FH License to Alter Security Deposit

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    FH License to Alter Security Deposit

    Hi, we have asked for a License to Alter our leasehold plus share of freehold flat and in addition to the usual details on the works and an undertaking for legal / surveyor / managing agent fee, the FH has asked for a security deposit of £10,000 to be held against any damage caused to another flat and/or common parts. Are they legally allowed to ask for this deposit or can we instead offer to indemnify against any such potential damage? Does it have to be explicitly allowed for by the lease?

    In addition, they have demanded that we pay for a "schedule of condition" of the flat below us and the common parts to be undertaken prior to any works commencing. What is this and what does it imply for us?

    #2
    A schedule of condition is a record of the decorative & structural state of a property. They get one before your work, and one after, and so can see if there are any deductions to make from your deposit.

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      #3
      Section 19(2) of the Landlord and Tenant Act 1927, which implies certain provisos into leases which permit alterations, says:

      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 will see there is nothing there about giving security. It is therefore arguable that none need be given if the lease does not provide for it. If the argument is not sustainable, then I think it has to depend on the nature and extent of the works carried out and the degree of risk associated with the works. If you are going to pay a deposit it must be held by the landlord's solcitors and the conditions for its release must be reasonable and clearly set out. As for the schedule you have to ask if the circumstances really require it.

      You need to bear in mind here that consent for alterations is often taken as an opportunity for landlords and their professional advisers to set the cash registers ringing. You mention above that the managing agents want a fee. What is that for? It is not unusal for professional fees to exceed the cost of the works. That is all dead money. Consider whether is cheaper to move to a flat which has what you want.

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