The dangers of DIY leases

Gemma. March blog photo

The dangers of DIY leases

It may be tempting for both landlords and tenants of commercial properties to try and save money on legal costs by dealing with the matter between themselves. There are a number of downfalls that a landlord / tenant may fall foul of. Commercial property Solicitor, Gemma Eastham, looks at the pitfalls.

SDLT liability – tenants

Whether SDLT will be payable will generally by determined by whether a premium is being paid for the grant or assignment of the lease, the value of the annual rent per annum and the length of the lease.

Where no SDLT is payable, a tenant may still be required to notify HMRC (submit a return to HMRC).

Failure to submit a return and pay the duty (if any) within 14 days of the effective date of the transaction will lead to a fixed penalty of £100 and interest being charged on any SDLT and if the date of submission is more than 3 months after the filing date, the fixed penalty will increase to £200.

When do you need to register a lease at H.M Land Registry?

Leases granted for a period of more than seven years and certain other types of leases need to be registered at HM Land Registry.

It is worth pointing out that any easements contained in a lease, such as rights to access the demised premises through common areas or the use shared facilities, i.e car parks, will not take effect at law unless they are registered, even where the lease itself does not require registration.  For a tenant, it is therefore important to ensure that any registration requirements are adhered to.

Unwritten tenancies

Unwritten tenancies are dangerous for both parties to a commercial tenancy because there is no clear record of the terms that have been agreed.

A landlord, for example, will have no right to forfeit the tenancy in the event of a breach of the terms of the agreement because an express forfeiture clause is required for this.

With a business tenancy it is important to ascertain whether the agreement is within the security of tenure provisions contained in the Landlord and Tenant Act 1954 (the right for the tenant to renew the tenancy at the end of the term).  If there is no express clause excluding these provisions in the agreement and the Landlord and Tenant Act 1954 has not been ‘contracted out’, the tenancy will be deemed to be within the Act.

This means that the tenant will generally be entitled to request a new lease from the landlord at the end of the contractual term of the existing lease. The landlord would only be able to bring the tenancy to an end by serving notice on the tenant in the prescribed form, which requires the landlord to give the tenant not less than 6 months’ notice.

This may affect any provisions which have been agreed between the landlord and tenant.

For example, a landlord and tenant may have verbally agreed that either party can bring a lease to an end by giving one month’s notice to the other party. Legally, the landlord would not be able to rely on this provision and would need to follow the above statutory procedure (6 months’ notice).

The full extent of this topic could be covered in something far longer than a blog, but these are some key areas that both landlords and tenants should consider before proceeding. Seeking appropriate legal advice at the outset could potentially save a landlord and/or tenant money in the long run. Legal advice is always recommended.

For further information, please contact our Commercial team at MBH Solicitors:

http://www.wigansolicitors.com Tel: 01942 206060 Address: 26 Bridgeman Terrace, Wigan WN1 1TD.

 

 

Can I refuse a new business lease because I want to move in to the property?

Unless a lease is contracted out, a business tenant has a right to a new lease upon expiry of their contractual term, subject to limited grounds.

Section 30(1)(g) of the Landlord and Tenant Act 1954 contains an ‘own occupation’ ground.
This allows a landlord to refuse the tenant a new lease if they can prove they want to occupy the property themselves.

If a landlord intends to refuse to grant a new lease based on the ‘own occupation’ ground, the landlord must have owned the property for at least 5 years.

What does the landlord have to prove?

You need to demonstrate that you have a settled intention to occupy all or the majority of the property when the tenant leaves.

If you wish to use for residential purposes, you must prove an intention to occupy the whole of the property.

What evidence does the landlord need?

If you plan to occupy and you would need planning permission (e.g change of use from commercial use to residential use) then you should obtain that or provide evidence that planning permission is likely to be granted.

How does the landlord start the process?

You must serve a notice pursuant to section 25 of the 1954 Act, quoting ground G (and /or any other grounds to refuse you can rely upon).

If the tenant has already served a notice (known as a section 26 notice) requesting a new lease, you must serve a counter notice within 2 months.

For further information, please contact our Commercial team at MBH Solicitors:

http://www.wigansolicitors.com Tel: 01942 206060 Address: 26 Bridgeman Terrace, Wigan WN1 1TD.

Written by our Gemma Eastham, Commercial Property Solicitor

I want to sell my leasehold property but I do not have long left on my lease

A property with a limited number of years left on the lease may be hard to sell because prospective buyers are likely find it difficult to obtain a mortgage.

Mortgage lenders are reluctant to lend money to a prospective buyer unless the lease has a requisite number of years left on the lease.

If you are struggling to sell your property, you may wish to purchase the freehold title or extend the lease.

Can I extend my lease?

Various factors are taken in to account, the main factor being that you must have owned your property for a minimum of two years and you must have been granted a lease of 21 years or more.

You cannot extend your lease if your lease has already expired, if the lease has been extended previously or of your landlord is a charitable trust.

How much will it cost me?

If you are looking to extend the lease of your house, generally you do not have to pay a premium, however, your landlord may ask for their representatives legal costs to be paid on their behalf. Your ground rent may also increase to a modern rent, from the date which your additional 50 years term begins.

What do I need to know?

You are entitled to extend your lease for a period of 50 years, in addition to the unexpired term of your original lease.

If the terms between you and your landlord cannot be agreed, or if your landlord refuses to extend your lease, then you can make an application to the First Tier Tribunal where the terms and price can be decided.

If you and your landlord have agreed to extend your lease for a further 50 years or for a longer period, we are happy to help guide you through the process, from the beginning to the end.

For further information, please contact our Commercial team at MBH Solicitors:

http://www.wigansolicitors.com Tel: 01942 206060 Address: 26 Bridgeman Terrace, Wigan WN1 1TD.

Written by our Gemma Eastham, Commercial Property Solicitor

Searches

As part of your purchase of a property, we would always recommend that searches are carried out. If you are purchasing with the assistance of a mortgage, the majority of searches are required by lenders and we will therefore be required to carry out searches in this circumstance.  However, if you are purchasing the property without the assistance of a mortgage you will be able to decide whether or not you wish for us to obtain searches.  We have therefore listed the searches that we recommend to provide some assistance in your decision. The recommended searches are as follows:

  1. Coal search – if the property is in the local area or in a different coal mining area, this search is recommend as it will reveal if there are any mine shafts or any subsidence claims near the property. This can cause an increased risk of subsidence at the property. If the search reveals a mine shaft or any subsidence claims then the search would need to be reported to your lender to see if they are willing to proceed. You may also wish to carry out additional checks to ensure that you are happy to proceed. If you are purchasing the property without a mortgage, this information will help you make an informed decision as to whether to proceed. It may also affect the future saleability of the property as any purchaser’s obtaining a mortgage would need to report the search to their lender.
  2. Local Authority search – this search shows information held by the Local Authority in respect of the property. The search, most importantly, would reveal if there are any grants in relation to the property. If grants are revealed we can ensure that the seller of the property repays the grant on completion. If you do not obtain the search and a grant is in existence on the property, you would then be responsible for paying the grant and this will have to be paid on the sale of the property regardless of the amount of the grant. We are not able to obtain this information without obtaining the search and therefore not obtaining the search can be a costly error. This search also looks at a wide variety of areas specific to the property such as: road proposals or transport proposals, contamination entries, Planning Permission applications and many more.
  3. Water Search – this search will confirm the location of any recorded main water or sewer pipes. The existence of the pipes can hinder any building in the future if the pipes are in the location you wish to build.       If any elements of the building you are to construct is within 3 metres of a public sewer you must obtain a Build Over Agreement from United Utilities before proceeding with any building. The search will also reveal if the property is connected to mains water supply and sewer supply etc.
  4. Environmental Search – This search looks at various environmental issues that the property may be at risk of. They include: flooding, contamination, subsidence etc. If the search reveals issues this will provide you with further information that you may wish to investigate before you purchase the property.
  5. Planning Report – we would recommend this search if you have any concerns that there may be any nearby developments. This is particularly important if the property you are purchasing is in a rural area as it may not be obvious that there are any developments nearby. We can advise the Local Authority search only reveals any planning permission obtained in respect of the property itself and not any nearby properties.

We can advise that the above are the standard searches that we would recommend for the local area and the majority of properties. However, there may be additional searches which we may recommend during the course of the transaction if it becomes apparent to ourselves that one is required. We can advise that these may be searches such as a tin search if the property is located in Cornwall or a Cheshire brine search if the property is located within Chester.

We may also recommend a chancel search if it becomes apparent to us that one is required as they are not required for every property. We can advise that a chancel search will reveal if the property is at risk of any chancel repair liability.   We would assess your matter as to whether a chancel search is required and inform you if we believe this should be obtained.

For further information or advice, please contact our Conveyancing Team at MBH by telephone on 01942 206060 or by email to mbh@wigansolicitors.com

www.wigansolicitors.com Tel: 01942 206060 Address: 26 Bridgeman Terrace, Wigan WN1 1TD.

Written by Sammy-Jo Woodward, Residential Conveyancing Solicitor

 

 

Landlords need to be aware – Plans to abolish Section 21 evictions

The government intend to abolish section 21 of the Housing Act 1988 (also known as ‘no fault’ repossessions).

What is a section 21 notice?

A section 21 notice allows a landlord to evict a tenant from the property without providing an explanation.

A tenant may not have caused the landlord any problems, however, a landlord can serve a section 21 notice on the tenant during a periodic tenancy (no fixed end-date) or at the end of a fixed term tenancy (a written agreement with a fixed end-date). A landlord must provide at least two months’ notice.

A landlord may want to remove a tenant from a property for many reasons, such as renovating the property, sale of the property or the landlord may wish to occupy the property.

The National Landlords Association (NLA) say that landlords should be able to use a Section 8 possession notice to evict a tenant who has broken the terms of their tenancy, for example by not paying rent or causing damage to the property.

This usually involves the landlord paying money to take the matter to court, if the tenant refuses to leave the property.

NLA say that landlords have been forced to use section 21 notices’ because they had ‘no confidence’ in courts to deal with a possession claim (breach of tenancy) quickly.

Will the proposed changes effect landlords?

If the changes are implemented, landlords will have to provide a concrete, evidenced-based reason already specified in law, in order to bring a tenancy to an end.

The government insist that landlords will be able to repossess their property for different reasons, specified in law, and in genuine cases, however the changes will protect responsible tenants from unfair evictions and unethical behaviour.

Shelter, a charity which helps people struggling with bad housing or homelessness, said the proposals would “transform lives”.

If you are a landlord and you would like to be notified if and when any of these changes come in to force, please do not hesitate to contact Gemma Eastham, Commercial Property Solicitor, at MBH Solicitors who will be pleased to assist:

www.wigansolicitors.com Tel: 01942 206060 Address: 26 Bridgeman Terrace, Wigan WN1 1TD.

LEASEHOLD AXED FOR ALL NEW HOUSES

The Government following a lengthy review have concluded that all new build houses will now be sold as Freehold to tackle the unfair leasehold practices that have been prevalent in the housing market within the last few years.

Ground rents on all new leases will be reduced to zero preventing Leaseholders being stuck with unfair rent reviews and will therefore prevent future home owners from being trapped with houses which cannot be sold as mortgage lenders will not accept the rent reviews or having to incur considerable expense to have the Lease changed.

All new houses will be sold on a Freehold basis unless there are exceptional circumstances and there will be immediate action to ban Help to Buys being used to support Leasehold houses.

The Government have also indicated that there will be a time limit of 15 working days and a maximum fee of £200.00 to obtain information from a Freeholder and/or Managing Agents in providing Leaseholders with information needed to sell their homes. This will hopefully speed up the selling/buying process on all leasehold property.

Buyers which have been incorrectly sold a Leasehold property will also be able to obtain their freehold outright at no extra cost. However, there has been no further guidelines in relation to how this will be.

Most older Leasehold properties are on a long lease, many being 999 year. However, newer properties can be on shorter leases of 250 or 99 years and have unfair rent reviews that can mean that the rent can be doubled every few years.  Hopefully the Government’s announcement will bring an end to this unfair practice.

If this has affected you, contact Sammy-Jo Woodward, solicitor or Caroline Rooks / John Petrie, Partners at MBH Solicitors, to discuss your conveyancing needs at:

www.wigansolicitors.com Tel: 01942 206060 Address: 26 Bridgeman Terrace, Wigan WN1 1TD

Twitter: @MBHSolicitors

HELP TO BUY ISA – TIME IS RUNNING OUT!

With effect from November 2019 you will not be able to open a Help to Buy ISA account.  However if you already have a Help to Buy ISA you will have until December 2030 to claim the bonus.

We find that some clients struggle with how the help to buy ISA’s work and we have therefore produced a guide as to the Help to Buy ISA below:

In order to claim the Help to Buy ISA bonus you must first qualify for it.   The following must be applicable:

  1. The property must be in the UK
  2. The purchase price must not be more than £250,000 ( or up to £450,000 in London )
  3. The property must be the only home you own
  4. The property must be your main residence.
  5. The property must be purchased with a mortgage

Once you have qualified for the bonus you can then continue to save and also continue to as well during the conveyancing (legal) process which you will begin once you have decided on a property to purchase.

Once the legal work has been carried out and you have signed your contract documentation we will then look to agree a completion date.  Before we are able to agree a completion date we must have received your closing statement which you will receive from your Bank once the account has been closed.    The Bank can take up to 10 working days to provide this to you and this can therefore delay completion.

Once you have provided us with the closing statement we will then be in a position to agree a completion date.  After the completion date has been agreed we will request your bonus from the Government. The 25% bonus will then be sent to us directly prior to completion.

After we have requested the bonus we will provide you with a completion statement which will show the full amount of the bonus that we are to receive prior to completion. You will then need to provide us with the balance of funds which will consist of the remaining deposit and fees.

The bonus must be used towards the purchase price of the property and we are therefore unable to provide this to you after completion. Therefore the bonus must be received prior to completion in order for this to be used.  Completion will then take place as any other transaction.

If you wish to discuss any element of a Help to Buy ISA please do not hesitate to give our offices a call and we will be happy to assist.

Contact Sammy-Jo Woodward, solicitor or Caroline Rooks / John Petrie, Partners at MBH Solicitors, to discuss your conveyancing needs at:

www.wigansolicitors.com Tel: 01942 206060 Address: 26 Bridgeman Terrace, Wigan WN1 1TD

Twitter: @MBHSolicitors