Should I sell or risk tenants buying at undervalue price?9:08 AM, 25th September 2019
About 4 weeks ago 48
“Who repairs what?” and “Who owns what?”
These are two fundamental questions that any leasehold owner looking to do works to their property must ask and get the answers to.
The answer will be found by reading and interpreting your lease.
For instance, a common enquiry relates to wanting to develop into the roof space.
It’s all going on up top
It is not safe to assume that just because you own the top floor flat and even that you may have access to this area that it is really yours.
Most leases work in one of two ways. In a lot of maisonette type property (‘one up one down’) the property is divided into slices – the top flat repairs and owns everything (inside and out on the top half) and the ground floor repairs and owns everything below. This isn’t always the case however, and a lot of older leases have shared responsibility for the roof and foundations.
With a lease that divides the property into ‘slabs’ the words ‘all that top floor flat’ may be a clue that the roof is included, but even this may need specialist help.
The other option is that the lease grants (‘demises’) the inside parts of the flat only to the owner and that the landlord retains all the outside and structural elements.
This arrangement is much more common and if you like is the ‘standard’ modern letting arrangement.
Why does all this matter?
It matters because if you want to do work to your property and you need to access or take over something that doesn’t belong to you, then if you don’t have the proper ownership rights or permissions then you will be in breach of your lease.
The consequences of this are potentially very serious and could lead to forfeiture (the right of the freeholder to end the lease and take the property away) or an injunction requiring you to put the property back to its original state.
In addition, if there are unauthorised works or additions it will be very hard to sell the flat and you will most likely end up paying over the odds for a retrospective permission.
I want to do works to the roof
If you don’t own this area then you are going to have to buy a ‘demise’ of this area so that it is added to your lease. If you go down this route then be careful as you also need to make sure that your existing lease and the new one allow alterations to take place
What if I own the area in question – isn’t that enough?
Possibly, but see the comments above about what the lease says – if it contains a total prohibition against alterations then you may have to buy a variation of the lease to allow alterations to take place. If the lease allows alterations then hopefully this is enough but you will still need a licence to alter
What is a Licence to alter?
This is a deed granted by the freeholder that allows the works to take place – it is a formal document and expect the landlord to charge his professional costs (legal and surveying) as part of granting this.
Will I have to pay a premium with a licence to alter?
Strictly speaking no, but you may have to pay an admin fee.
How much will this be?
The Commonhold and Leasehold Reform Act 2002 stipulates that this must be ‘reasonable’ but the truth is that the cost of arguing at length about this and/ or going to tribunal over a ‘modest’ amount is likely to outstrip any saving made and to result in delays.
For that reason you may have to expect to pay some sort of admin fee alongside the professional costs.
What does the law say about charging a premium?
If a tenant is looking to carry out ‘improvements’ then the Landlord and Tenant Act 1927 states that the landlord can claim ‘damages’ for any loss in value to the freehold as a result of the works / alterations. This only applies if the lease allows alterations in the first place – hence the need to check your lease very carefully.
What do these damages amount to?
It is probably easiest to think of this in the context of a commercial property on a shorter lease. If the tenant wants to do works the landlord has to be compensated for any loss off rent he will suffer when the lease comes to an end and he tries to re-let the property. For instance, the new tenant may want to put the property back to the way it was before and a commercial landlord might have to give a rent concession to get them to take the property.
For a residential flat, the end of the lease is generally some way off (possibly hundreds of years) and so any ‘damage’ has to be ‘deferred’ until after the lease ends. This means in practice the amount is fairly nominal but if there is any debate then you may need to engage a valuation surveyor.
Works and leasehold property – What do I need to know?
If you are planning works here are the essentials:
1. Get a copy of your lease
2. Read it / get help with interpretation if needed
3. Approach the landlord for formal written consent / a licence to alter
4. Obtain any other necessary consents (e.g. Planning and building regulations)
5. Talk to the managing agent (if there is one) so that they know what is going on
6. When you have all of the above engage contractor and start the works -remembering to adhere to the licence
I write for and edit the websites www.leaseholdinfo.com and www.leaseholdreformnews.com.
I am a specialist leasehold property solicitor and head of the Landlord and Tenant Team at Bishop & Sewell LLP, a firm of solicitors based in Central London.
This article is for general guidance purposes and does not constitute legal advice. If you require legal advice, please visit www.bishopandsewell.co.uk or email: email@example.com
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