… the debt-chasing solicitors correspond with a buy-to-let investor who is barred from renting out his flat
LKP is not going to spend too much time on well resourced buy to let investors getting into a jam that their lawyers should have prevented, but this one is curious.
The purchasers bought a flat in Thornton Heath, Surrey, as an investment but have been informed by our old friends at JB Leitch that no subletting is permitted.
Here is the proposed solution from Andrew Bailey, at JB Leitch.
I refer to your recent conversation with my colleague XXX and your below email.
For the avoidance of doubt, my firm have been instructed on behalf of the Freeholder of the Property via their appointed agent, Leasehold Property Management Limited (“LPM”) in connection with a breach of lease pertaining to sub-letting of the Property of which you and XXX are the leasehold proprietors.
The lease in respect of the Property contains a complete prohibition regarding sub-letting at Clause 7 that states:
“THE Lessee hereby covenants with the Lessor and as a separate covenant with the Management Company (a) that the Lessee will not during the said term assign sub-let or part with the possession of the whole or any part or parts of the Demised premises…”
Please confirm in open correspondence that it is admitted that the Property is being sub-let as alleged.
Without prejudice to any action that my client may take concerning the breach of lease, my client will accept the following terms to remedy the breach:
1. You enter into a Deed of Variation with our client;
2. You pay consideration of £705.00;
3. There be a 50% increase of the current ground rent payable;
4. You pay an annual sub-letting fee of £100.00 plus VAT;
5. You pay LPM’s costs of £440.00 inclusive of VAT; and
6. You pay our client’s legal costs of £240.00 inclusive of VAT.
Should you fail to admit the breach or the above terms are unacceptable to you, please note that my client will issue proceedings in the County Court to seek a declaration that the Lease is in breach as a pre-requisite to forfeiture proceedings being instigated in respect of your leasehold interest in the Property.
I note that you are currently seeking advice from Lease in respect of your position.
Should I fail to hear from you within 14 days of the date of this correspondence, my client’s terms will be withdrawn and proceedings will be issued accordingly.
Andrew Bailey FCILEx
Chartered Legal Executive
Assuming sub-letting is not allowed in the lease and that the freeholder would accept a Deed of Variation, what then of other leaseholders who may have purchased properties, specifically because other flats could not be sub-let? would that not be a breach of lease by the freeholder?
And if a Deed of Variation is needed for a sub-let, why would a Deed of Variation not be required for the sale of a House Manager’s flat?
Indeed. Or how did Anchor simply ignore numerous leases to allow subletting when specifically not allowed at retirement sites in order a/ to help residents or heirs unable to sell; or b/ garner some subletting fees.
Strangely it is this firm JB Leitch who sponsor the Manager of the Year awards for News on the Block. Does not their action in this case rather downgrade that award and title.
They also sponsored the 2014 Leasehold Advisory Service annual conference.
This drew the comment from a very senior industry figure:
“Having JB Leitch sponsor the LEASE conference is like the Citizens’ Advice Bureau being sponsored by Wonga!”
Forfeiture is rare and it is because relatively recent reform legislation provides that in all such cases reasonableness must first be determined by the Court or First Tier Tribunal-Property..
However, what is NOT rare is the widespread use of the threat of forfeiture in relation to false demands and/or unreasonable charges. It is this threat of forfeiture that is continually used by unscrupulous freeholders for the purpose of extracting vast, and more often, undue sums out of unwitting leaseholders This outrageous practice persists because the trade is wholly unregulated.
Bring on Jim!
Meantime, how do you interpret the covenant in question which states “…the Lessee hereby covenants with the Lessor….that the Lessee will not …part with the possession of the whole”
A more usual clause would read along following lines:
Not at any time to assign underlet or part with the possession or occupation of PART ONLY OF THE FLAT.- and permission to do so not to be withheld unreasonably.
Are we to understand that in this case an unscrupulous freeholder can demand an extortionate fee for a Deed of Variation for permission to sell the premises?
Obviously any tribunal would kick that one out., and any reputable lawyer acting for a freeholder and with the interest of the client at heart would advise likewise.
However, of far greater concern is the demand that in order “to remedy the breach”
“3. There be a 50% increase of the current ground rent payable!”.
This attempt to vary the Ground Rent is I believe part of a wider scheme by unscrupulous freeholders to increase future asset value., usually for loan purposes. This is what is taking place in the “informal lease extension” racket business (see under column headed Tokyo).
The evidence yet again of yet anther freeholder seeking to manipulate current ground rent income, for whatever purpose, demands investigation. I imagine current ground rent can only be increased through a new lease!
Methinks, there is more to this JB Leitch letter than meets the eye!
LKP has featured an article on a property management firm who only work for leaseholders in order to avoid conflict of interest. I have yet to come across any firm of barristers or solicitors willing to work exclusively for leaseholders, which means I’m unable to give them any business on a preferential basis and must try to find the least bad knowing that they’d be just as happy to work for an oppressive landlord.
Having refreshed my memory of JB Leitch’s personnel with a quick review of its website (it sends email from “litigation executives” who are “office assistants”) I note that it is in the business of innovation, finding new wheezes for landlords to extort more money from leaseholders.
The latest is, surprise, surprise, health and safety inspections. The rationale is for the landlord to limit his liability in the event of the RTM not discharging its responsibilities. Threatening letters can be sent (for a fee) and court action taken (for some more fees). Lovely, jubbly.
My understanding — and I’m not a qualified litigation executive, never mind a lawyer — is that RTM companies take over the landlord’s responsibilities except for collecting ground rent.
I would be somewhat surprised if we received correspondence from JB Leitch on this topic as the legally required fire inspections routinely did not take place in our development prior to RTM. The landlord’s online system gave dates on which they occurred. The only problem with that was that THEY DIDN’T. The reports were simply faked. That was demonstrably the case even before an RTM- commissioned inspection established very conclusively that things repeatedly certified as working were not and could not have been. Lives were put at risk and could have been lost as result.
To go from faking the reports to trying coerce RTM companies (for their and the landlord’s safety of course) to paying for reports with, I would assume, nice commissions for the landlord is … just lovely jubbly business if you can get it.
It’s also called protection money.
Just another sordid wheeze; another creative way of leveraging freehold for additional profit.