July 2018
By Simon Tye- Legal Adviser at LEASE
Common queries we receive at LEASE on alterations are:
- what charges can the landlord raise, associated with granting consent to make alterations?; and
- can the landlord ask for a premium, based on the consequential increase in value of the leaseholder’s property, as a condition of granting consent?
What you as a leaseholder can do is the focus of this article.
Check your lease to see if it contains any clauses dealing with the situation where you want to make alterations to your flat.
Does it contain a clause obliging you to obtain your landlord’s consent in writing before the alterations are carried out? Sometimes the clause limits the need for consent just to structural alterations, but in other cases it can require consent for any kind of alteration.
Typically, such clauses state that consent for alterations is not to be unreasonably refused. In any event, the law implies that consent (also described as a ‘licence’) to carry out alterations in the nature of “improvements” will not be unreasonably withheld (section 19(2) of the Landlord & Tenant Act 1927).
If you are uncertain about the terms of your lease, please do not hesitate to call one of our advisers.
Cost associated with granting consent
Just as the law implies that consent cannot be unreasonably withheld, it also states that a landlord can charge a “reasonable sum” for legal or other expenses “properly incurred” in connection with the granting of consent.
Be aware of the sort of charges a landlord might make. These could include such items as; surveyor’s costs of checking plans and the work itself, solicitor’s costs for drawing up a formal licence and general administration charges.
Leasehold history has shown that the opportunity to recover reasonable costs can be misused to make substantial profit. In ‘Protecting consumers in the letting and managing agent market – Call for Evidence’ (2017), the English Government stated:
“63. In addition to service charges, leaseholders can face unfair administration fees when seeking permission to make changes to the property, or on sale. The Conveyancing Association has estimated that 75 per cent of leaseholders are paying excessive administrative fees as part of the sales process and that routes to redress are limited.”
The English Government has published its intentions as regards these fees in ‘Protecting consumers in the letting and managing agent market Government response’ (2018), saying:
“125. We will ask the Working Group to look into those fees and charges that go beyond leasehold service charges, but can impact both leaseholders and freeholders, and consider under what circumstances they are justified, and if they should be capped or banned. This includes the use of restrictive covenants, leasehold restrictions, administration charges and other charges placed on properties.”
In the meantime, a leaseholder has the right to challenge the reasonableness of such charges, if necessary, at the First Tier Tribunal (Property Chamber) or Leasehold Valuation Tribunal in Wales, as these are classified as an “administration charge” under the Commonhold & Leasehold Reform Act 2002. However, making such an application involves setting out for the tribunal not only the facts in support of the application, but also the law relevant to it. This is complex in itself and the process can be time consuming. Hence, it is advised that effort is made to resolve the matter before resorting to the tribunal system.
LEASE advisers are regularly asked to advise on any charges and conditions that a landlord might insist upon in return for granting consent.
A lease is a long-term relationship between you and a landlord.
At LEASE we are mindful of the importance of ensuring disputes do not escalate to the point where neither side is satisfied by the outcome but at the same time ensuring through our advice that as a leaseholder you are aware of your rights and how to assert them.
Again do not hesitate to call us to discuss your legal position, the role of the tribunal and how to resolve matters.
Can a premium be charged as a condition of granting consent?
It is not uncommon, as a condition of granting consent for alterations, for a landlord to request a premium (lump sum payment). So, it begs the question: can they do this?
The answer depends on whether the alterations are just to the leaseholders ‘demised premises’, or whether they involve altering, or cutting into, the part of the building that belongs to the landlord.
Alteration to the “demised premises”
The “demised premises” is what is included in the leaseholder’s ownership under the terms of the lease. There is usually a definition of this in the lease and this will often be the interior of the flat including the surface of the interior walls and up to the ceiling above and joists below. It will not usually include the structural, external walls or roof, although each lease should be checked for the precise details. For example, a loft space may sometimes be included in the demised premises, sometimes not.
If the proposed alterations are to the leaseholder’s demised premises it is likely that any attempt to charge a premium would amount to an unreasonable refusal of consent. Remedying an unreasonable refusal is not straightforward in that it requires a leaseholder to apply to the County Court for a declaration that their landlord has unreasonably refused consent to alterations.
Alternatively, it would be possible to apply to the appropriate Tribunal for a determination that the charging of a premium is not a reasonable administration charge.
Alteration to the landlord’s retained property
Areas of a building that are not part of a leaseholder’s demised premises will, normally, be part of the landlord’s retained property, that is part of the freehold. Examples include the external and structural walls of the building and the roof.
If the alterations that a leaseholder proposes include an alteration to part of the freehold, the landlord is not obliged to grant consent; and the implied term not to unreasonably withhold consent does not apply.
As the Landlord can refuse to grant consent to alter a part of their retained freehold property, they can also ask a premium as a condition of granting consent. There is no restriction on the amount of the premium they can ask for. It is not uncommon for a landlord to ask for a percentage of the increase in the value of the leaseholder’s premises as a result of the alteration.
A common example we see is where a leaseholder wishes to convert a loft space. If the loft space is part of their demised premises they can carry out alterations to the interior and consent cannot be unreasonably refused. However, if the roof (and loft space below it) is not part of the leaseholder’s demised premises, and they wish to put skylights or a dormer in the roof, the landlord could refuse this or ask for a premium to allow it.
Another example is where the leaseholder wishes to add an extension to his demised premises. If this involves cutting into an external wall that belongs to the landlord, the landlord could ask a premium or refuse.
In practice, the comments above will apply mainly to flats rather than leasehold houses, as a leaseholder of a house will usually own the whole of the house, interior and exterior.
A LEASE adviser can consider the terms of the lease to identify if possible what is part of the demised premises and what belongs to the landlord.
Conclusion
If you wish to carry out alterations or improvements, the lease needs to be examined carefully to check whether consent is needed and the extent of the leaseholder’s demised premises; both will then affect whether a premium can be charged or not.
Further information:
