Lease Covenants

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    Lease Covenants

    Hi Everyone,
    Being a Director of a Freehold Company and just being stitched up at LVT hearing can any one pass comment on this.

    this clause in in our lease.

    Contribution to the Company:
    19 (a) To pay to the company and as a separate covenant by the Lessee with the company a fixed charge of the sum of twenty-four pounds (£24) on the anniversary of each year of the said term the first payment to be made one year from the date of these presents towards the cost of the Lessees contribution as hereinafter provided SUBJECT however that if the Lessee’s contribution shall not exceed the fixed charge in any year the company shall not be obliged to account to the Lessee for any surplus------------------------
    (b) To pay to the company and as a separate covenant by the Lessee with the company 3.9% of all moneys expended or contracted to be expended by the company (i) in complying with the covenants on the part of the company hereinafter contained (ii) in insuring in the joint names of the Lessor and the Company against claims made against them or either of them in respect of the common parts of the Estate of Caple Court or the liabilities of the Company or the Lessor in respect of the same and (iii) an amount equal to Ten per centum of the total expenditure ( such amounts being payable to the Company as a management fee) such moneys to be paid within twenty-eight days of demand thereof by the Lessor or at its option by the Company or at such intervals as the Lessor or at its option the Company shall consider expedient and any sums due under this sub –clause if not paid shall forthwith be recoverable by action by the Lessor or at its option by the Company and carry interest at Eight Pounds (£8) per centum per annum until payment Any demand served on the Lessee by the Lessor or the Company pursuant to the provisions of this sub-clause shall unless and until some error therein is discovered or proved be sufficient evidence that the sum thereby demanded id due to the Lessor PROVIDED that when making the demand the Company shall give credit to the Lessee of any surplus of the fixed charge paid by the Lessee in the year in which the demand is made

    I was told by a lawyer to do this.
    Look at LESSEES COVENANT 4 clause 3.(19)(b) for the payment of a service charge by tenants. It appears at first sight to say that the company can (under the Lease) demand payment of sums expended or contracted to be expended (i.e. no authority to invoice for future expenditure or for a reserve fund). But there is no restriction on the number of times a year you can invoice for expenses incurred – it looks as if each month end you just look at the purchase ledger plus contracts entered into for future work, total it, divide in the normal way and invoice for it if that keeps the cash rolling in.

    The LVT chair said money not payable to end of the year,I can not see where he got that from.

    Any professionals on here like to comment. I would be interested.

    #2
    You get £24 on account, clearly a very old lease,

    The key terms are expended or contracted to be expended which limits you to money spent, bills due or bills received but not paid, and contracts that you have entered into.

    The latter is difficult in that it’s unlikely to be extended to an annual contract such as cleaning except those bills in the period for which you have billed.

    The chair is wrong in that the lease is clear
    at such intervals as the Lessor or at its option the Company shall consider expedient and
    but its only 10 % of that.
    Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

    Comment


      #3
      Hi Leaseholdanswers,
      Thanks for your comments.

      The problem I have that 3 members of the Company have not paid any service charges for 5 years.
      We collected monies under the Morshead Mansion (by resolutions) however the LVT would not stand for it so we lost 3 years service charges.
      However this year I have invoiced in April for money spent including the cleaner and lawn mowing( both which are under contract)
      we then had consultation for major works billed them for that plus money spent from April until now.Still they do not pay.
      I say we are owed the money and the interest on late payment.The 10% is a management charge to them
      The LVT Chairman did not agree with me and actually laughed at me when I said that it was due.I have just back dated the ground rent for 6 years
      hoping they will not pay it and then get them in county court where the Judge might know what the lease states.

      Comment


        #4
        The reason being is that half the post is missing…….TAB readers will know that here are some gremlins, one of which lets you post, until you post, and then requires you to log in and then only posts some of the auto saved content. And then hangs.

        A lot of this is subject to seeing the entire lease. In hindsight the correct step was to take counsel’s opinion and then if the lease is as scruffy as it appears, apply to the LVT to have it amended. Even Morshead is still partly unresolved as the last Appeal decision indicated.

        Arrears. As long as the owners have been notified of the incurred expenditure for any chosen accounting period within 18 month of the beginning of that period, then it is barred by time from being recoverable.

        Accounting period: while the lease allows for ad hoc demands, on which the LVT is wrong, in so far as what has been posted, the quote suggests that at some point the company is required as landlord to account for expenses.

        The LVT would be right then as there may be other wording in the lease that allows for recovery of any balance as (a) indicates that they must if the E exceeds the on account payment. That said, one way of reading it is that if you demand all that you expend over the year, plus £24, you are in fact not required to account to the lessee on that surplus of £24….

        It may be that is that under the lease, £24 and pay up within 28 days of demand, but I cant say without looking at the entire lease and the LVT determination suggests that there is a lot more to read.

        Articles rarely allow that and even if they do then they are regarded as service charge and can be limited.

        The money under the section 20 project had to be expended or contracted, other wise, no, it would not be due.

        Ground Rent is irrelevant to your problem as long as it is billed correctly with the right statutory info in the notices, then six years is due, unless the leases were granted after 1-1-96, the defaulters only owe the amount from the date that they owned the property. The Court will not touch on service charge as the GR is no service charge

        My advice is as above get the lease and articles to counsel first before you make the company insolvent. An appeal might be possible.
        Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

        Comment

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