Much obliged - a guide to residential leasehold covenants
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By Simon Tye, Legal Adviser
This article originally appeared in News on the Block in July 2011
An Absolute prohibition on subletting is rare but can be found in some leases. If present, then it is hard to avoid. It is not a term that an individual leaseholder could apply to the “Appropriate Tribunal” to vary under section 35 of the Landlord & Tenant Act 1987.
In England the Appropriate Tribunal is the First tier Tribunal(Property Chamber) and in Wales it is the Leasehold Valuation Tribunal.
An absolute bar on subletting could be the subject of an application under section 37 of the 1987 Act, provided a substantial majority of the leaseholders are in favour of variation. The most common clause requires the leaseholder to obtain the freeholders consent to subletting (a qualified covenant). The clause may require the leaseholder to provide a copy of the tenancy agreement and covenants to be entered directly with the freeholder.
The clause may also say consent should not be unreasonably refused, but in any event the Landlord & Tenant Act 1927 section 19(1) provides that the landlords consent should not be unreasonably refused for subletting.
Also, where a written application is served on the person who may consent to the subletting they owe, pursuant to Section 1 of the Landlord & Tenant Act 1988 , a statutory duty to the leaseholder, within a reasonable time: –
- To give consent unless it is reasonable not to do so
- To serve notice of their decision whether to give consent including any conditions and if withheld, the reasons.
- The onus of proof is on the person refusing the consent, or imposing conditions, to show that these are reasonable and that they notified the leaseholder within a reasonable time.
The leaseholders remedies against unreasonably refused consent to subletting are as follows:-
- To proceed without consent. This is not advisable as it is a breach of the lease and enforcement action could be taken by the freeholder, e.g. forfeiture.
- To apply to a County Court for a declaration that the freeholder is unreasonably withholding consent. This can be expensive, even if successful.
- To apply to the County Court for damages for breach of statutory duty if the landlord has failed to comply with the provisions of section 1 of the Landlord & Tenant Act 1988. This is an additional remedy to applying for a declaration that consent has been unreasonably refused.
Schedule 11 Part 1 of the Commonhold & Leasehold Reform Act 2002 defines an administration charge.
The lease may specifically refer to an administration charge being payable for the freeholder’s licence or consent. If not, the Landlord & Tenant Act 1927, section 19 allows the freeholder to “…require payment of a reasonable sum in respect of any legal or other expenses incurred in connection with such licence or consent..”
A variable administration charge, such as a fee for subletting, must be reasonable.
Any demand for an administration charge should be accompanied by a summary of leaseholders’ rights and obligations. There is a right to withhold payment if the summary is not provided.