This binding ruling by the Upper Chamber (Lands Tribunal) of January 2012 should be quoted in all correspondence where freeholders or their agents are demanding sub-letting fees of more than £40 plus VAT which are not specified in the lease
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In monetary terms sub-letting fees are one of the more trifling little earners in the leasehold game, but they are deeply resented by flat owners who see that landlords do almost nothing for their money.
Now, it seems, the Land Tribunal agrees with them, ruling in four cases that sub-letting fees should be around £40.
Anyone involved in a dispute with a landlord could offer this sort of sum and be in with a fair chance that that would be the end of it.
Sub-letting fees vary, but charges of £100 – £135 are common, and then there are registration fees of around £75.
Four appeal cases were brought by landlords to the Land Tribunal last February and they were heard together by George Bartlett, QC, president of the Upper Tribunal.
Two appeals were brought by our old friends Peverel, this time trading as Holding and Management (Solitaire) Ltd.
One concerned a Barratt £123,295 flat in Essex, where the owner was being charged of £105 for this (as well as £75 for the preparation of a deed of covenant and £75 for registration).
The other a £104,500 Barratt flat in Reading, which was being rented out under an assured shorthold tenancy agreement for £750 per month. Solitaire wanted a £135 fee for consent and a notice fee of £75.
Another case, brought by Samnas Ltd, concerned a £122,000 flat in Banbury, Oxfordshire, where the company was after £105 , as well as £75 for registration of the sub-letting.
The last was in Milton Keynes and concerned a £166,000 property where Flambayor Ltd was after £135, and £75 for the registration.
In all cases the leases made clear that the properties could not be rented out “without the prior written consent of the lessor and the management company, such consent not to be unreasonably withheld or delayed”.
The landlords argued that registering the sub-letting agreement involved considerable work, but the tribunal was having none of it:
Bartlett concluded:
“The appellants seek to justify the consent fee in terms that apply to all consents, and they do so by setting out a list of work that, it is claimed, their agents do. It looks to me to be a list of all the things that could conceivably be done in connection with the grant of consent rather than the things that would need to be done in a typical case or that were in fact done in the cases under consideration.
“I am wholly unpersuaded by the appellant’s [Solitaire] assertion that it would have been necessary for an administrator to spend approximately two hours dealing with the application and the legal department about one hour.
In the absence of any information on the part of the appellant as to what was actually done, by whom and how long it took, I am not satisfied that a fee of £105 for the grant of consent in addition to fees for the covenant was justified or that consent could reasonably have been refused in the event that Mrs Norton [a flat owner] had refused to pay it.
The same goes in relation to Dr Rudnay [flat owner in the case brought by Samnas Ltd]. Doing the best I can on what is before me, I conclude that a fee greater than £40 plus VAT could not be justified, and I determine that this amount is payable.
“In relation to the other two cases a fee of £135 was sought – higher than the £105 because, it was said, the consent was a retrospective one. The appellants have done nothing to show that in these two cases extra costs were incurred. I therefore determine that the amount payable in each case is £40 plus VAT.”
The full case can be read here
(http://www.landstribunal.gov.uk/Aspx/view.aspx?id=823)
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The freeholder recently requested me to pay £78 registration fee plus £75 subletting fee. I challenged them sighting the above cases and they have agreed to accept £40 + vat subletting fee but wont budge on the registration fee. It does say in my lease that the registration fee will be no less than £65 +vat (£78) but the lease was written in 2007. I pointed out that regardless of what it says in my lease the LVT has ruled in the above cases that a £75 registration fee was too much. Their reply to that was their fee is as stated in my lease and that if I write to them again on the subject the matter will be referred to their legal department and I may be charged for their reply. I am currently considering my position so any advice would be appreciated.
The case described above opens the floodgates for leasehold tenants to ensure they do not get ripped off on this score. I had a similar problem to that which you describe. I protested. Paid the minimum asked for and made it clear I was doing so under protest. Then I took them to an LVT citing the decisions mentioned above. I won and Estates and Management were forced to send me a cheque for the difference between their fee and that which the court stated was fair (£40). Don’t let them intimidate you with bully tactics. The law is on your side on this occasion.
For the record this was my case:
Vanguard House v Proxima GR – Case Ref: LON/00AM/LAC/2011/0019
Dear LKP,
Our landlord has decided to write to all owners asking them for a £65.00 plus vat fee for subletting as it currently states this in the lease. Those who have not sent the fee, or who have only sent £40 plus vat, have all now received another letter demanding another £65.00 plus vat for administration. If they don’t pay up there will be further action and interest to pay plus more costs!
My question is this:
If there has been an LVT ruling on fees for subletting, are the landlord in breach of the law or can they still charge the amount it says on the lease?
I would be interested to know what you think off the record!
Many thanks
Karen
Dear Karen,
Most leases do not set a specific sum for sub-letting. The cases at the LVT which were then appealed up to the upper Lands Tribunal, referred to on the LKP site under ‘sub-letting’, confirmed the LVT’s decision by ruling that a fee of £40 plus VAT was reasonable. LVT’s decisions do not set precedent, but they are obliged to follow decisions from the Lands Tribunal
In your case, it is more complicated as the lease specifically states £65. The only way to challenge this may be to take a case to ask the LVT to vary the terms of the lease. Without that option you may have a problem
Administration charges is another issue. If the landlord has not cashed the £40 +VAT cheques and now produces a second £65 +VAT charge for continuing to demand his £65 +VAT sub-letting fee, you could be going into a nasty loop. If he has cashed the £40+VAT, it’s not a lot better
For the short term the options might be
1) For people to send in the outstanding £25 plus VAT. They should state that they do not agree with the demand and do not accept the right of the landlord to charge a further £65+VAT in administration costs as there is no evidence this is a true cost.
2) To advise the landlord that in light of the Land Tribunal decision you intend to take a case to have the LVT vary the terms of the lease and retrospectively claim for historic overcharges unless the landlord voluntarily agrees to accept a fee of £40+ VAT in future
In view of the specific wording in the lease, it may also be worth taking advice from a specialist solicitor.
Regards, LKP
Hi LKP,
I have also received correspondence from management company acting for The Landlord saying I need to pay a £75 fee for consent and £78 fee for registration.
The lease does not reference any specific fee for consent. The lease does have a clause of paying for registering the tenancy agreement.
To cut a long story short, I am dubious as to the validity of the fee for consent. Should I have to pay the consent fee of £78, or based on the Land Tribunal findings should I only be paying no more than £40 for this?
Do the Land Tribunal findings supersede the details of my lease from 2008?
Should I only be paying £40 for consent and registration fees combined?
I really think that this needs to be clarified as there are a lot of leasehold tenants in the same boat. My thinking is that I might be safest paying the registration fees as they are specifically stated in the lease, but pushing on at least getting the £75 consent fee reduced to £40 based on the land tribunal judgment.
This whole area needs to be legislated for by government but that’s another days work!
According to the management company I’ll have to pay for consent fee and registration fee every time there’s a new shorthold tenancy agreement signed by a tenant in the property, even if it is the same person … £153 pounds a pop for that each time £75 plus £78 is very excessive. Help!
Our ex-landlord made us pay £200 pound safety deposit each with the accumulation of £1000 pounds.
Now I have moved out 2 months short of the termination date. They have still not returned it and are now trying to bill us over 700 pound 2 months late for silly things like washing outside windows.
Can this be allowed as we are only students and that money can help me start my new life.
As a student, you should appreciate a lesson learned.
You signed a contract when you moved into the accommodation. Did you read it?
You have said you moved out early. So the landlord can charge rental up to the agreed period.
Since you have a duty of care for any property you rent, window cleaning is not a “silly thing”
Imagine one day in the future you supply a service for which you expect to be paid, but you are told “I can’t pay i am a student ?
Ian, life is not like that, very sorry!
Pay the bill.
Just got a letter from our managing agent (one of the sub-companies off Peverell ironically) with the same request for such charges. We are already paying service fees under protest and now they seem to want to commit more daylight robbery (the amount they were charging for a lightbulb change was horrendous) Am glad the LVT saw some sense.
Can anyone advise if this ruling still holds if we want to challenge the MA regarding the amount of money? Or has there been an overturn that allows the agents to charge items as they please?
Milo
Exactly what are your MA’s demanding? I would need to see a copy of the letter…
Hi all, I have recently started letting my flat , and have been sent a letter from the management company, pier management, demanding £100 + vat to register a sublet licence. I have asked them for a breakdown of costs , and also for their vat registration number. I have also asked them to provide me with a copy of the lease that states the information about subletting. Shall I quote this case, and offer then £40+vat, or take it to a lvt or court? Any help is greatly appreciated
Pier charging £100 for subletting : what again, naughty naughty?
It really doesn’t matter that the LVT [in fact, the Upper Tribunal] thinks £40 is a fair fee for landlords to charge for subletting (LKP article above. Dream on, guys.) ALL that matters is what it says in your lease. Or, perhaps, what it does NOT say in your lease.
Pier have this unfortunate habit of writing to leaseholders to tell them there is a clause in their lease which allows them to collect subletting fees.
In our case, we put it to Pier (yes, they are our landlords, too) that they were not entitled to charge a subletting fee because there is no provision in our leases for us to notify them of any subletting until the last seven years of the term of the lease. Therefore, quod erat demonstrandum, since we are not required to notify Pier of any subletting, it follows that Pier is not entitled to charge us a fee to sublet. No matter what the LVT thinks is fair.
Now, I admit, Pier took a bit of persuasion. But a timely intervention from the trading standards officer based at Southend-on-Sea did the trick. (It usually does). A number of happy leaseholders then wrote to me along the following lines:
‘Dear Sue
‘I hope that everyone has had a nice cheque from Pier management through the post today. My 2 years’ license fee has been refunded with a letter of apology.
‘Many thanks for your help.’
Take heart, guys. Read your leases.
Sue Stuckey,
The vast majority of leaseholders have never read their lease. They should.
If they do they will discover to their very pleasant surprise that most leases are written up in easily understood language. A challenge is not as some may think based on some vague interpretation of the wording. Something will either be allowed or it won’t.
So for anyone who has been the subject of subletting charges, before the charge for subletting is challenged, the first question is does the lease allow for a sublet permission/registration fee?
If the lease does not provide for it, that is the end of the matter. You simply point out that no sublet charge is provided for in the lease, so you have no obligation to pay and all demands for payment must cease. If, however, the lease does provide for sublet permission/registration fees, the next stage is that those fees have to be reasonable. This is where the LVT have made different decisions.
Generally amounts between £40-£75 have been allowed.
That said, some freeholders have tried to charge a permission to sublet fee and a registration fee.
The LVT has ruled that since most of the work for a sublet permission and registration is so similar, the extra charge has been limited to around £25.
No one should be frightened by their lease. It actually gives leaseholders many protections.
‘The vast majority of leaseholders have never read their lease.’ Who can really blame them when even a registered auditor (name withheld to avoid his embarassment… or worse) told me in all seriousness ‘Nobody reads leases nowadays.’
I know he certainly didn’t. Yet he was perfectly happy to take our money for his audit of our service charge accounts, which he certified ‘in accordance with international standards’. But if he had read the advice in Technical Guidance 172 available from his professional body, ACCA, then he would know that he was obliged to read at least a cross-section of the leases pertaining to the charges he was auditing and that the audit he should have carried out was in accordance with International Standards on Audit 800 ‘special frameworks’.
I digress. I love my lease. We should all learn to love our leases. As you say, most leases are fairly user friendly. They give leaseholders many protections. They give landlords many protections, too. A well-drafted lease is an object of great beauty worthy of admiration, crafted to ensure a balanced relationship between landlord and tenant and the effective management of any leasehold property.
As the late Lord Justice Denning, Master of the Rolls (and a master of the English language) ruled when giving guidance on the interpretation of the lease: ‘Clear words are needed to exclude [or include] a tenant’s rights …’
If the lease clearly states that the tenant needs permission to sublet then the tenant must seek permission. If the lease clearly states that the landlord is entitled to collect a fee then the landlord is entitled to collect a fee. The amount could be argued. Clarity is everything. Denning, RIP.
Hi, I’d like to know a couple of things. We tried to buy a flat as a buy to let, we were later told the owner of the block had a clause saying properties could only be sublet after a deed of variation in the lease, for which we were told to pay £10,000 as the flat’s owner didnt want to pay. The flat owner put the flat on the market again and we got a letter from the estate agent saying it could be as low as £1500 or £1000 but we had already missed out by then. The flat was being let out and the same estate agents who tried to sell it to us were managing it on behalf of the owner AND had originally sold her the flat, yet they claimed to know nothing about the clause prohibiting subletting. I am trying to claim compensation for lost fees. Any ideas?
One of the properties i manage have recently send out subletting consent forms and advised that the charge of £220.00 + VAT would be payable once the form was received.
The managing agents are BNP Paribas and the head lease states that they are allowed to charge a reasonable fee for subletting consent.
We have argued that this is not a reasonable fee and that the cost is exorbitant but they have replied with the following; “The fee is reasonable and will apply to the registration of the subletting and the work that goes into facilitating the review and administration process through to providing Landlord’s consent by way of a formal document”
Would we have to get solicitors involved to get this lowered as they refuse to negotiate at present.
Teresa,
I would write the following:
With regard to your demand for £220+VAT, i draw your attention to recent LVT/ Upper Tribunal
decisions that accept £40 is a reasonable amount to cover actual costs incurred to register/grant permission for a sub let. I therefore include a payment of £40.
I sincerely hope you can act in a sensible manner over this matter.
Be assured if this does have to go to the Upper Tribunal, in view of other decisions, your claim for £220+VAT is very likely to be ruled out, and you run the real risk that others for whom you have already charged this sum for sub-let fees will be made aware of the decision and themselves claim overcharge refunds.
I have a lease that states sublet is allowed subject to agreement from the freeholder and subject to a maximum tenancy agreement term of three years. No fee stated. How often is it reasonable for the freeholder to charge a fee – for each tenancy agreement or just on a change of tenant?
A fee is reasonable, and tribunals have routinely handed down far lower consent fees than freeholders demand. Avoid the consequences in terms of bungling your case by paying the sum, denying liability, and apply to tribunal for a ruling. This way avoids the risk of costs. Do NOT ignore a demand for agreement and registration of a sublet: it is a often/almost always a condition of the lease that consent is required and you are in breach of lease without it.
But registration fees are not under FTT jurisdiction
Can you cite a case where the tribunal has reduced a consent fee and another court has upheld a disproportionate registration fee?
Subletting fees are routinely being abused by freeholders and their agents to cultivate fees for piddling amounts of work.
Or do you disagree with that statement?
In all cases you should check your lease. do not rely on a freeholder’s word alone that there is provision for a registration or permission to sub-let fee. Remember, the freeholder has a copy of the lease, so ask under what schedule contained in the lease are fees being demanded?
If the answer from the freeholder is along the lines of “We advise you to check your lease”, that probably means they are “trying it on”
Assuming the lease does provide for such charges those charges have to be reasonable.
If you believe them to be excessive you must take Admin’s advice, it is crucial. Pay under protest. That way you are safeguarded from any action or extra charges the freeholder might have wanted to take. Whilst it is true that in some cases unscrupulous freeholders have used “Registration fees” to avoid the old LVT’s it remained the case that many LVT’s did rule that granting permission for a sublet and registration were very similar processes, using combined information.
LVT’s have varied in reasonableness of fees, but generally they have ranged from £40- £75.
If a freeholder has charged a registration fee as well this has generally been set at £25.