Landlord Incorporation – Company Indemnity of Existing BTL mortgages

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The following quote, confirming that refinancing is NOT necessary at the point of incorporation, comes directly from the HMRC manual …

“The transferor is not required to transfer business liabilities to the company but often does so.

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NDR – Council is wrong?

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I have a tiny shop with ratings on VOA site showing as follows:-
April 2010 – Jan 2014 £2,600
Oct 2013 – 17 March 2014 £0
April 2017 – present £1,650

The assumption by the owner that on purchase in non-business rates applicable as well under the £12,00 rateable value.

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Test Case: Landlord’s consent with mutual and absolute covenants

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In this case – Duval v 11-13 Randolph Crescent Ltd – reached the Supreme court in May 2020 after a tenant in a block of flats had requested the landlord’s consent for alterations, but disputed by another tenant in the same block, objecting to the landlord giving consent.

Under the terms of all the other leases in the block, alterations similar to this one were prohibited. The wording of the leases was such that the landlord had covenanted to enforce the covenants in all the other tenants’ leases.

However, contrary to this, the landlord went ahead and granted consent for the tenant’s works. Upon hearing of this the other tenant claimed that this was a breach of the landlord’s covenant.

When challenged, the landlord having lost in the lower courts, pursued the matter by appeal to the Supreme Court which dismissed the landlord’s appeal. The Court decided that there was an implied covenant by the landlord not to do anything that would prevent it from enforcing the tenants’ covenants in the other leases. The covenant, the Court reasoned, would be useless if the landlord could modify it willynilly, or vary, or permit breaches as it pleased.

The tenant had planned to remove a substantial part of a load bearing wall in the basement of her flat. She realised that this action would be in breach of a clause in her lease, so she approached her landlord for a licence.

After studying the engineering and architectural reports provided by the tenant the landlord decided to grant that licence. However, this was objected to by the neighbouring tenant above who issued proceedings for a determenation that the landlord did not possess the power to grant the licence.

The neighbour’s argument was that because the landlord had promised (undertaken via the mutual enforceability clause*) to enforce the covenants in the leases, providing the tenant agreed to indemnify the landlord for the legal costs, the landlord must not therefore licence the breach of an absolute covenant**.

The tenant claimed that there was an implied term that the landlord would not “put it out of its power” to enforce the absolute covenant clause of the lease by licencing what would otherwise be a breach of it. The Supreme Court, as had the Court of Appeal before it, agreed.

The lease contained two relevant clauses:

“Not without the previous written consent of the Landlord to erect any structure pipe partition wire or post upon the Demised Premises nor make or suffer to be made any alteration or improvement in or addition to the Demised Premises” – the qualified covenant; and

“Not to commit or permit or suffer any waste spoil or destruction in or upon the Demised Premises nor cut maim or injure or suffer to be cut maimed or injured any roof wall or ceiling within or enclosing the Demised Premises or any sewers drains pipes radiators ventilators wires and cables therein….” – the absolute covenant.

The case has wide implications as mutual enforceability covenants are pretty standard clauses in modern leases. The Duval case shows that a landlord cannot grant a licence which allows something which would otherwise be a breach of covenant.

* What is a Mutual Enforceability covenant

It is usually the case that the landlord has the power to ensure that the lease terms are complied with by leaseholders. The leaseholder will then need to ask the landlord to enforce the terms of the lease against another leaseholder, usually where the lease states that a leaseholder can ask the landlord to take action, the leaseholder making the request has to cover the landlord’s legal costs.

In some cases, the lease may allow a leaseholder to take direct action against another leaseholder for breach of the lease, but only if the wording of the lease allows it.

** What is an absolute covenant

It is an absolute prohibition against doing something. A covenant not to assign the lease or carry out alterations are examples of absolute covenants. On the other hand, a qualified covenant is a covenant that requires the landlord’s consent, stating that the landlord’s consent will not be unreasonably withheld.

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Property Market Outlook For 2021

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So what’s in store for property investors in 2021?

In this video, I am joined by property entrepreneur Andrew Roberts as we take you through the threats, risks and opportunities for property investors in 2021.

Please click on the video below.

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Mould with a Covid Twist?

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I have tenants who have both been furloughed. One of the neighbours inquired if there was a leak in my flat as the internal glass door was streaming with condensation (this is an internal door leading to a small hall then another internal door)

I suspected that the tenants had not been heating enough and venting appropriately.

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