying to charge us nearly £15k for this licence, we feel this is unreasonable, based on the previous license costing 1/3 of the increase in value and feel a premium nearer £5k would be appropriate. We have explained this to them, but so far they are unwilling to budge.

Are we stuck in a position where if they are unwilling to negotiate we will have to pay that figure, or can we take them to a tribunal in order to agree what we feel would be a more sensible fee?

[AndrewDod]

On whose land are you building?

[jazzythumper]

On whose land are you building?

We are building on land that is within our demise

[jazzythumper]

This article here would suggest that they should not be charging a premium at all.

https://www.lease-advice.org/article...-be-justified/

What are peoples opinion on this?

[jazzythumper]

Also the exact clause in our lease is

"Not at any time during the term to make any alterations or additions to the Demised Premises or to cut maim alter or injure any of the walls or timbers thereof or to alter the Lessor’s fixtures therein without first obtaining the written consent of the Lessor (such consent not to be unreasonably withheld or delayed)"

Is charging us £15k unreasonably refusing consent as the article above suggests?

[scot22]

I believe making consent subject to that fee is unreasonable. Is it worth a few hundred, have a limit, to involve a solicitor ?
Look for free initial consultation.

[Lawcruncher]

"Not at any time during the term to make any alterations or additions to the Demised Premises or to cut maim alter or injure any of the walls or timbers thereof or to alter the Lessor’s fixtures therein without first obtaining the written consent of the Lessor (such consent not to be unreasonably withheld or delayed)"

As consent cannot be unreasonably withheld no premium can be charged. Statute is clear:

In all leases whether made before or after the commencement of this Act containing a covenant condition or agreement against the making of improvements without a licence or consent, such covenant condition or agreement shall be deemed, notwithstanding any express provision to the contrary, to be subject to a proviso that such licence or consent is not to be unreasonably withheld; but this proviso does not preclude the right to require as a condition of such licence or consent the payment of a reasonable sum in respect of any damage to or diminution in the value of the premises or any neighbouring premises belonging to the landlord, and of any legal or other expenses properly incurred in connection with such licence or consent nor, in the case of an improvement which does not add to the letting value of the holding, does it preclude the right to require as a condition of such licence or consent, where such a requirement would be reasonable, an undertaking on the part of the tenant to reinstate the premises in the condition in which they were before the improvement was executed.

You should never have been charged before. Ask for a refund. Was the surveyor acting for you?

[jazzythumper]

Thanks Lawcruncher, very helpful.

The previous license was complicated and we had to remove and replace part of another flats demise that was owned by the freeholder as part of the works, so I am not too worried about that, without paying compensation we wouldn't have been able to do the works.

But this extension to our summerhouse does not affect any other demise.

How do you suggest we proceed on this? By making their offer have they unreasonably withheld consent? We have made a counter offer of significantly less money than what is proposed as we thought it would be the route of least friction.

What's the best way to proceed forward from here?

[jazzythumper]

Just wondered if anyone had any further advice on this?

Thanks

Jazzy

[trespas]

The £15k you mentioned above - is that the ‘profit’ from doing the works, or the total uplift in value? I.e. is it that your extension costs are, for example, £10k, and the total estimated increase in property value is £25k, and it’s the profit on which that they’re demanding the premium?

I’ve read conflicting accounts regarding whether the freeholder asks for a %, either the total uplift value, or the profit. If they’re requesting based on the former, could you push them to taking a % of the latter instead?

[Section20z]

Just do it, let them try and sue you.

[Lawcruncher]

I’ve read conflicting accounts regarding whether the freeholder asks for a %, either the total uplift value, or the profit. If they’re requesting based on the former, could you push them to taking a % of the latter instead?

There are two possibilities:

1. The lease has an absolute prohibition on making the alterations the leaseholder wants to carry out. If that is the case there is no obligation on the landlord to give consent. He can demand whatever premium he wants and the leaseholder either accepts or he does not. No valuation formulae apply.

2. The lease has a qualified prohibition on making the alterations the leaseholder wants to carry out, that is the lease says that they cannot be carried without the landlord's consent. If the lease says that then (if the lease does not so provide) the consent must not be unreasonably withheld. The law goes further and says that the landlord is entitled to (a) compensation if the alterations diminish the value of his interest and (b) payment of any expenses incurred in connection with the granting the licence. If the alterations do not decrease the value of the landlord's interest the landlord is not entitled to a premium and since he is not entitled no question arises as to how it should be calculated.

[Lawcruncher]

Just wondered if anyone had any further advice on this?

Thanks

Jazzy

You are in the classic situation of someone who has rights which can only be enforced by action which risks legal costs wholly disproportionate to any benefit which may be obtained.

I think the first step is to put the landlord right on the law quoting section 19(2) of the Landlord and Tenant Act. If you make no progress, the following options are available:

1. You engage a solicitor in the hope that that shows you are serious and they will sit up and take notice. The snag with that is that it is not too difficult these days to run up a four figure bill without achieving anything.

2. You threaten legal proceedings. Whether you actually take them requires careful consideration - see comment above.

3. You give notice to the landlord that consent is being unreasonably withheld and that you propose to proceed with the works within whatever period you consider reasonable - I suggest a month is more than reasonable. If you are going to go ahead without consent you need to be very confident that consent is being unreasonably withheld. It is of course also a risk. You have to weigh up whether you think the landlord will risk the expense of litigation. The main snag is if you want to sell within 12 years as you have no consent for the alterations.

4. You forget the whole thing.

[jazzythumper]

The £15k you mentioned above - is that the ‘profit’ from doing the works, or the total uplift in value? I.e. is it that your extension costs are, for example, £10k, and the total estimated increase in property value is £25k, and it’s the profit on which that they’re demanding the premium?

I’ve read conflicting accounts regarding whether the freeholder asks for a %, either the total uplift value, or the profit. If they’re requesting based on the former, could you push them to taking a % of the latter instead?

The £15k is the total uplift in value, not profit.

[jazzythumper]

Thanks for all your help LC

I spoke to The Leasehold Advisory Service, and have come to the conclusion that we should try and propose / negotiate the following.

We note that the you are trying to charge us £15k for the premium to build an extension to our property.

We have taken some legal advice and there are routes under the Landlord and Tenant Act and Commonhold and Leasehold Reform act that mean we shouldn't have to pay anything apart from the administrative costs for a license to alter.

This is not a preferred route as previously discussed we're prepared to avoid this and pay £5k for the license.

If we can't a agree a sensible figure for this license based on the fact that our proposals are much smaller and add much less value than the works carried out under the previous license then we will be unable to agree a license on these terms.

Is this a sensible approach?

With regards to point 3 if they didn't agree to this would it further reinforce that consent is unreasonably being withheld?