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High Court ruling to impact on flat owners planning to sell up

Wed 16 Nov 2016

Flat owners who intend to sell a flat may need the prior consent of their landlord. They need to be careful how they go about this, following a legal ruling.

In the case of No.1 West India Quay (Residential) Ltd v East Tower Apartments Ltd, a dispute arose regarding the planned sale of three apartments.

The tenant had argued that the landlord had unreasonably delayed approving the purchase - a view backed by Central London County Court.

However, the landlord subsequently appealed to the High Court, which ruled in their favour on the grounds that the tenant had not sent their request for consent to assign to the right address.

Nevertheless, the landlord was found to have unreasonably withheld consent due to their insistence of seeking costs of £1,250.

The High Court ruled that the landlord was entitled to costs of £350 plus VAT as a matter of contract under the lease.

Mark Vinall, a partner at Winckworth Sherwood who specialises in enfranchisement and conveyancing matters, commented: "Flat owners planning to sell their flat may need their landlord’s prior consent. This can take time to obtain. 

"They need to check their lease to see if consent is required and, if it is, be careful to ensure that they follow the procedure it prescribes in this regard. If they don’t then they may lose valuable time as it is only once the application process is validly engaged that the clock begins to tick for the landlord to consider the application, respond and for any consent to be documented.
"In this case the flat owner submitted their application to the landlord at an address it had been given for this purpose instead of the address at which the lease required it to be submitted. As a result a month was lost before time began to run for the landlord to consider the application.
"They must also be prepared for the landlord requiring an inspection of the flat; this is regarded as being reasonable as the landlord can’t otherwise know whether there are any breaches of the repairing and alteration provisions in the lease and, if so, the seriousness of the breaches. This is necessary as while the landlord could take enforcement action against the buyer in respect of a breach of the repair obligation it may not be able to do so in respect of a breach of an alterations clause.  So this is another reason for flat owners to think carefully about unauthorised alterations before bring their property to the market.
"They should arrange for a bank reference for the proposed buyer at an early stage demonstrating their ability to meet their commitments under the lease; it will be reasonable for the landlord to require this even if the lease doesn’t expressly state they can call for this or the buyer is paying a significant premium without recourse to borrowing.

"Landlords and their managing agents on the other hand need to be careful not to over-egg their claim for cost to consider the application. In this case that was fatal; as a result, the flat owner succeeded in obtaining a declaration that the landlord had unreasonably withheld consent to the assignment."

So flat owners planning to sell need to be ready to meet the landlord’s requirements if they want to minimise the risk of suffering delays that might adversely affect their sale, i.e, consider whether there are any un authorised alterations.

Landlords may consider revising their procedures, i.e. to require an inspection by their surveyor at the tenant’s cost.” 

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