Licences and Sub-letting Fees
One of the questions we are asked on a regular basis by Landlords and Managing Agents is whether they are able to charge for granting a licence to sub-let or for assignment where the Lease for a particular development makes no provision for such a charge.
Many Landlords are losing funds to which they are properly entitled because they rely only on the wording of the Lease.
The good news for Landlords is that where the Lease makes no provision for them to raise a charge for this service they are, in fact, able to do so. There is a very useful statutory provision in the Landlord and Tenant Act 1927 which will assist. Clause 19 makes provision for situations where if there is a covenant, condition or agreement against assigning, underletting, charging or parting with possession of the premises, whilst the Landlord cannot unreasonably withhold consent, he nevertheless has a right to require payment of a reasonable sum in respect of any legal or other expenses incurred in connection with such licence or consent.
The phrase “other expenses” covers administration charges of the Landlord and the Managing Agents in dealing with such licence or consent.
This is not quite the end of the story. The key word in this provision is “reasonable”. If a Landlord seeks to charge a sum which is unreasonable for the licence or consent then he could be deemed to be unreasonably withholding consent so it is very important to find a balance which properly covers administrative and legal expenses but is not so high that the leaseholder would find it to be unreasonable. This balance very much depends on the nature of the licence or consent. Those matters which involve a great deal of administrative time in investigating the suitability of an assignee and the drafting of legal documents will, of course, incur a much higher level of administration, whilst those matters which require a standard letter and form of consent will have a lower figure for what is “reasonable”. The usual fees for simple consent and licences is between £40 and £100.
It is also important to bear in mind that, where a charge is raised for this service, it is variable administration fee and should be accompanied by the appropriate Summary of Rights and Obligations to avoid the leaseholder seeking to avoid payment.
This is an increasingly important area where we are assisting many landlords to recover such charges and we are always very happy to answer any questions you may have. Please contact Charlotte Collins on 0333 0300 200 or email email@example.com for further information.