Selling, Subletting? – Tell The Managing Agent

For my first article I have decided to focus on something very close to my heart – information provision, or in our case, the lack of it when it comes to selling, subletting or parting with possession of a leasehold flat.

Most leases have a minimum requirement that compels leaseholders to serve notice and these are known as assignment conditions.

When selling a leasehold flat there are three main types of assignment conditions; the purpose of these conditions is to allow managing agents to keep track of who the leaseholder is and to enable them to continue to collect service charges and ground rent effectively:

1) Deed of Direct Covenant

This is where the seller often has to ensure that the buyer enters into a deed of covenant with the freeholder. This deed of direct covenant creates a contract between the buyer and the freeholder to whom the buyer has to provide his details as the new leaseholder.

2) No Assignment Without Consent

A typical lease will require that the sale or mortgage of a flat cannot take place without the prior written consent of the landlord but this is often ignored and the assignment usually remains legally valid.

3) Requirement to Register The Assignment

This is where the leaseholder has the right to sell but the lease requires that the landlord/managing agent be notified of the sale within
28 days by the buyers solicitor.

Our development has seen a rapid turnover of leasehold flats being sold but as yet we haven’t seen whether leaseholders are abiding by these assignment conditions because we are not aware of any flats being sold since we took over management. What we are trying to do though is to get a handle on all the unfettered subletting that has and is continuing. The terms of our lease allows it but only with the permission of the freeholder, or in our case our managing agent as our freeholder is deceased.

In essence we have started the process from scratch, sending letters to all the leaseholders asking those who are landlords to purchase a Licence to Sublet.

The licence is the ‘permission to sub-let the property’ granted by the freeholder to the leaseholder and issued by the managing agent on the landlords behalf. Its a simple process in that all they have to do is to send a written request for permission to sublet along with the tenant references which will have been obtained ahead of sending the request.

The leaseholder will issue an Assured Shorthold Tenancy agreement (which provide the landlord and mortgagee quick and easy repossession) and which is also the ‘contract’ between the leaseholder and the tenant. This AST will incorporate the leaseholders responsibilities under the term of the lease along with a copy of the relevant clauses. An additional clause that states that the tenant will abide by these is also useful as are the contact details of any letting agents used. Every time the tenant changes, the process is repeated with a new licence being granted. With most landlords this will be a once a year process.

So far though this request for information has elicited little or no response despite the fact that most of our leaseholders do sublet. The situation is made even more difficult because they are not compelled to provide information so unless they readily volunteer it our managing agent tends to get it in piecemeal fashion if they get it at all.

We also had another managing party that didn’t even want to know of our managing agents existence and that was our local council! Due to the serious shortage of social housing a few of our landlords have been enticed into entering into a separate lease agreement with one of a number of council managing agents under the Private Sector Leasing Scheme.

When we enquired as to which flats came under the council or their agents management they stated that they were not obliged to provide details of the flats that had been leased to them under the Data Protection Act. When that approach was combined with a landlord who refused to divulge his (council) letting agent when we had an anti social tenant, only dealt with our agent by e-mail when the problem was reported to him and only told us who managed the property after we wrote a strong letter of complaint about the noise at 3am on a monday morning, it was an absolute nightmare. What made it worse was that the council who put the tenant in wasn’t even our own council – it was another one!

When you consider how many parties can be involved in the management of a block of flats, effective communication becomes ever more essential.
We have our managing agent, our right to manage company, individual landlords, their letting agents and now two local authorities and their agents and we are only a small development compared to many others.

The Licence to Sublet has come in for criticism from some because its seen as a way for managing agents to make even more money from beleagured leaseholders and theres no denying that the freedom to charge whatever they like does nothing to help. The license is however a vital tool in providing managing agents with better knowledge of when tenants move in and out of the property, improving the peace and security of the development because problematic tenants can more easily be recognised and dealt with. It also ensures that anyone who sublets has complied with their lease obligations and provided an address for ‘deemed services’. This means that they can’t use as a defence the excuse that they didn’t know about the service charge demands as the subtenant hadn’t forwarded their mail.

So whether selling, subletting or parting with possession, records of these ‘transfers’ are key in maintaining effective flat management. So, please, talk to us!!

Written by Sharon Crossland.

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