Changes to lease wording

[bigalxyz]

In the process of buying freehold for our building. 9 participants (from 11 flats).

Our solicitor will extend leases to 999 years for an additional fee if we want to. She has asked, as part of that extension process:

“Are there any amendments that you are seeking to make to the leases once you have acquired the freehold? Any important amendments should be detailed in the PA so that the parties know they are bound to comply later on. Please do let me know your thoughts.

I’m wondering what she means by that. What sorts of changes might we want to make to the lease wording? It’s a very vague question because anyone reading this post won’t have the lease wording in front of them, admittedly.

(I’ll be able to ask her myself, but not until next week - wondered if I might investigate over the weekend first)

thank you

[sgclacy]

For example - cancelling the ground rent or increasing the term might be the sort of things you may wish to do once you have acquired the freehold

possibly the leases may have drafting errors or the insurance clause is not widely drawn - these issues would have come up when you and your fellow participators were buying your flats

[Gordon999]

Ask solicitor for the cost to change the lease to 999 years at one peppercorn ground rent for one leaseholder and for all 9 participants at the same time. You may get a better quotation for lease change for all 9 done together.

[bigalxyz]

sgclacy,

Thanks. Yes the 999 year term extension is very much on the table. If all 11 leaseholders had participated then I guess we could have got rid of ground rents but AFAIK (?) with only 9 we won't be able to do that. As for the current lease wording - it's quite old skool and I wonder if our solicitors have a more modern boilerplate wording...but I don't know if they do, and if so, how it might differ from what we already have...

[bigalxyz]

Gordon999,

Thanks. It looks like we're doing the 999 year extension, yes - solicitor has already quoted for the fee to handle that for us. Currently 104 years unexpired so it's not down at the 80-85 years where mortgage lenders would start to get twitchy, but it's only a few hundred quid per flat so probably still worth doing.

Solicitor's question seems to be more about other changes to the lease wording, but I'm not sure what might be possible/desirable here. Maybe I should just speak to her next week.

[sgclacy]

Thanks. Yes the 999 year term extension is very much on the table. If all 11 leaseholders had participated then I guess we could have got rid of ground rents but AFAIK (?) with only 9 we won't be able to do that. ...

yes you can.

You can extinguish the ground rents for the participators

[bigalxyz]

Ahhh ok - thanks - solicitor will no doubt raise this when the time comes

[sgclacy]

Your faith in such people is refreshing

[Lawcruncher]

It is difficult to answer your question without reading the lease.

Obviously anything unduly onerous has to come out. Apart from that it has to be decided what everyone wants, for example with regard to subletting.

Ideally you need to ensure marketability but with adequate safeguards.

[Macromia]

Effectively, you have the opportunity to change anything within the leases of the nine participants that you all agree to - as long as this won't affect/contradict anything in the leases of the two flats who aren't participating (although parts of their leases can potentially be changed as well if all 11 are in agreement).

For example, if the leases state that no pets are allowed, or that flats must not be sublet, the nine participants could potentially agree to allow both keeping of pets and subletting - but they cannot do this without the agreement of the other two leaseholders if the leases of the other two flats state that all leases will contain the same restrictions and these leaseholders are not willing to agree to pets and/or subletting being allowed.

As Lawcruncher says, you need to consider what changes might be in your best interest, while also making sure that the changes offer suitable protection for the block and the residents that live there (removing clauses requiring carpets, or prohibiting some types of alteration, may seem like it would give you all more flexibility, but will be inviting problems for the future).

[Gordon999]

You could state some conditions for subletting e.g subletting of flat under AST agreement for 1 year term or less is permitted .

[Lawcruncher]

Your faith in such people is refreshing

The solicitor has said: "Are there any amendments that you are seeking to make to the leases once you have acquired the freehold? Any important amendments should be detailed in the PA so that the parties know they are bound to comply later on. Please do let me know your thoughts." That is more than you would get from many.

[Lawcruncher]

You could state some conditions for subletting e.g subletting of flat under AST agreement for 1 year term or less is permitted .

If the leases are going to be for 999 years there is not a lot of point imposing a restriction in such terms. It is also open to interpretation. You have to decide first if you are going to allow subletting at all. That has to depend on what people want. If any owner already sublets then you cannot really impose restrictions greater than already exist. In some cases restrictions will make the property more marketable and in others less. Unless the building is on the seafront or otherwise attractive to holidays you may want to ban lettings of less than, say, three months.

If allowing subletting, the following are worth considering:

· If the term is 7 years or less, requiring the subtenant to agree not only with the leaseholder but also the landlord (a) to comply with the regulations in the head lease and (b) not do anything which would be a breach of any other covenants and conditions contained in the head lease.

· If the term is more than 7 years requiring the subtenant to agree not only with the leaseholder but also the landlord (a) to comply with the covenants and conditions contained in the head lease other than the payment of rent and service charge.

· Imposing on the leaseholder an obligation to enforce the terms of any subtenancy.

· Requiring notice to be given of any subletting other than a renewal but specifically stating that no fee is payable for registering it

[ram]

Do not get rid of the ground rent ...

Because, you can not usually use the service charges to engage solicitors to take any leaseholder to court.
AND the Directors will not want to use their own personal money to forward a deposit before a solicitor will act for them.
( Soliitors know that leasehold properties have no funds of their own -- i.e. The company. ).

Ground rent exists to be able to pay solicitors to send letters to leaseholders / to engage solicitors if someone trips and breaks a leg on a known problem a the property. etc, etc etc.

Assume you have just spent the last of the service charges incom on all repairs and maintenence, then who pays the solicitors if one is needed.

The leaseholder shareholders won't pay, because they fear losing the case, and so will the directors.

We have no freeholder money, so people don't get sued for none payment of service charges --- end of.

[Lawcruncher]

There is some logic to post 14. However, you will need to get shifted if you want to charge a ground rent because the law changes on 30th June. Long residential leases granted on or after that date cannot reserve more than a peppercorn rent. If you complete before then and are considering charging a ground rent bear in mind that:

· The rent must not exceed the amount which may make the tenancy an assured tenancy as that will make a flat difficult to sell.

· The rent should not be index-linked as that will make a flat difficult to sell.

· If you collect ground rent no way can the company be a dormant company.

· The income will be taxable.

· You can make provision for the reserve fund to be available for legal fees.