It’s all about the Lease
We have carried out a lot of lease reviews recently and it has been a handy reminder about how essential it is for all parties to know the contents of the lease.
No happy endings come from Managing Agents taking on management of new properties without full knowledge of the content of the leases or Leaseholders signing up to a lease without realising what the requirements are within it. Both of these scenarios can often be the direct route to legal proceedings.
Here are few suggestions of what we think are notable and how a better understanding could avoid issues later down the line:
- Reasons that make a lease review worthwhile
- Who pays what, to who and when?
For Property Management professionals
There are many articles out there in property management blogs and magazines regarding the holy grail of getting cash flow to your properties (and your businesses) as efficiently as possible. But to ensure this can take place;
- When should your demands go out and how much can you charge?
- Is there flexibility built in to the lease?
- Are the charges variable?
- Reserve funds and sinking funds– it’s hard to underestimate their value but are they written in to the lease?
- Who pays the insurance and in whose name should the insurance be taken out?
Having answers on hand to these questions will help avoid disputes and potential trips to the First-tier Tribunal.
Leaseholders
Most of us want to live somewhere which is maintained to a high standard, but:
- How much does that cost and how are those costs calculated? and
- When is payment due?
If the additional charges contained within your lease are not explained properly at the conveyancing stage or you settle on a place that is above your means and fall behind on service charge or ground rent payments then the consequences can be severe. Your property can suddenly feel like a financial trap and delayed or non-payment can quickly escalate, especially if there is impending major works.
2 Community rules
For Property Management professionals
Property Managers that we work with genuinely care about the developments that they manage. They are very willing to answer any questions that leaseholders may have about a development and knowing the leases restrictions and requirements and being able to spot breaches that are relevant and can affect Leaseholders is essential;
- What are the rules about washing lines or satellite dishes?
- Are there any rules about rubbish bags?
Leaseholders
There are lots of weird and wonderful clauses that can appear in leases;
Pets are a big one – especially the bigger the pet! You may understand that you can’t house a Dog in your one bedroom flat but strictly speaking what about a Goldfish? “all creeds are welcome but not all breeds”.
What about nuisance? Restrictions on playing music, walking around on wooden floors and prescribed quiet hours can be common place.
3 Maintenance
For Property Management professionals
Arise glamorous modern buildings with lots of amenities which require maintenance beyond changing light bulbs or fixing rotten window frames.
- What are the lease requirements in this regard?
- Do you have the ability or correct suppliers in place to cover this?
- What big bits of expenditure are required and when?
Wear and tear is normal to deal with – regular major works will require more planning.
Leaseholders
Games rooms, tennis courts, roof top pool, state of the art gym are all very desirable but
- What do they cost?
What about decoration?
- Many leases allow you to paint your walls but redecoration could be required on a regular basis.
- Who should clean the glass on your balcony?
4 Value
For Property Management professionals
Be aware of the Terms of the lease. Knowing how valuable a lease is (or not) is useful so that you can consider this and potentially take the steps that need to be taken to enhance or protect the value of your or your clients asset.
- What is the date of the lease?
- What is the term?
- How long is remaining?
Leaseholders
Not living at the property/got a tenant? Are you breaching a subletting term of your lease?
Knowing the terms of your lease and how long is left is vital;
- Early action can avoid a hefty premium or
- could a future buyer achieve lending against a short lease term?
Knowledge and early action is not only savvy but essential.
Leases are often drafted by us lawyer types and whilst sometimes they are difficult to understand it is hard for any party to say that they aren’t aware of something that clearly stated (albeit deeply) within the clauses of a lease.
For legal advice or assistance on leases or any of your property management needs we’d love to hear from you.
Contact LMP Law by phone on 0115 784 1614 or by email on [email protected]