Unfair fees for Deed of covenant after 18years of renting my flat

by Readers Question

5:41 AM, 20th May 2015
About 4 years ago

Unfair fees for Deed of covenant after 18years of renting my flat

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Unfair fees for Deed of covenant after 18years of renting my flat

I have been renting my flat for 18years without any need for a deed of covenant. I with other owners have a share of the Freehold of the building.

All of a sudden company directors(owners who have put themselves forward as directors) are asking for a £150.00 +VAT for deed of covenant for each new tenant.

-Firstly this is a huge amount of money for a few pages of paper, which can be printed in no time and may be 10minutes of administration time.

-Secondly, they want my tenant to sign the deed of the covenant and not me the owner.

-Third thing is that no one ever asked for a deed of covenant before, although I have been told that this is in my deeds.

-Also the contents of the proposed deed of covenant seems to be relevant to both myself and my tenant,

– In addition my tenant has been there for a while and might not want to sign the deed of covenant in the middle of their tenancy.

I have asked the property manager to remove some of the clause and he has emailed me back agreeing to this!

Can they ask for so much money after such a long time, and ask my tenant to sign it?

I am totally confused and stressed out by this. The building manager is now bullying me and telling me that if I do not sign their deed of covenant, they will take me to court, I will loose my flat and I have to pay all their costs or I can pay £900.00+VAT to their solicitor to do a separate deed of covenant for me.

I appreciate any help and advice, as I have no idea how to go about this and I am getting desperate.

Thanks

Ovalunfair fee



Comments

Maria M.

11:48 AM, 20th May 2015
About 4 years ago

After the unreasonable demands £150.00+VAT for each time I get a new tenants or renew the existing tenants contract, I have been looking in more details in the Deed of Covenant prepared by my Freeholders. They are asking for the all the floors to be covered with carpet, Bathroom and kitchen with carpet tills!! I can't believe in this day and age having carpet tills in the bathroom and kitchen.
The more I read my lease, the more I realise, what a load of unfair, complicated and antiquated document my lease is. It seems all to be in the favour of the Freeholders, as to what is suitable, what is a fair and everything else.

Even when you have a share of the Freehold there is still sting in the tail. As the Freeholders use complicated company laws, that the conveyance solicitors do not bother to look at or explain. Surely these unfair laws should be changed in a more blanced way, between the Freeholder and the Leaseholders. Why does no one ever campaigns for this to change these old laws that favour the Freeholders all the way?

David Aneurin

13:49 PM, 20th May 2015
About 4 years ago

1.If you have a share in the freehold then you must be a member of the management company. Therefore you too can become a director and have some influence on the administration of the block
2. It seems unusual that a deed is required so long after the event. I cannot see what action they can take if you do not sign the deed. I do not see how they can take you to court.
3. Is the manager acting on his own behalf or with instructions of the directors - if so refer to1 above and either or both - apply to become a director and contact other leaseholders who may share your view..
4. The charge is too high for the filing a document. Seems to be the manager on a money making exercise.

Tony Lilleystone

18:19 PM, 20th May 2015
About 4 years ago

I am guessing that your property is in a fairly large block, with some flat-owners renting their properties while others are owner/occupiers. I have encountered a number of such properties where the owner/occupiers are not happy with the behaviour of short-term tenants occupying under ASTs so take control of the freehold (or management) company and endeavour to make it harder for flats to be sub-let.

The problem for people like yourself is that if you do not occupy your property you may take little or no interest in the affairs of the company and do not attend AGMs or other meetings. It then becomes possible for those that do attend to vote themselves in as directors and then do things like demanding people obtain licences to underlet and charge fees for the privilege (or telling the managing agents to do this.)

You should check what your own lease says about the need for a licence to let, and what it can contain. But part of the purpose of the licence is to require your tenants to confirm they will abide by the tenant covenants contained in your own lease of the flat, and any regulations relating to the use of common parts of the building, so it is understandable that your tenants will be required to sign.

Such covenants and regulations are intended for the benefit of all occupiers of the building and intended to stop un-neighbourly behaviour such as watching TV at 3 am with the volume turned right up or installing wooden flooring without proper sound-proofing in an upstairs flat so that the people downstairs can hear your every move (Over ball Rugby please note.)

I agree that the charges for such licences are usually outrageous when the document will be a standard-form one run off the computer. In fact the amount you are being charged doesn't look too bad compared with some I have seen, so perhaps the best thing would be to pay up for now (unless there is nothing in your lease requiring any such licence.)

But it might also be a good idea to see if you can become a director of the freehold-company and exercise more control on the way is run. Get copies of the company's Memorandum and Articles of Association as well as minutes of recent AGMs and particularly any resolutions passed at such meetings. Such documents should be available from the company secretary or from Companies House (on the GOV.UK website, which also contains some guidance on company law.)

Tony Lilleystone

18:54 PM, 20th May 2015
About 4 years ago

Reply to the comment left by "Oval ball Rugby" at "20/05/2015 - 11:48":

Welcome to the wonderful world of leasehold flats! (at least, in England and Wales.)
I have some comments on your post:
1. There is (or was) a group which campaigns for the abolition of residential leasehold, known as CARL, but I can't seem to find a current web-site for them. However the Leasehold Knowledge Partnership site (http://www.leaseholdknowledge.com/) is quite interesting on this topic.
2. Back in 2002, after about 40 years of thinking about it, the government created an entirely new form of property ownership specifically for flats, known as 'Commonhold.' This is supposed to be similar to the strata title arrangements which I understand exist in Australia and many American states (condominiums.) Developers and freeholders took one look at this and realised that once flats were sold they wouldn't have any scope to milk flat-owners for outrageous service charges, licence fees, etc. Lenders decided they weren't going to lend on Commonhold properties, and lawyers decided why bother learning some new complicated law when no-one was going to bother with it. End result - the law is a total waste of space.
3. Yes, we badly need to amend the law on residential leaseholds. But unless a government (of whatever colour) thinks there are enough votes in it, it ain't going to happen. And I suspect the present government would be strongly influenced by the big property companies which own many freehold reversions.

Jay James

20:48 PM, 20th May 2015
About 4 years ago

Nationalise freeholds to one Government dept!
(just an off the cuff thought)

Maria M.

20:59 PM, 20th May 2015
About 4 years ago

Reply to the comment left by "David Aneurin" at "20/05/2015 - 13:49":

Thanks for your reply.

Yes, I can put my name forward and become a director. But I neither have the time nor have any knowledge of what my responsibilities as a director would be?
With all that said, it seems that the existing directors have voted and agreed that all leaseholders, who rent their properties must pay £150.00+VAT for any new or renewal tenancy agreements.

Yes, it is in my lease that I should have a Deed of Covenant, and pay their solicitors fee for this which is not less than £15.00( fifteen pounds)+ VAT and not £150.00(hundred and fifty pounds) +VAT. However although they were aware that I was renting my property. They never asked for it before.

Yes, I am certain that this is a money making exercise as emailing someone a form and then filling it does not cost this much money. There are around 50flats that are rented, so this is a nice little earner for them.

Yes, the building manager is telling me, if my tenant does not sign the Deed of Covenant that he is providing at a cost of £150.00, then I can deal with their solicitors directly and the cost would be £900.00 or their solicitor will take me to court and eventually I would loose my flat!

Although my name, my tenants name and the Freeholders name is in the Deed of Covenant. Somehow they only want tenants to sign it, but they not want me to sign it!!

Maria M.

22:22 PM, 20th May 2015
About 4 years ago

Reply to the comment left by "Tony Lilleystone" at "20/05/2015 - 18:19":

Yes there are around 100 flats and most of them are rented. There has been a few issues in a couple of the blocks, regarding noise etc, but nothing major. However the issues were resolved and there is no further issues.

I have attended a number of AGM, but not many people attend. The most I have seen is about 7-8 people. As most flats are rented, people come and go. You never know, who the owners of these flats are. More importantly not a lot seems to
happen in the AGM's, as they brush over things and then things seems to be done by the Property Management Solicitors.

The company structure seems quiet complicated, as there are a large number of 'A shareholders ( get dividend if any monies left in the reserve funds), a much smaller number of ' B' shareholders and then a very few flats that have no shares.

Thanks for advise. I will get copies of the company’s Memorandum and Articles of Association as well as minutes of recent AGMs and particularly any resolutions passed at such meetings. Such documents should be available from the company secretary or from Companies House (on the GOV.UK website, which also contains some guidance on company law)

With all that said, my lease state that need for Deed of Covenant, however it has never been exercised during the last 18 years. Can they exercise it now after all this time?
Do they need a resolution to exercise what is in the lease after so many years?

Thank you in advance for any additional advice that you can give me.

Maria M.

22:41 PM, 20th May 2015
About 4 years ago

Reply to the comment left by "Tony Lilleystone" at "20/05/2015 - 18:54":

Thanks Tony, you seem to have such a lot of knowledge. Thanks for sharing and all your advice.

I look at the web site for (http://www.leaseholdknowledge.com/). It is very interesting. I believe these unfair Leasehold laws should be abolished and a more fair and straight forward lease written in plane English should be given to Leaseholders. As most of the Freeholders are rich people who get around the law and sting the leaseholders, who mostly can't afford to pay large sum to specialist solicitors who understand the company law.

I have made a big mistake buying a flat, without understanding the terms of the lease or any understanding of the company law and the complicated infrastructure of the Property Management company.

Any other advice would be most welcomed. Thank you.

Maria M.

22:50 PM, 20th May 2015
About 4 years ago

Reply to the comment left by "Jay James" at "20/05/2015 - 20:48":

James, I am not sure, how many government department, are dealing with it at present?

All I would like to see is a fairer system, one that is balanced for both Leaseholder and Free holders.

I pray for the day that Leases are written in plain simple english for the benefit of all and not just this complicated, old fashion language written by the lawyers for the big companies and rich Freeholders.

Jay James

10:02 AM, 21st May 2015
About 4 years ago

Reply to the comment left by "Oval ball Rugby" at "20/05/2015 - 22:50":

A very bid "ditto" to your comment Oval.
--
Not quite sure what I was thinking at the time of my previous comment, but I wonder if the situation would be better with just a single freeholder for the UK?
Their actions may be more transparent and under pressure of public and media, especially so if they were a public body.
Better still, ban freeholders from making any money.

Any way, that is fantasy.

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