Global Licence or a Standard Licence to let required by Freeholder – is this a scam?

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Permission from freeholder - Global Licence/Standard Licence to letTwo years ago we received a letter from the freehold manager of our leasehold flat saying we now require a standard or global licence to let, and if we did not obtain either within 14 days a solicitor would continue with legal action.

When we purchased the property nothing was ever mentioned about these licences but we still informed the freeholder that we would finance the purchase with a buy to let mortgage.

I am wondering if any other landlords have been placed in this position. I called the E&M sub-let department (never heard of it before) and queried what this was all about and asked that before I part with any money I wanted to receive breakdown of costs etc. and why I was not made aware of this 6 years ago!

I did not receive a letter until 2 months ago, again asking for us to obtain either licence in the next 14 days.

At this time I asked around but no one knew of this so I did not reply. One week ago I received another letter but the standard licence had now been changed to consent licence, reduced from £135.00 to £100.

Another charge is also payable, £75 when a tenant changes or the term expires or roll on. The global licence is not much better £330 for a max period of 5 years but with a added benefit of a 50% reduction for new tenants or tenancy expires or renewals. Personally I think this is a complete rip off.

I will be pleased to copy the letter into the comments section if anybody feels it is necessary to provide guidance. I’ve not added it yet though due to its length, same goes for the relevant page of our lease.

Any help or advice would be most welcomed as I am really not sure who to believe.

Thanks in advance

Kind regards
Rob Durack

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Comments

  • I don’t think it’s a scam as such, I have looked at a property with this charge. I didn’t buy it for other reasons. I do have a flat where the management company (the residents) charge a fee for a new tenancy. I think it’s a bit steep but it does cover the additional costs and it goes into the communal funds so I am happy with that.

    However, you should have been told when this fee was introduced if it is subsequent to your purchase and on what grounds rather than being threatened with legal action for something you knew nothing about. If it keeps the other costs down it may be a good thing, but you need to investigate thoroughly.


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  • Dear Rob,

    Although I am a block managing agent by profession I do buy flats as my pension. Some two years ago I bought a flat in a block where it became apparent on completion that the freeholder was making charges like this of £100 plus VAT or £120 plus VAT per year. This was amongst other charges such as £1,200 plus VAT for consent to change your windows. There was no reference to any such charges in the lease. I love nothing more than a fight with a rip off artist!!!

    In short I managed to trace my 16 co-lessees, we formed an rtm and took the management away from these guys. I also fought all these fees and got them ALL refunded to all tenants retrospectively.

    The story continues as I managed to obtain a lease extension for the flat I had bought at a fair price after a bit of a fight when they saw I was not backing down. I acted for myself as I have done a large number of lease extensions acting for both freeholders and leaseholders over the past year. As the returns I was getting were actually very good I bought another flat and again I am doing the lease extension. This time they are playing hardball and we are set for a Hearing next month. My evidence is overwhelming and if Mark feels it is in order I will post what transpires.

    The firm I work for manage a lot of property in London and the South of England. Not everyone loves us but we do always try to be fair. We never advertise and all our work comes from personal recommendations but if there are people out there who do need a change of managing agent or someone to act for them in regards to a lease extension Mark can provide my details and he can also reference our management skills


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  • Hi Rob,

    I think it would be helpful if you could share a copy of your lease with us to help advise if you should be paying this fee of not.

    I am familiar with a subletting consent, which seems to be what you are reffering too. If an agent handles the adminstration of this consent or similar for Alterations etc, it is considered to be outside of the contractual remit (in most cases) and will therefore there will usually be an extra charge. (Throw in all the standards minimum charge garb and you wind yp with £100+ fees. )

    I think the agent sounds a little hectic though given their lapse in folllowing this up both at the start and following the intial letter. Dont be too alarmed, they appear to be trying (albeit porrly) to enforce the lease covenants.

    Hope this helps
    Lauren Wadey recently posted…Opportunity to Buy a 3/4 bedroom house in ArundelMy Profile


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  • Rob says:

    Hi guys
    Thanks the responses.

    Just to give you an idea of what I am dealing with, here is the letter Estates and Management Ltd, which is acting on behalf of their client RQ Blocks E and F Ltd.
    At the time of purchase, we believe the freeholder was St George Ltd so we have obviously missed something along the way.
    I’ve also copied in a small part of our lease which states consent is required and there may be a reasonable fee.

    I find it difficult to accept that we pay considerable costs for a professional letting agent to fully manage our property, yet we are then stung with this fee! If we knew this when we purchased the property back in 2005, we may have decided not to purchase the property. I appreciate your feedback and any advice. I’m not sure as to whether I should get a solicitor involved.

    Letter begins:

    Estates & Management Ltd

    Sublet guidelines

    Our client RQ Blocks, Royal Quarter E and F Ltd has clear polices in place, principally to ensure leaseholders’ rights are protected and each of you can continue to have quiet enjoyment in accordance with the terms of the lease.

    Freeholders consent is generally required under the terms of the lease prior to any subletting subject to certain conditions. Further formal notice must be served on the freeholder and certified copy documentation relating to tenancy agreements should be provided along with our completed application form.

    The freeholder must also be notified of any updated correspondence addressed for the leesee. Our team of experts will be able to advise you in relation to particular requirements contained within the lease.

    Our fees for ensuring the above relate to our service on behalf of our clients which include reviewing tenancy agreements to ensure that they comply with the terms of the lease and that the tenants are suitable issuing consent documentation, receipting notices, updating our databases, storing copies and making changes to correspondents’ address.

    As we are sure you will appreciate, legal advice is sought in connection with drafting of all documentation including the licences that we offer and the execution of such documentation incurs costs relating to staff time and additional resources required such as IT infrastructure and lease storage/retrieval.
    We should also point out that where leesees fails to comply with the terms of this lease and obtain necessary consent from our client and serve required notices, this results in further administration time and related costs being incurred.

    We regularly review our fees to ensure that whilst maintaining a suitable level of service to our clients and lessees, these fees remain reasonable.

    At present, we offer two packages in relation to consent to sublet issued on behalf of our client:
    * Standard licence
    135 GBP: Licence granted to individual subletting arrangement meeting the requirements of the terms of the lease, to include the review of all documentation by our legal and administration team, issuing of all consent documentation and updating our records.
    In addition your lease will require that notice of underletting be given to the freeholder.
    We have incorporated the form of notice within the application form for your convenience.
    As you will see, your lease provides for a registration fee for this notice to be given, our current registration fee is GBP75. Every time a tenant changes or when the tenancy term expire or becomes a rolling renewal fee for consent, a registration fee will become applicable.

    * Global licence
    GBP330 Licence granted for all subletting arrangements meeting the requirements of the terms of the lease, for a maximum period of five years, to include reviewing all documentation and issuing all consent documentation. The benefit of obtaining a global licence is that the renewal fees are only applicable whenever a tenant changes, and not upon expiry of each tenancy agreement. Upon a tenancy change a reduction of 50 per cent will be offered from our current notice of underletting fee.

    Therefore to summarise the fees are as follows:
    * FOr respective standard licence GBP 135 together with notice of underletting (GBP75) total: GBP210
    * For the provision of retrospective global licence inclusive of underletting fee total GBP330
    * Where landlords consent is not required under your lease, then only the notice of underletting fee will be payable.
    Where the lease requires a deed of covenant to be entered into, a fee of GBP75 is payable for the preparation and acknowledgement of the document.
    Where a letting is to a private company, the names of all the proposed occupants will be required and the freeholder must be notified of any change in occupancy.
    You are advised that our client does not commit the following subletting arrangements:
    * Tenancies where rental payments are settled by third parties
    * Tenancies to housing associations through a private social landlord scheme/local authority.
    * Tenancies of part only of the premises.
    * Tenancies to asylum seekers
    * Tenancies on short term lettings where the term of tenancy is under three months.
    * Animals kept by subtenant at the premises, even where consent may have been provided to the lessee.

    Please complete our application form with your particular requirements and return it to us with the relevant fee, along with all documentation. If you do not currently have a tenancy agreement, we are still able to provisionally grant consent once we are in receipt of the completed application form and the required fees.
    A signed copy of the tenancy agreement should be sent to us as soon as this has been completed. You will see that the application form incorporates the notice of underletting.
    Should you have any queries, please contact our team who will be happy to assist.

    ————

    Our lease:

    Alienation

    27. Not:

    27.1 At any time during the said term to sublet the whole or any part of the Demised Premises save that an underletting of the whole of the Demised Premises (with the prior written consent of the Lessor which shall not be unreasonable withheld or delayed) is permitted in the case of a term not exceeding three years let on an assured short-hold tenancy agreement or letting to a company or any other tenancy agreement whereby the tenant has not obtained security of tenure on any expiry of earlier termination of the term.

    27.2 At any time during the said term separately to assign transfer or part with the possession or occupation of any part or parts of the Demised Premises but only to assign transfer or part with the possession whereof as a whole.

    27.3 To assign transfer or part with the possession of occupation of the Demised Premises during the last seven years of the said term without the prior consent of the lessor (such consent not to be unreasonably withheld).

    Registration
    28. WIthin one month after the date of any and every assignment transfer mortgage charge discharge or mortgage or charge lease or tenancy agreement (including any immediate or derivative lease or tenancy agreement of the Demised Premises for any term) any assignment of such lease or tenancy agreement or any grant of probate or letters of administration order of court or other matter disposing of a effecting the Demised Premises or the devolution of or transfer of title to the same to give or procure to be given to the lessor notice in writing in duplicate of such disposition or devolution or transfer of title with full particulars thereof and also at the same time to produce or cause to be produced to them a certified copy of the document effecting or (as the case may be) evidencing such disposition or any other matter for retention by the lessor and also to pay or cause to be paid at the same time to the lessor such reasonable fee as shall be appropriate at the time of registration in each case together with value added tax thereon in respect of any such notice.


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  • Rob, the lease is fairly watertight in that you would have to pay a registration fee and you should really have read the lease before purchase. That having been said a lot of freeholders do try and maximise their returns from these clauses over and above what is reasonable and having to pay a fee at every new tenancy and every renewal is not reasonable,
    If the original freeholder was St. George I assume the flats are quite high value but I cannot see any reference anywhere to the new freeholder
    Two ideas: One to write to them and suggest that the fees are unreasonable and to offer them £50 plus VAT for the first registration of a tenancy and £25 for subsequent renewals of the same tenancy. You might also ask them for details of a contact person at the freeholders and write to them separately letting them know how you fee. Secondly, how big is your block and is it worth trying to form an rtm. If the freeholder knew you were considering doing this then you might find all the registration fee requests disappearing. Perhaps other people have some other ideas. Whatever you do write to the managing agents and let them know you are contesting this so if they try and sue you for a breach of lease you are covered by having given notice of a disputed charge.


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  • think i would invite them to take me to court, sounds like an ‘unfair term in contract’ which would not be enforceable .


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  • I hate to contradict anyone but litigation can get very expensive. If this managing agent had two thousand flats under their management (a pretty average sized firm) it would be worth their while going to Court with barristers to argue that their costs were reasonable and Rob could be left with their costs (which they would rack up as high as possible) and his costs which even if he won would wipe out any savings on the registration. Far better to keep arguing, having told them the matter is in dispute and try and get some support from fellow lessees in the same position. There are a lot of things to consider, not least where the registration fee is in relation to the rent as a percentage and how far you want to take this. Arguments like this are not for the faint hearted.


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  • Given our experience with Estates and Management Ltd, I would not buy a property that they had anything to do with unless I got a VERY good deal.

    Do other landlord’s think the same about E&M?


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  • Hi Ian

    E&M are the freehold managers of a few blocks in which I own leasehold flats and I’ve had no more problems with them than others. My main bug bear with most of these companies is that they serve their bills to the property and I don’t get to hear about them until their debt collectors write to me and add on charges. I’ve never paid those charges as I argue with them and show them proof of previous correspondence informing the management company of my address for invoicing purposes. It used to piss me off because it is bad practice but over the decades I’ve become philosophical about it. It still happens a lot but I just get on with it and put it down to being a landlord. Utility companies are no better!


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  • @ Ian
    Yes Ian, I do think the same as you as we own a property managed by E&M and constantly bang our heads against a brick wall with their ever increasing fees, which seem to be as a result of knee jerk solutions to problems that they don’t deal with properly ending in huge expense every few months.
    @ Rob
    We are waiting for a similar letter to drop on our door mat from E&M, although we did register the first tenant but took the decision that all follow-on fees were a rip-off at tenant change-over time.

    For all the reasons above we are seriously considering putting the property on the market when the current tenant gives notice, which flies in the face of our long term investment strategy of keeping all our properties for ever more.

    As a matter of interest we have another leasehold property that is an excellent place and is immaculately looked after by a very responsible and hard working management company but the leasehold costs each year are crippling.

    My advice to anyone is to think very carefully before purchasing leasehold property and also do all your sums very carefully (and add in a contingency quota to cover for constant unknown costs), read the small print carefully before committing to the purchase and remember that you have no control over other owners or their tenants, or even unconnected persons that can cause you unnecessary expense.


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