Worried about late registration of sublet

[PeteMckern]

I'm new here and also quite new to letting out my apartment which I own but it is a leasehold property.

A new 6 Month Assured Shorthold Tennancy was started last May (2016) for 6 months. The AST is fully managed by a local estate agent - the tenant is as good as gold. At this time the freehold was owned by a big House-Builder / developer. My Management Co (for the service charges). are aware the property is sublet.

My lease allows subletting as long as it is the whole apartment, not just part of the apartment.

The House-builder sold the freehold to a third party in August 2016. Later that year my tenant renewed his AST for a further 12 Months ( Nov 2016 to Nov 2017)

I have since noticed, in my lease, a clause under "Disposals" that (paraphrased) says:

"within one calendar month of every transfer underletting assignment..... send a certified copy for the purpose of registration and a fee of not less than £100 + VAT ..... to both the freeholder's agent and management company"

There are no other rules on on subletting the apartment in the lease as far as I can see - not even one which says I need consent to sublet.

I put my hands up here and realise there is, potentially, something I should have done from the start but didn't - i.e. send a copy of the AST along with a fee for the purpose of registration to the Freeholder.

I am now really worried about what might happen:

Should I just send in the fee and a copy of the current AST. now to the new(ish) freeholder and hope they don't mind it being a bit late?

Do nothing until the AST next renews and then send them in?

Am I worrying unnecessarily?

Can the new freeholder demand more fees - for late payment and registrations and also backdate to when they didn't actually own the freehold (i.e. when the AST started back in May 2016 and the Developer still owned the freehold)....?

Advice and experiences very gratefully accepted.

[scriv]

My advice is to really examine your lease in detail to make sure that there is nothing specifically stated about subletting and consent, so that you are fully au fait with what your lease demands.

I had a property where a fee for registering a subletting was required in the lease, but the freeholder never demanded it. Then they sold to a new freeholder who did enforce it.

Then my tenant renewed his AST and extended it - I was advised by my Letting Agent that an extension of the AST did not count as a new assignment so I was not obliged to treat it as such and did not need to register it for a fee.

It is also my understanding that the new freeholder cannot claim the fees for the time before he owned the freehold as these are Administration charges and different to the Ground Rent entitlement.

I qualify this by saying this was just my experience.

[PeteMckern]

Thanks so much for your reply. Totally understand you qualifying this to say it is just in your experience.

I have been though my lease over and over now and there are only two clauses referring to subletting. One which restricts me from subletting part (but not all) of the property - which is fine - the whole flat is let. The other which mentions the registration and registration fee. There is definitely no clause about needing to seek consent before subletting and I know through talks with the developer before purchasing there would not be any objections or the need to seek permission before subletting written into the lease.

So my best case scenario seems to be the same as your experience - i.e. do nothing for now as, since the new freeholder took over, there has not been any change in assignment .... BUT if the AST does change to a new tenant in the future I will definitely need to register it and pay the their fee.

I guess my worry is I am now aware that the new freeholder (an investment co.) has not registered my current AST and I don't want to be open to big future hassles from them - I'd rather say "sorry it's a month or two late but here is a copy of my AST for your register and £120" .... but even then I am concerned this will just start a whole heap of avoidable grief....

[scriv]

Pete, I understand completely how you feel as regards paying them to avoid the worry.. the sad thing is that sometimes this does open the door to further hassle from them.

Has the new freeholder written to you introducing themselves and their requirements? It is my understanding that they should have done this and given you all your rights etc when asking for admin fees etc.

And also, do you know what the other leaseholders in the block are doing? It can be helpful to get together in situations like this and sort out the requirements collectively?

[PeteMckern]

Thanks again - yes, they did send a letter initially when they took over. It was very generic and mainly about ground rent collections and penalties for being late with the payments - it was a one-size-fits-all letter for leasehold houses and flats for which they they seem to be scooping up the freeholds of. It mirrored pretty much exactly the general text from their website! It also had a paragraph warning about not seeking permission and paying possible fees to them before commencing any home improvements such as conservatories (not relevant for flats!) and also that "if you are thinking about renting your flat in the future you may need permission - please fill in our on-line form" - again, at the time I didn't really think this was valid as, 1) mine was already let and 2) my lease doesn't require permission to be granted.

The letter didn't mentioned registering any current running AST / sublets and no demand for this or the fee has been received to date. It's only through looking at my lease for something else recently that I focused and deciphered the registration thing and thought, I bet the new freeholder will be wanting to enforce this and collecting the fee!

The apartment block is some distance away - I am very hands off really, leaving it all to my managing agent, but as far as I know none of them apart from mine (6 in total) are currently let out - all owner occupiers.

[scriv]

Oh dear. This does sound a bit like the outfit that we had dealings with in which case I think you would benefit from more informed advice as to how best proceed.

We were in a collective group action on a large development and our solicitors sorted it out in the end as there were many other issues involved.

Hope someone comes along soon to offer more informed advice.

[Gordon999]

Were leaseholders offered "right of first refusal" on the freehold title before it was sold by the developer ?

[PeteMckern]

Gordon999 - yes we were. Sadly we collectively didn't do this. If I remember correctly the freehold for 6 flats was sold on for around £36K total, so quite a lot for each flat anyway at the time. There are other parts of the lease (onerous grounds rent reviews for e.g.) coming to light now (alerted by recent press) but that's for another topic...

Does the right of refusal have any bearing on my original worry about not yet registering the current AST with the new freeholder (my argument being there has been no change of tenant since the new freeholder took over - although there has been a renewal of the AST)...

Beginning to regret ever buying a leasehold property!

[scriv]

Pete -

Our freeholder's pattern was to follow up their generic letter four months later with a more specific one requiring completion of their form re subletting arrangements/consent and payment of their fees - and then if you do not comply, they write again 2 months later, the letters getting increasingly more nasty and legal sounding and threatening action for breach of lease in the style of a debt collection agency.

It all depends on the wording of your lease though and it does sound from what you say that a fee of 'not less than £100 + VAT' for registration is due to them on a new assignment according to the terms of your lease so you will be obliged to pay them registration fees and submit the AST agreement when you have a new AST agreement.

I am not sure whether they have the right to demand registration for a tenancy renewal or extension though unless specifically stated in your lease - but they may claim you are in breach of your lease until you do register your AST. However, I would not think that they are entitled to inflict penalty charges for late registration/payment as these are administration fees and come under a different set of rules from the paying of Ground Rent.

You may also find that their fees are significantly more than the £100 + VAT and that they may also try to charge you for granting of consent even though your lease does not require it. Whether you argue the toss or pay up what they demand depends on whether you have the stomach for battle.

I'm not sure it makes much difference whether you write to them now with your payment and offer of the £120 or whether you wait until they write to you. It depends on what will give you a greater peace of mind,

Again I must emphasise that my comments are just based on our personal experience rather than legal expertise.

[Gordon999]

The requirement to pay £100 + VAT for registration appears under " Disposal" means after the flat has been transferred to another person who becomes the new leaseholder.

Letting under AST agreement is not a disposal of the flat and does not change the name of property title holder and therefore does not require registration . As you say there are no clauses requiring you to obtain consent for subletting.

What was the commencing date of your leases ?

[scriv]

Oh dear. Sorry if I have confused the situation by not understanding the concept of Disposals.

[PeteMckern]

Gordon999,

The flat's lease started 1/1/2010. I am the first and only owner and leaseholder. The AST running (and renewed in Nov 2016) started May 2016.

So, thanks Gordon999 and, Scriv, no problem at all with any misunderstanding of the word Disposal - this is news to me too - it sounds like good news, but I'd like to show the entire clause in its context to Gordon999 if that is OK:


9 Disposals

(a) Not to transfer underlet or otherwise part with possession of part only of the Property

(b) Within one calendar month of every transfer underletting assignment other form of disposal mortgage or legal charge of this Lease of the Property and also of every Grant of Probate or Letter of Administration Order of Court or other instrument effecting or evidencing a devolution of the title of this Lease being executed or operating or taking effect or purporting to operate or take effect to provide the Company's solicitors or agents and the Management Company's solicitors with a certified copy for the purpose of registration and to pay the solicitors or agents for the Company a reasonable fee of not less than £100 per notice (together with any Value Added Tax which may be payable in respect thereof) and if appropriate to pay the Management Company such reasonable fee as the Management Company shall require (together with any Value Added Tax which may be payable in respect thereof)

So in your own opinion, there is no requirement to register the AST as all this comes under the heading Disposals?

Sorry - a real newbie on all this and reading leases is not something I know much about... but I did think this would mean any sort of subletting.

Thanks again for your time.

[Bay]

Hi Pete,

My lease has exactly the same terms as noted above under Disposals and I wanted to check how you progressed with the request for the fees from the agents..? Thanks

[leaseholder64]

My understanding is that headings in legal documents are navigation aids and don't contribute to the meaning, unless the meaning is otherwise ambiguous.

Also, "assign" in layman's terms means "sell". Landlords don't assign leases. A tenant can assign a lease.

The purpose of the registration is so that the superior landlord knows who he is dealing with, both directly, and if the sub-tenants cause problems, indirectly. Although they don't get to dictate the terms of your tenancy agreement, they do, at least, know what you can do to discipline your tenant, and, if good, may advise you how to make it better next time. (Off the shelf tenancy agreements don't seem to adequately protect landlords against covenants being breached by their tenants.)

£100 may seem a bit steep, but seven years ago, our solicitors said the would not accept less than £50, as that is what they would charge for the registration service.

[Gordon999]

PeteM,

My opinion after carefully reading clause (b), the fee of £100 + VAT applies to registration of any documents which affect the lease title resulting in disposal to others or taken as security for mortgage loan; and renting of property under AST agreements is not a disposal of the lease title and does not require registration of the AST.

Who is the "company" in your lease ?. It uses the term "company's solicitor" and not "landlord's solicitor". .