Archive for the ‘Property, Landlord and Tenancy’ Category

MORTGAGE REPOSSESSION and LEASES

Tuesday, April 10th, 2012

Where a mortgaged property is subject to a lease and the lender seeks to exercise a power of sale, the lender will need to know whether the lease will be binding on the lender.

If the lease was granted after the mortgage, then the matter is governed by section 99 of the Law of Property Act 1925. This gives a borrower who is in possession of the mortgaged property a power to grant leases that will bind the lender, provided the lease meets certain criteria. Being unpopular with lenders, they almost in all cases, remove this power altogether or make a requirement for the lender’s prior consent by a provision in the mortgage deed. As a result of this, if the borrower grants a lease without the consent of the lender, and the lender wishes to sell, the lender can obtain a court order for possession and the tenant will have no rights against the lender and will have to leave.

The Law of Property Act 1925 provides for whether the lender can sell without being bound by a lease that was granted prior to the creation of the mortgage. For example, a lease for a term of seven years or less is an unregistered interest that will override a disposition of the land.

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CHANGES TO THE TENANCY DEPOSIT SCHEME

Tuesday, April 10th, 2012

April 2012

From 6th April, the rules relating to the Tenancy Deposit Scheme will change as follows:

– Deposits received on or after 6th April must be protected within 30 days of receipt.

– Those deposits that have already been received, must have been protected by midnight on the 5th April 2012.

– Where an Assured Shorthold Tenancy is renewed with a tenant, and the deposit is retained by the landlord, the deposit must be re-registered.

– Where a landlord takes money to cover loss of rent or for damages or losses to the landlords property, it will be treated as a deposit, despite the name given to it by the landlord.

– Any guarantee or bond given to the landlord will not need to be registered unless money is literally handed over to the landlord.

– The landlord cannot charge the tenant a deposit protection fee, however the landlord can charge for administration services, and can also charge VAT for it.

– The certificate and certain information in relation to the deposit protection must be supplied to the tenant and any third party that provided the deposit.

– Where a landlord wishes to serve a section 21 Notice, it will not be enforceable, unless:

1. The deposit was protected within 30 days of receipt or returned to the tenant before serving the section 21 Notice

2. The certificate and certain information in relation to the deposit protection was supplied to the tenant and any third party that provided the deposit

– Where the landlord uses the custodial tenancy deposit scheme, he must ensure that he provides DPS the correct contact details for the lead tenant. This is to ensure that where the DPS needs to return the deposit to the lead tenant at the end of the tenancy, it can contact the lead tenant to do so.

– The deposit must be registered in the name of the registered proprietor of the property, unless an agent is registering the deposit.

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Commercial Property

Wednesday, January 5th, 2011

If you run a new business and have outgrown running operations from your bedroom then you will inevitably be looking for a commercial property to base your company in.

Before you contact a commercial property agent you will need to decide whether you want to buy a property or lease one. Whichever is right for you will depend on how you see your business growing and changing in the future.

If you envisage rapid expansion then leasing would represent a more flexible option than buying. As your space needs increase you won’t have to go through the hassle of selling your original premises.
Obviously, although buying will not afford you as much flexibility when changing properties, it will generally allow you more freedom of action as an owner rather than a tenant.

If you want to make changes to the property, you will not have to waste time and money obtaining the landlord’s approval and you will not have to get involved in negotiations with rent and lease reviews.

There are many factors outside of your own business that could have a bearing on your decision to lease or buy – fluctuations in the property market for example. If you anticipate rental rates to go up rapidly it may be unwise to lease.

If you own the building this will obviously represent a significant asset, which allows you to borrow against it and lease out it to other businesses. You would benefit from any future appreciation and not have to worry about increasing occupation costs.

Getting a mortgage for a commercial property
For small businesses, the most common form of finance for purchasing a commercial property is a commercial mortgage.

These are offered by a variety of lenders, including High Street banks, and the terms and costs can vary. You can compare and arrange deals by yourself or employ a specialist commercial mortgage broker.

You will need to pay quite a hefty deposit, as a commercial mortgage is likely to cover around 70% to 75% of the value of the property. Remember to factor in additional costs you will have to meet such as interest payments, conveyancing and capital repayments as well as broker fees if you use one.

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Responsibilities of Landlords and Tenants

Saturday, July 24th, 2010

When acquire a commercial leasehold property, a legally binding contract known as a lease with the owner of the commercial property will be entered into.

The parties under commercial lease law are referred to as the landlord and the tenant. The lease lays down the responsibilities and obligations of both parties and these are known as covenants.

Common tenant covenants include paying service charge, keeping the interior of the property in good repair and not altering the structure. Common landlord covenants include insuring the property and affording the tenant quiet enjoyment of the property without interruption.

It is important for both parties to read the lease with extreme care because once it is signed the respective parties are bound under commercial lease law by all the clauses.

When taking on a commercial property lease it is important to understand the responsibilities for the repair and maintenance of the building that is being rented.

Tenants are typically responsible for internal repairs and maintenance. In some cases however they will also be responsible for external maintenance. This is more likely if there is a sole occupant of a building.

In multi-occupancy premises the landlord is more likely to carry out external repairs and maintain common parts. Ultimately, however, the division of maintenance responsibilities will be determined by what’s agreed in the lease. As a result it is important to check a lease carefully before it is signed.

It is particularly important, before signing a lease to check what the liability is with regard to repairs needing to be done.

Dilapidations
When signing a lease it is important to be clear on the repairs the landlord may require a tenant to pay for at the end of the agreement. This is known as dilapidations. This can often be a problem area.

For example a tenant may be responsible for reinstating the premises to its original condition. As a result it is important to get professional help from a chartered surveyor, who will record the state of the premises when the lease was taken on to prevent the landlord from making unjustified demands later on.

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Sub Leasing

Tuesday, July 20th, 2010

If you are leasing a commercial property, and you find that you cannot get out of the lease then it may be possible for you to sub-lease the property.

Most leases of commercial buildings give the tenant the right to sublet.

Subletting means that the tenant grants a new lease (the Sub Lease or Underlease) out of the existing lease (the Head Lease).

A Sub Lease cannot be granted for a term that exceeds the term of the Head Lease. Subject to this point, whether or not a sub lease can be granted depends on the terms in the Head Lease, and where the Head Lease is silent on the point then there is no restriction on the grant of a Sub Lease. More often though the Head Lease will permit a Sub Lease to be granted subject to it complying with certain conditions laid out – and subject to the landlords consent.

Usually the easiest way of granting a Sub Lease will be to grant a lease by reference to the Head Lease – i.e. a lease in which you set out the rent and term but otherwise import into it all the same terms as are in the Head Lease. This should pass on to the sub tenant all the responsibilities of the tenant – though of course it does not relieve the tenant of those liabilities to the landlord – a direct contract remains between the Head Landlord and the Head Tenant.

In the grant of a Sub Lease it means that there are generally two documents required:

  1. the Sub Lease itself; and
  2. the Licence to Sublet – this is granted by the landlord
  3. As in the situation of a Lease, if further security is required against performance of the sub tenants obligations then the tenant may wish to consider taking a rent deposit.

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Subleasing Commercial Property

Saturday, February 13th, 2010

If you are leasing a commercial property, and you find that you cannot get out of the lease then it may be possible for you to sub-lease the property.

Most leases of commercial buildings give the tenant the right to sublet.
Subletting means that the tenant grants a new lease (the Sub Lease or Underlease) out of the existing lease (the Head Lease).

A Sub Lease cannot be granted for a term that exceeds the term of the Head Lease. Subject to this point, whether or not a sub lease can be granted depends on the terms in the Head Lease, and where the Head Lease is silent on the point then there is no restriction on the grant of a Sub Lease. More often though the Head Lease will permit a Sub Lease to be granted subject to it complying with certain conditions laid out – and subject to the landlords consent.

Usually the easiest way of granting a Sub Lease will be to grant a lease by reference to the Head Lease – i.e. a lease in which you set out the rent and term but otherwise import into it all the same terms as are in the Head Lease. This should pass on to the sub tenant all the responsibilities of the tenant – though of course it does not relieve the tenant of those liabilities to the landlord – a direct contract remains between the Head Landlord and the Head Tenant.

In the grant of a Sub Lease it means that there are generally two documents required:

1. the Sub Lease itself; and
2. the Licence to Sublet – this is granted by the landlord

The same conditions regarding registration requirements and SDLT apply to a Sub Lease as they do to a Lease.

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Tenancy Deposit Protection Schemes

Friday, November 27th, 2009

What is the Tenant Deposit Scheme?

From 6th April 2007 any landlords or their agents who take a deposit from a tenant must have that deposit protected under one of two schemes:

1. A custodial scheme – this is where the deposit is held in an approved scheme during the deposit and will continue to be held if any legal dispute arises between the
landlord and the tenant.

2. An insurance based scheme – this is where the landlord keeps the deposit but the deposit is insured in case of any dispute.

It is for the landlord (not the tenant) to decide which scheme to choose. The custodial scheme is free to landlords and tenants. Part of the interest generated by
holding the deposit in the custodial scheme will be used to administer the scheme, the remainder of the interest will be paid to the tenant or the landlord.

However under the insurance based scheme the landlord must pay a premium, but keeps the deposit. If a dispute arises between the landlord and the tenant the landlord
must hand over the deposit to the scheme for safekeeping until the dispute is resolved. If the landlord fails to handover the deposit the scheme will abide by any
court order or ADR decision to pay the tenant and recover the money from the landlord.

At the end of the tenancy agreement the landlord and the tenant must agree on the amount of the deposit which is to be returned to the tenant and this must be repaid
within 10 days of agreement being reached (or in the case of the custodial scheme within 10 days of the scheme being notified of the agreement).

Are any landlords exempt from the requirement to protect deposits in a recognised scheme?
The new law applies to all new tenancy agreements from 6th April 2007 where the landlord takes a deposit from the tenant even if a landlord lives overseas. If the property is in England or Wales and the landlord takes a deposit then they will have to protect the deposit under one of the recognised schemes.

The new law does not apply to any landlords who do not take a deposit from the tenant.

The new law does not apply to tenancy agreements created before 6th April 2007. It also does not apply to tenancies created before 6th April 2007 which come to an end
after 6th April 2007 but continue as a periodic tenancy. However, if a replacement tenancy agreement is signed after 6th April 2007 the tenancy deposit scheme will
apply to the deposit taken prior to 6th April 2007.

Who will run the schemes?
There are currently three bodies approved by the government to administer the scheme:

1. The Deposit Protection Service (Custodial Protection Scheme) The Pavilions Bridgwater Road Bristol BS99 6AA Tel. No. 0870 7071 707
www.depositprotection.com

2. Tenancy Deposit Solutions Ltd (insurance-based tenancy deposit protection) Tenancy Deposits Solutions Ltd 3rd Floor, Kingmaker House Station Road New Barnet
Hertfordshire EN5 1NZ Tel. No.: 0871 703 0552
customerservices@mydeposits.co.uk

3. The Tenancy Deposit Scheme (insurance-based tenancy deposit protection) The Dispute Service Ltd PO Box 1255 Hemel Hempstead Hertfordshire HP1 9GN Tel. No. 0845 226
cdeposits@tds.gb.com

What information about the scheme is the tenant entitled to receive?
The landlord must inform the tenant of the details of the scheme and how the deposit is protected within 14 days of receipt of the deposit. This is done by serving written details on the tenant. The written details must include specific information (“the prescribed information”).

The CompactLaw Landlord’s Pack tenancy agreements have the prescribed information attached so that it can be served at the same time as the tenancy agreement. If a landlord fails to serve the written information on the tenant they will not be able to serve a s.21 notice requiring possession of the property at the end of the tenancy (although a landlord can still seek possession under any of the other grounds which apply to assured shorthold tenancies).

A tenant can seek compensation from the landlord for failure to serve the written information and this will be equivalent to three times the value of the deposit.

What happens if a dispute arises between the landlord and the tenant about the deposit?
Both schemes are subject to Alternative Dispute Resolution (ADR). However the use of ADR is not compulsory. However if a landlord and tenant agrees to use ADR then they will be bound by the decision of the ADR service and cannot have the matter settled by the court instead. Where a landlord or tenant is contacted by the scheme administrator and asked if s/he is prepared to consent to ADR and they fail to reply, the scheme can proceed with ADR simply on the basis of the consent of one party.

Instead of ADR the landlord or tenant can apply to the court to settle disputes about the return of deposits.

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