April 28, 2017

Warner Court sky-high sublet costs when a relative goes into care

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WarnerCourt2This is a recent inquiry to Carlex from Warner Court, in Sandhurst, Berkshire:

“My mother-in-law owns a flat and may have to go into a care home.

“We were considering renting out the property but have been told by E & M [the Tchenguiz interests based in the British Virgin islands], that in addition to paying the ground rent of approx £400 a year and the service charge of approx £2,700 a year, we will also need to pay additional fees of £130 (registration fee) + £92.50 (fixed-fee transfer fee) to E&M and also one months rental (approx £1,000) to First Port!

“I am staggered that to rent out a property that my mother in law owns will cost (in addition to estate agents fees), £4,000 plus VAT.

“Is this correct practice, or am I missing something here?

“I have read that courts have ruled that £40 maximum is the amount a freeholder could charge, so I am wondering why I have been quoted so much.

“I do hope you can help me, even if you could just explain why it may be so much.

“I have spoken to E & M and First Port and they are both telling me that the 1 month rent goes into the contingency fund for the flats, but surely the service charge of £2,700 that my mother in law pays each year is also adding to the contingency fund?

“By the way I have also been told that these fees are payable every time there is a change of tenants or yearly which ever comes first, so I could be in a situation where the tenant changes after 6 months so all these fees could be doubled in a the space of 12 months.”

Carlex replied below, but please add any useful comment, and we will draw them to the attention of the inquirer.

Dear XXX

Some of these fees are indeed scandalous, and I copy the Law Commissioner into this correspondence as he is inquiring into event fees.

The £2,700 service charges have to be paid anyway, even if the flat were empty, and this is perfectly reasonable.

The fees to E&M are the usual chiseling to garner money from subletting common to most leases. These are not the highest sums we have seen, but almost certainly your lease will require you to obtain the freeholder’s consent to sublet.

The £1,000 demanded by FirstPort is almost certainly a condition of your lease to make a contribution to the contingency fund. This is not a payment to your freeholder, but a condition of your lease to contribute to the common good of the site.

It is far too high for simply subletting a property and it begs the question of whether you had, say, four tenants in a year would you have to pay it on each occasion. In such circumstances, it is possible to rent out a retirement flat at a loss.

McCarthy and Stone varied its newer leases to deal with these issues after Carlex took the matter up http://www.carlex.org.uk/mccarthy-stone-reform-sublet-fees-discussions-carlex/

At Gibson Court in Surrey one family was forced to pay £2,500 into the contingency fund on a sublet.

The injustice of this is obvious: your family is paying for further care; you have the ongoing service charges; you have the agency fees to find a tenant; and then you have a disproportionate amount to pay to the contingency fund.

The counter argument will be that your relative had legal advice when she bought the property and therefore would have known what was in the lease.

So – legally speaking – it’s just hard cheese.

This argument is utter rubbish, and explains why Carlex / LKP have involved itself in this leasehold issue.

I would advise taking this up with your MP, the housing minister and local media.

It won’t have much practical effect, but you will perhaps feel better afterwards.

Kind regards,XXX