We are residents of a block of flats comprising six units, and we have bought the Freehold. Recently we asked our solicitor about the advisability of amending a clause in the Lease governing the question of sub-letting. Due to a bad experience with sub-let tenants we wish to tighten our control over any future ones.
To this effect our solicitor has formulated the following amendment:
The Tenant shall further observe all further regulations which the Landlord from time to time may deem necessary for the safety care or cleanliness of the premises or for securing the comfort and convenience of the tenants of the premises PROVIDED that no such additional regulations shall subject the Tenant to any unusual or unreasonable burden.
In his covering letter the solicitor also stated the following: “I have retained the general power of the Landlord to make regulations, as this is very common in long residential Leases, and will give the Residents’ Company the ability to react to different situations in the future without the need for a further variation in the Lease. Regulations should govern the day to day occupation of the flats, but not fundamental issues.”
Five of us are happy with this proposal. However, the sixth has qualms – being quizzical of the Landlord’s powers to make changes, and if this is common practice. They are also concerned whether the additional clause might affect the saleability of their flat.
We should be very grateful if you could say a) whether or not you find the proposal normal, and b) whether it might militate against a flat’s sale value.
The FPRA replies:
In my experience it is very common for the long lease of a flat to reserve a general power on the part of the Landlord (whether the Landlord is a Residents’ Management Company or an outside ground Landlord) to make regulations for the good management of the block. Probably more leases contain them than do not. I would certainly not expect the inclusion of such a clause in a lease to affect adversely the value of a flat. It is, I think, generally accepted that regulations of this kind cannot contradict or frustrate any express provisions in the lease, and that they should generally be confined to the sort of matters with which they customarily deal. The reference to “unusual or unreasonable burden” in the wording suggested by your solicitor expresses this quite nicely.
I would, however, question whether provisions of this kind are going to do very much to solve the problems you have encountered with sub-tenants. If the lease permits sub-letting – and most, though not all leases do – then a leaseholder could always argue that regulations could not validly be made which would restrict this.
Further, it is not always appreciated that any covenants of a restrictive nature found in a lease (or indeed in regulations made under an enabling provision in a lease) would be binding on a sub-tenant even if the sub-tenancy agreement does not contain them. So, if a lease prohibited the keeping of pets, and a sub-tenant disregarded this, saying that this was not prohibited in his (sub-) tenancy agreement, the Landlord could still obtain an injunction against the sub-tenant; the sub-tenant might, however, then have a claim in damages against the leaseholder.(In the case of a gross or persistent breach of such a covenant the landlord might do better to tackle the issue by forfeiture proceedings against the leaseholder, which would also include the sub-tenant).
If you want to restrict but not prohibit sub-letting then the best solution may be to require, as an express clause in the lease, that lettings should require the consent of the Landlord, such consent not to be unreasonably withheld (though even if these words were not included it would be implied by law that consent could not be unreasonably withheld). There is not a lot of case-law on what amounts to unreasonable refusal in the case of a long residential lease, but I think you could use such a provision to require references from prospective sub-tenants, and to insist that each tenancy agreement was approved by the solicitor to the Landlord, at the expense of the leaseholder. This would ensure that the tenancy agreements did comply with the lease; the additional expense would be probably be acceptable to the leaseholder who was an owner-occupier who had to be absent for a while, but the buy-to-let investor, on the other hand, might prefer to buy somewhere where this minor obstacle to sub-letting was not to be found. One could argue that any restriction in the lease may slightly lower the price: on the other hand, I have heard anecdotal evidence of sale prices in a block where sub-letting is prohibited altogether being higher than in an identical neighbouring block where this restriction has been removed. This will, however, depend very much on the nature of the flat, and what the demand is locally for buying to let, compared with the demand for owner-occupation.