Are there restrictions on short lets in this lease

[Tom1966]

Hi All,

I have read several similar threads in this forum on this question, but each case seems to be individual and carries a different answer.

Clause 18 of the lease of my two flats in an estate containing 3 blocks of six flats states the following:
"Not at any time during the term hereby granted to carry on or permit any art trade or business on the demised premises or permit the same to be occupied or used for any illegal or immoral purposes or otherwise than as a residential flat for the occupation of one family and not to have or permit to be had any sale by auction or for any meeting for any religious political or other purpose in or upon the demised premises."

For the last year I have been letting my flats on a short term basis, with each let being 28 days or shorter. The management company say I have breached the terms of the lease and have asked me to stop this sort of letting. They give no specific reason why they feel that I am in breach of the lease.

Clearly, the terms of the lease allow for residential lettings. No business is carried out on the premises (lettings are arranged well away from the premises). The flat is not used for religious or political purposes, nor is it used as a brothel - all explicitly banned by the terms of Section 18. The flats are only let to one family. The flat is used purely for residential purposes.

Yet the management company (in which I own two eighteenth shares) claim I am in breach by my repeated short-term lets.

I would have thought that a lease which explicitly bans the use of the flat for religious meetings would state a minimum period for a let, if there were a minimum period. But perhaps I am missing something.

Can anyone help?

Best regards,
Tom

[ram]

Look in your lease for a covenant that states

Not to assign underlet or part with possession of the whole of the demised premises without the consent in writing of the lessor

[Lawcruncher]

Underletting is not in breach of clause 18. It is a user covenant. So long as the flat is not being used for any of the purposes listed there is no breach. Whilst letting the flat may be a business, it is not a business being carried on in the flat.

[Tom1966]

Look in your lease for a covenant that states

Not to assign underlet or part with possession of the whole of the demised premises without the consent in writing of the lessor

Thank you for your reply.

That clause exists, but only for the final 7 years of the lease. The lease is for 999 years!

Best regards,
Tom Crispin

[leaseholdanswers]

Thank you for your reply.

That clause exists, but only for the final 7 years of the lease. The lease is for 999 years!

Best regards,
Tom Crispin

Ok Tom, a word of caution, many read the lease and stop at the first bit or two that seems to answer their issues. Make sure you read the lease from to back as its is often is more than one place.

If you have and are confident about that then the reply to agent is to say " thank for your letter. here is copy of my lease which contains no restriction on subletting for any period nor requiring consent, save for the last 7 years. I would be grateful if you would review the lease and either confirm that understanding or point me to my error within seven days. If you fail to do so, I reserve my right to issue proceedings for harassment and a breach of quiet enjoyment should you and your clients persist in these unfounded claims".

[ram]

I would not write that letter yet.

If you re-read the bit about the last 7 years, it should mean that you need the freeholders consent to sublet, but you cannot sub-let in the final 7 years of the lease. That's so that when you have to return the flat in 999 years, there must be no complications of having let your flat to someone else, and there is a clear handover.

Permission to sublet is given for each and every sub-letting, so you need permission to re-sublet every time you sub-let to someone else, i.e every 28 days, to a named subtenant.
This you have failed to do, therefore you are in breach of the lease.

The above info is well documented on here from a respected member.

[Tom1966]

I would not write that letter yet.

If you re-read the bit about the last 7 years, it should mean that you need the freeholders consent to sublet, but you cannot sub-let in the final 7 years of the lease. That's so that when you have to return the flat in 999 years, there must be no complications of having let your flat to someone else, and there is a clear handover.

Permission to sublet is given for each and every sub-letting, so you need permission to re-sublet every time you sub-let to someone else, i.e every 28 days, to a named subtenant.
This you have failed to do, therefore you are in breach of the lease.

The above info is well documented on here from a respected member.

I have read (and tried to understand) the full lease several times. Here is the relevant covenant:
"(26) During the final seven years of the said therm hereby created not to assign sub-let or part with the possession of the demised premises without the consent of the Lessor in writing first being obtained such consent not to be unreasonable withheld in the case of a respectable and responsible person not being an incorporated body and at no time during the said term to assign sub-let or part with the possession of any part other than the whole of the demised premises."

I take that to mean that until 992 years of the lease have expired I am free to sub let or sell the whole flat, but not part of the flat.

Best regards,
Tom

[leaseholdanswers]

OK as long as you are sure that is the only clause then yes you are correct. The only restrictions apply in the last seven years and therefore RAM's post has no bearing on you;for the next 900 odd years that is.

[leaseholdanswers]

I would not write that letter yet.

If you re-read the bit about the last 7 years, it should mean that you need the freeholders consent to sublet, but you cannot sub-let in the final 7 years of the lease. That's so that when you have to return the flat in 999 years, there must be no complications of having let your flat to someone else, and there is a clear handover.

Permission to sublet is given for each and every sub-letting, so you need permission to re-sublet every time you sub-let to someone else, i.e every 28 days, to a named subtenant.
This you have failed to do, therefore you are in breach of the lease.

The above info is well documented on here from a respected member.

having seen the lease wording it is as summarised earlier without restriction except in the last 7 years. The clue is in the wording "in thelast 7 years"

[ram]

I take that to mean that until 992 years of the lease have expired I am free to sub let or sell the whole flat, but not part of the flat.

That is clearer now.
I concur, your lease says you only need permission to let in the final 7 years.

As mentioned, parts stating about sub-letting, underletting, assignments are not always on the same page of leases, so as long as there is no other covenants, looks like you do not need consent to sub let at the moment, but ___________-

There may be a clause "Not to do or permit to be done any act or thing which may render viod the policies of the building."
And by having constantly changing tenants, this may impact on the blocks insurance.

You should always inform the managing agent how many people live there, even if only for 28 days, as sometime insurance policies want to know how many people reside in each flat, and we used to have to state their names ( we don't have to now ).

There may be a clause stating that the company be given documentation of any sub-tenancies, even if no permission to sub-let is required.

There may be a clause not to cause any annoyance or inconvenience to the other residents,
and by having constantly changing tenants every 28 days, and scuffs on the paint work / flooring in the common areas via suit cases, even extra beds, would be an annoyance and having to redecorate more often the common areas because of your tenants, could be classed as annoyance or inconvenience, especially when the leaseholders ask why is the paint continually being damaged, and why should they pay for additional painting because of your guests.

I would not like a constant stream of tenants changing every 28 days here, what with the constant reminders of where to park, and every 28 days someone having to say, stop parking there, stop blocking my parking space.

I think there is more to this than just sub-letting, but you will soon find out when you advise that permission to sub-let is not required. ( assuming the lease is as you mentioned )

[Tom1966]

That is clearer now.

[...]

I think there is more to this than just sub-letting, but you will soon find out when you advise that permission to sub-let is not required. ( assuming the lease is as you mentioned )

Thank you once again for your reply.

This morning I had a letter from the Management Company's solicitor:
"I acknowledge receipt of your letter dated 5 September 2014 and again have taken my clients' instructions.

My clients' position on this matter is quite clear. The business that you are running from these flats must now come to an end. So far as my clients are concerned you are in breach of your lease in repeatedly letting the flats as short holiday lettings. Our original letter of 4 July 2014 makes this clear.

These lettings must now cease. Please confirm that there will be no further letting of the two flats in this way and that you will not be advertising the flats for this type of letting in the future."




Other relevant covenants are as follows:
(15) Not to do or permit or suffer to be done anything whereby any policy or policies of insurance on the demised premises may become void or voidable or whereby the rate of premium thereon may be increased and forthwith on demand to pay to the Lessor or the Service Company all sums paid by way of increased premiums and all expenses incurred by the Lessor or the Service Company in or about the renewal of such policy or policies rendered necessary by a breach of this covenant.

(19) Not to do or permit to be done in or upon the demised premises any act or thing which shall or may be or grow to the annoyance nuisance damage or disturbance of the Lessor or its other tenants.


With regard to (15):-
If lets of 28 days or fewer increases the building premium, and I am liable for that increase, it follows that if an AST let increases the buildings premium over owner occupation, tenants who sub let on ASTs are liable for that additional premium.

With regards to (19):-
If I consider the flats where 17 are owner occupied, and the eighteenth tenant decides to sub let, this might be an annoyance to the owner occupiers, but it is permitted.

Of course, other people may not see things the same as I do and I want to be a good tenant and to do the right thing for owner occupiers and other residents of the block.

I made a "without prejudice" offer to the management company after the first solicitor's letter. This was to:
1. rip up the new laminate flooring I have had laid in my second floor flat and replace with underlay and 80% wool carpet (my other flat is ground floor and I do not believe that noise from within the flat is an issue)
2. contribute an additional £80 per month per flat for the management company to use at their discretion to mitigate the result of any real or perceived "annoyance nuisance damage or disturbance of the Lessor or its other tenants".

These offers were rejected.



I have repeatedly asked the management company for details of any complaint, but nothing specific has been given, only something about doors slamming. This I feel is a problem with the main entrance door, and something which the management company can easily resolve. The issue is not one exclusive to my tenants, and I expect they are equally disturbed by the main door slamming closed. My offer of an additional payment of £1920 per year to the service company would be more than sufficient to cover any additional premium or maintenance of the blocks.

Best regards,
Tom

[leaseholdanswers]

On what if any basis did they state that the lease was being breached ir subletting on a holiday basis is a breach of the lease because……. and/or clause x y z?

If not then your
reply surely has to be “why is it a breach?”

The clauses you refer to, are those which you identified or which they referred to ?

15 is actually two things

1 things which void/make voidable the policy- depends on the policy wording and if in fact while the insurance may be voided by short lets, whether in fact that condition is inconsistent with the buildings insurance cover that the lease specifies or ought to reasonably include

2 things which may increase the premium or expenses- if as above the insurance cover needs expanding then that cost is borne as you say be you-tell then send me the bill and on yer bike! Some policies are fine with lets of 6 months plus but do preclude short or holiday lets. That as above doesn’t mean that the landlord can choose not to cover it if the lease says that he should or could.

19 is the nub I suspect- neighbours don’t like shortlets and there may be problems with your occupants and perhaps a mix of both.

We need to know more about the 4th July letter to see what they said as it might be arguable that if letting is not subject to consent, and it’s a matter of
A insurance which might well be remedied with a hike in cover and premium, and/or
B changes in letting practice and rules e.g no 3 am arrivals and appropriate checks on moving in and out damage to common areas, and makingit clear no arting at 2am etc.

What I am thinking about is responding atlo that if you regard me to be in breach then you need to explain with reference to the lease how I am in breach, set out the issues and type of complaints that have arisen, and give me an opportunity to see if a it does refer to my letting, b appear to be genuine and c these can be resolved or managed. If you threatening legal action simply due to slamming doors then think again..... You can see if a door closer could be fitted to the main door and a liner in your interior doors to dampen them being closed and in turn issue new house rules to guests.

Otherwise to refuse to do so and they will get short shrift in any Tribunal. The above is intended to get them to comprehensively respond in one letter which they will see as your intention to react formally.

[ram]

As above.

And, re the flooring, if the lease says floors in rooms a, b + c must be carpeted, then your comment of " but i'm on the ground floor and my timber floor won't bother anyone", is not an excuse.
You signed to obey the lease even if you think a covernant does not apply to you.
All covenants apply to you.

Solicitors letters to you will be chargable, and at least £ 25 per letter from the Man Co. plus maybe the solicitors time.

I used to rent a commercial workshop, repairing cars, and got a letter from the Landlords solicitor not to use the word -- lets say "Moulton" in my firms name Moulton Motors, which was the name of the garage previously, and the name of the road also, because the landlord had title to that name ( Moulton )

I wrote to the solicitor saying
I KNOW you have been instructed by your client to write those words in your letter to me, but I reject your letter, as I do not reply to such stupid idiotic claims, and I do not talk to solicitors on such mundane matters.

I have replied in length to your client, direct, therefore he will not be charged for you forwarding a copy of my letter to him ( I'm kind like that ).
Any more letters from you, ( the solicitor ) will be returned to you, and returned because you don't know what you are talking about. Your client has not title to the road name, nor the previous garage name as your client did NOT purchase any rights to the name Moulton.

You as a solicitor should have checked all trade marks and registered marks before you sent me your letter, and I know you did none of those 2 things, therefore you, Sir, are a bounder, are misrepresenting the truth, and solicitors are not allowed to do that, and I cannot believe a word you say in the future.

( I had no idea if he had purchased the rights or not, but my instinct said, no way woul the landlord be bothered )

I heard no more on the subject.

I also sold Porsche 911 replicas, and received a solicitors letter from the Porsche legal department to cease production.
I replied that they show and tell me why they, and they alone, don't have to comply with the 15 year copyright limit on car body panel designs. ( and a much longer letter than here )
Nothing was heard from them again.

What I am trying to say is, I would,( but maybe you wont ) would be writing to the solicitor saying that if there is a clear breach of the lease, the Managing agent can tell you the exact conditions that breached the lease, and it does not take a solicitor to pass on the M.A's concern, and that in future, the M.A's are to write to you direct, as this is a pure wast of money which I will be recording for future.

But, they have a point in those things mentioned, and I think they can "get you on those".

[Tom1966]

And, re the flooring, if the lease says floors in rooms a, b + c must be carpeted, then your comment of " but i'm on the ground floor and my timber floor won't bother anyone", is not an excuse.
You signed to obey the lease even if you think a covernant does not apply to you.
All covenants apply to you.

There is nothing in the lease about flooring types. I only offered to change the flooring because the resident below spoke to me about it, and said that she was sometimes disturbed by noise from above. I know that I would be irritated if a landlord of a flat above me swapped old carpet for laminate flooring and I heard people above walking about when all I wanted to do was watch TV.

A ground floor flat has no such issue.

The thing is, I want to be a good considerate landlord - but the managing agents don't want to engage with me in a constructive manner.

Best regards,
Tom

[Tom1966]

We need to know more about the 4th July letter to see what they said as it might be arguable that if letting is not subject to consent, and it’s a matter of
A insurance which might well be remedied with a hike in cover and premium, and/or
B changes in letting practice and rules e.g no 3 am arrivals and appropriate checks on moving in and out damage to common areas, and makingit clear no arting at 2am etc.

4 July letter:

We are instructed by --- and we understand that you are the long lessee of the above flat.

We are instructed that you do not live at the flat and the flat is currently being used for short let and specifically holiday letting.

We are instructed to bring to your attention the terms of your lease and specifically clause 3(18) of the Lease which states as follows:-
"Not at any time during the term hereby granted to carry on...any trade or business upon the demised premises or permit the same to be occupied...otherwise than as a residential flat for the occupation of one family..."

Repeated short lettings is a breach of the terms of your lease.

Our clients are also concerned that you may be in breach of a further provision of the Lease not to allow anything to be done at the premises which may cause the insurance policy for the building to be void or voidable or cause an increase in the premium of the insurance policy.

In the circumstances we must insist that the repeated breach of your lease must cease and the letting of the flat in this way must be brought to an end.

Please acknowledge receipt of this letter and can confirm that there will be no further holiday lettings after 28 days of this letter.

If it is necessary for us to take further action then we will be obliged to give notice of any action to the Royal Bank of Scotland PLC, your mortgagee, and we will seek to recover the costs of any such action from you. We hope that will not be necessary.



To which I replied:

Further to your letters dated 4 July 2014, we would like you to assure --- Residents Company Limited, a company in which we hold one ninth of the shares, that both of the above properties are used for no purpose other than as residential flats. No trade or business is carried out from the properties. This is entirely consistent with the terms of the lease.

The Inland Revenue are very clear that furnished residential lettings are not a trade.
Furnished holiday lettings are treated as trades to give them access to some trade advantages. However, they are not actually trades.
HMRC Helpsheet 253, Page 7.
www.hmrc.gov.uk/helpsheets/hs253.pdf
Furnished holiday lettings are treated like a trade only for certain purposes. Details are given in the table below. But remember that they are not actually taxed as trades (unless, exceptionally, they are treated as a trade on their own facts quite apart from the special legislation - eg if material services are provided), so normal rental business rules apply.
Property Income Manual, Page 4105
www.hmrc.gov.uk/manuals/pimmanual/PIM4105.htm

For Inheritance Tax, furnished residential accommodation is treated as an investment, not a business:
HMRC V Pawson (deceased) [2013]

It is clear from your letter that the residential lettings of our properties at 5 & 7 --- Crescent are causing some annoyance to one or more shareholders, and this is something that we wish to resolve. It is not our intent to irritate other shareholders or their tenants. Only one person has spoken to us about any problems, and that related to noise due to our use of laminate flooring at 5 --- Crescent, previously carpet had been used as a floor covering. To resolve this issue our offer to --- Residents Company Limited is for us to lay underlay and woollen carpet in all rooms except the kitchen and bathroom, and that part of the hallway which already has fitted floor matting, and this underlay and carpet will be either be laid within 28 days of --- Residents Company Limited accepting this offer or the flat will be unoccupied until the carpet has been laid. We would also welcome the opportunity to speak with other shareholders or their tenants about measures we could take to further reduce any noise from the residential tenants of our flats.
In addition to this, and without prejudice, we would like to offer to make --- Residents Company Limited a voluntary donation towards general maintenance for any period during which we let our properties for tenancies of less than six months. This donation will be equal to the current service charge, and backdated to the first full calendar month from when we took possession of each of the properties. In the case of 7 --- Crescent this would be from 1 October 2013, and in the case of 5 --- Crescent this would be from 1 March 2014. A lump sum donation of £1,520 would therefore be given immediately for the period up to 29 September 2014, and a total donation of £1,920 per annum would be given from that date, either donated monthly or yearly in advance. The current service charge of £80 per month per property would still be paid.
This voluntary donation could be used at the discretion of --- Residents Company Limited to mitigate any perceived or real annoyance caused to shareholders by our use of residential lettings of under six months.
We are happy for this agreement to be either formal or informal – however, if a formal agreement is necessary, it will be for --- Residents Company Limited to bear all legal costs involved in drawing up a contract.

Please let us know if your clients wish to accept these offers as a means to resolve this matter, and if the directors of --- Residents Company Limited are happy for us to talk with them directly.



I received a swift acknowledgement followed by this on 20 August:

I refer to my letter of 24 July 2014 and can confirm that I have now received instructions from my clients.

They do not wish to accept the proposals set out in your letter and require you to bring the repeated short holiday lettings of your premises to an immediate conclusion.

Please confirm that you will comply with this request.



To which I replied:

Further to your letter dated 20 August 2014, we are somewhat confused as to why your clients feel we are in breach of the terms of the lease. We can see nothing in the lease restricting the letting of the flat for residential use, other than the use must be “moral” and “legal”.

Most of the flats 1-18 --- Crescent are let by shareholders to residential tenants, the others are occupied by shareholders. We can see nothing in the lease which restricts the type or length of tenancy. As we pointed out in our previous letter, case law suggests that this type of residential letting is treated as the same class of investment business as other residential lettings in the block, and we can see no valid reason why our lettings should be singled out as a breach of lease.

Perhaps your clients could be more specific in why they feel we are in breach of the terms of the lease, and what, specifically, they believe the terms of the lease allow (minimum period of tenancy, type of tenancy, etc.)

We again reiterate that it is not our intention to irritate or annoy any other shareholder or their tenants, and are eager to stop or prevent any annoyance we or our residential tenants cause. However, we cannot do this if we do not know specifically what the annoyance is that we or our tenants are causing.
Similarly, we want to comply with the terms of the lease, but we do not understand why your clients feel that our lettings are a breach of the lease.
We are happy to attend the next meeting of --- Crescent Residents Company Limited, and speak to the other shareholders about the letting of our properties.



I have already posted the reply I received today.

Best regards,
Tom