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

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

11:20 AM, 19th June 2013, About 9 years ago 37

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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



Comments

by

14:37 PM, 23rd June 2013, About 9 years ago

Presumably your solicitor would have reviewed the lease at the time of purchase. If they failed to notify you of the potential for these pernicious charges I would have thought they had been negligent in their conveyancing and bear some liability for the costs you may now be incurring. Would a quiet word in their ear to tell them about their oversight have them act on your behalf to get it sorted?

by Lauren Wadey MIRPM, AssocRICS, CIHM

16:13 PM, 24th June 2013, About 9 years ago

I would be interested to hear if Tony Whites suggestion pays off. I would have thought the conveyancer has protected themselves against this eventuality somehow.

by Joe Bloggs

22:53 PM, 24th June 2013, About 9 years ago

mark - i have flats with e&m and they write to my home address, however you need to give them a correspondence address.
rob - i got that sort of letter from e&m a few years ago and did not pay as its outside my lease terms.

by

11:18 AM, 26th June 2013, About 9 years ago

Hi Guys

I am trully thankful for all the posts and advice over the last week. Myself and my wife are currently querying the freehold of our property. I have been informed that the company that is initiating the global/standard licence are the head leaseholders and NOT the actual freeholders. We will dispute that our lease was with the freeholders.
I hope to let you know in due course. Thanks again
Rob

by Annette Stone

18:10 PM, 26th June 2013, About 9 years ago

Rob, What a to do you are having!!! This sort of thing is usually done when a deal is struck between the seller of a freeholder and the purchaser and there is a strong suspicion that if they were going to conduct the sale properly and issue Section V Notices on all the lessees giving the opportunity for 50% or more of the lessees to purchase the freehold the lessees would buy, they opt for the creation of a Head Lease which still requires Notices to be served and for lessees to be kept informed. Even if they created a Head Lease the Head Lessor should not revise any of the terms in the original lease.

Similarly there is nothing to stop 50% or more of the lessees getting together and exercising their rights to buy the freehold even now. This is complicated by the existence of the Head Lease but a competent property valuer working with an experienced lawyer in the field will be able to explain how all of the "intermediate interests" are bought if this is the wish of the lessees.

My advice is to check your original lease thoroughly and compare it with the Head Lease. If the Head Lease has added any clauses you are home and dry.

If you wanted to try and buy the freehold and needed some guidance get my details from Mark and e mail me.

In my experience these very big freeholders/head lessees or management companies who are tied to one particular freeholder will cave in if you apply enough pressure and I am currently involved in something along slightly different lines but also involving unreasonable demands and I am fighting it all the way.

by Roger Hardwick

12:43 PM, 29th June 2013, About 9 years ago

Dear Rob,

A few points:

(i) The first point of reference, as always, is the lease. Does it prohibit subletting with the prior written consent of the landlord? Does it place other restrictions on subletting? Note that very short term (e.g. 1 – 4 weeks) or holiday letting is likely to amount to a breach of a covenant to use the property only as a “private residence” or “private dwelling” (Caradon DC v Paton); or a covenant prohibiting use of the property for trade or business (Thorn v Madden and Tendler v Sproule). It may be that longer term letting (6 month+ ASTs or even longer) may amount to a breach of the trade/business covenant, but there is not much case law on that.

If the lease does not prohibit subletting (without the prior written consent of the landlord), then there is no need to obtain the prior written consent of the landlord. I suspect E&M have applied their policy to their entire portfolio; and I know they have got it wrong on a few occasions (where I have acted for the leaseholders); demand consent to sublet fees where the lease contains no requirement for consent.

(ii) Most leases which prohibit subletting without consent, anticipate that the consent will be required on every occasion that the property is sublet. As I understand it, E&M have adopted a policy on subletting which includes the option of obtaining a global licence, but which also includes the possibility of obtaining consent every time the property is sublet; or on an annual basis. They are perfectly entitled to offer these options (the global consent would in effect operate as a general waiver of any future breach, or any future breach during that year), so long as they also offer the leaseholder the opportunity to obtain and pay for written consent on a “one-off” basis. They cannot insist that the leaseholder goes for the global consent, unless the lease itself requires it (that would be highly unusual).

(iii) It is worth remembering that where a lease does prohibit assignment or subletting without consent, it will be an implied term that such consent cannot be unreasonably withheld (s.19(1) of the Landlord and Tenant Act 1927).

(iv) The bad news is that even where a lease does not expressly require the leaseholder to pay an administration fee for dealing with applications for consent to sublet, it is considered reasonable for the landlord to withhold consent until the leaseholder pays the landlord’s reasonable administration fee (Holding & Management (Solitaire) Ltd. v Norton), HOWEVER ...

(v) ... a fee for providing consent in this context is a variable “administration charge”, which must be reasonable (Commonhold and Leasehold Reform Act 2002, Sch.11, p.2) and in the case of Holding & Management (Solitaire) Ltd. v Norton (an Upper Tribunal case, which sets a legal precedent – please remember that LVT decisions are not binding on anyone other than the parties to those proceedings, so they are of limited use), a reasonable fee was held to be £40 plus VAT.

I hope that helps.

Kind regards,

Roger Hardwick
Brethertons LLP

by Joe Bloggs

13:24 PM, 29th June 2013, About 9 years ago

hi roger
fantastic summary supported by caselaw.
particularly interested to see £40 is considered reasonable.
from my recollection of the lease it was unclear whether consent was required each time a tenancy changed or just once (i obtained consent to sub-let just the once when i became lessee). i would have argued the contra-preferentum rule had they pursued me, which they did not.
many thanks and may well be in touch for any future matters!

by Mark Alexander

13:45 PM, 29th June 2013, About 9 years ago

@Roger Hardwick - I totally agree with Joe Bloggs, fantastic response and an absolute please to have an L&T lawyer commenting here with such authority and clarity.

The £40 revelation has got me thinking, I may well be referring to your post in my future correspondence with freehold management companies and/or indeed instructing you to defend me if I fall out with them, which, based on this is pretty inevitable now.

Please complete your member profile so that we all know how to get in touch when we need you.

Thanks again.

Regards

Mark

by

11:15 AM, 1st July 2013, About 9 years ago

Again thanks for all the advice etc.
To be honest i am a bit overwhelmed with with all the various terminology. I have forwarded an email disputing the licences to E &M.
A reply stated that they will respond in 10 days.
Roger thank you for your in-depth post. Not sure if you have seen part of my lease within this thread and the letter from E&M acting on behalf of their client?

I believed their client was the freeholder (St George) with whom my lease was with but now it has come to my attention that E&M are working on behalf of the leasehead purchaser RQ Blocks E &F Limited. This was stated in a letter dated 29 March 2007.

On another note I have just recieved another letter fron E&M (dated 12 June 2013) stating that "RQ Blocks E & F, your immediate landlord, wish to enter into a long term agreement"

The proposal that they have in mind concerns the appointment of new managing agents to manage a number of blocks of flats in the RQ development. The proposed term of the agreement is likely to be for three years in the first instance, they say.

They have bullet pointed a number of services that would be provided such as:
* Deal with demand and collection of service charge and ground rent monies and other sums. (actually another company at present collects the service charge and this is Consort Property Management) .

There are various other services they mention too.
They also state under the bullet points there there is no written form of contract at present as managing agents all have their own preferred terms of business.

To be honest, the whole matter is very confusing.
Roger if you can help in any professional way I would be most grateful.

Thanks again Mark for allowing me to use this forum, even if I do feel out of my depth here!

by Lauren Wadey MIRPM, AssocRICS, CIHM

16:09 PM, 1st July 2013, About 9 years ago

Sounds like Section 20 terrority now, Rob.
RQ will be offering the management contract for the blocks out, based on loose terms (bullett points ) to several agents who will bid under a closed tender for the future management, offering their most competitive price/services.

Ultimately, RQ will be hoping to secure a fixed rate of fees for the term, to prevent significant icreases to the budget year on year - like with an energy tariff.

If this is the first notice you have received on the matter, it will be entitled " notice of intention". You have 30 days from the date of the letter to comment on this proposal and nominate an agent that you might wish to be considered for the management of the block.

points to consider/query are:
-Why do they want to enter into a 3 year agreement? If the agent is new and you are tied in for 36 months this might not be desirable.
- Opposingly, section 20 allows you to secure a much longer contract (say 5 -10 yrs) which if you are confident in the selection might be more beneficial.

After this they will contact the selected agents and then these bids will be conveyed to you in a future notice, along with the proposed selection of agent.

Please feel free to give me a call if you have any queries on this, as it is quite involved.


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