Leasehold property - apparently I am in breach of lease, help!

[ShoutyMom]

We own a flat, bought on a first time homeowner mortgage. We moved overseas last year owing to DH job, and therefore put the flat on rent, after taking approval from the bank (consent to let). Everything was done through an estate agent, who sourced the tenants, did the paperwork and now collect the rent monthly. We put in place landlord insurance as well as informed HMRC about our non resident status. We thought we were all sorted and everything has been done cleanly and above board.

We have now received a letter from the Property management company appointed by the landlord saying we are in breach and need to pay:
GBP705 for licence to sub-let
Annual consent fee GBP175 plus VAT
Property management company fee GBP295

I have since checked our previous correspondence and they are right (as expected!), one of the covering letters says "some leaseholders have entered into a Deed of Variation in order to sub-let their properties. This Deed can be arranged directly with the freeholder."

We mistakenly assumed the estate agent would look into all paperwork, permissions etc.

Soooo, the question is, is there any wiggle room at all? Or do I just have to grin and bear it, and shell out all those $$$? Anythng else that is a potential ticking time bomb that I should check?

You've been very naive. You could approach the freeholder direct now and compare the costs.

Yes we have, haven't we
Still sifting through the pile of papers we have to figure out who to contact.

So do we actually risk losing the property? If it actually comes to that, what happens to all the down payment and mortgage payments we have made over the years?

Just pay whatever they request and all should be well.

Its an easy mistake to make, i'm sure you had enough to think about with you move abroad without going over all the associated paperwork for you old home.
I certainly wouldn't worry about them taking your property, not sure what you can do about the fees they wont.
Is the £295 fee annual, or a charge for the fact they had to chase you for the money? If its a penalty charge you could perhaps arrange to pay that in installments

I'm sorry, but it's very naive to state you wouldn't be worried about the freeholder taking the leaseholder's property (forfeiting the lease) Rose. This is clearly a clued up and active freeholder with a management company working for them.

I would clarify the property management fee and whether that is a one-off and contact the freeholder to see if they will deal with you direct.

If the lease is forfeited then I'm afraid it's tough in terms of the monies you've paid out and you will still be liable to pay the mortgage.

Thanks very much all of you, that gives me a starting point! Will find the contact details of the freeholder and write to them, though I am not holding out much hope - as wowfudge has pointed out, they seem to be pretty clued in.

In order for the lease to be forfeited, the case would have to go to court/tribunal and it is extremely unlikely that any order would be made for the OP forfeit the flat for such a minor breach. The court could order a fine though so, as others have suggested, it would be wise just to pay up.

I'm sorry but I totally agree with lalaonlegs, unless the op continues to breach the lease & does not pay the money there is little to no chance that she would loose her property. I was just trying to put the OP at ease as their is absolutely no need to panic at this point & it's a bit naive to suggest there is (had to get that in there as it seems to be the word of the day)

Read your lease before you do anything.

It's very likely there is a clause covering this specifically.

I had a similar issue whereby when I told the freeholder I was letting the property they insisted I pay about £500 for the pleasure of their permission, which was their standards rate.

Turned out my lease said I had to pay a percentage off the monthly rent which worked out at about £20 per year!

A lot of Freehold managers are very shrewd and realise they can make a lot of money by intimidating people with their official looking letters.

I'm not saying you won't have to pay anything, just that it might not be as much as you expect.

Thanks everyone, just found the lease agreement. Looks like I've got a pile of reading to do!

Roseandbee, thanks for your kind words - while they can't make this mess any better, they do make me feel a bit calmer!
Bearbehind, lucky you, hoping against hope that it turns out to be something like that for me!

OK can anyone translate the legalese for me, here's what it says on the lease about subletting:
Quote
The the Lessee will not during the term hereby granted assign sub-let or part with the possession of the whole or any part or parts of the Demised Premises EXCEPT that this covenant shall not prevent the assignment of the whole of the Deemed Premises to an assignee who has applied to become a member of the Management Company nor shall this covenant prevent the Lessee from mortgaging or charging the whole of the Demised Premises and

That the Lessee will procure that such assignee if so required by the Lessor or the Management Company shall at his own expense enter into a direct covenant with the Lessor and the Management Company and each of them to perform the covenants on the part of the Lessee contained in this Lease including this present covenant.
Unquote

Does this mean subletting is prohibited? But the LPM letter says we can do it, but have to cough up approx GBP1200 now, and something like GBP500 (175+295) annually thereafter? I am so confused!

Yes. That is why you need a licence to sublet (which they want to charge you £705 for. This effectively varies the lease so despite it saying you cannot sublet, the licence will say you can. Have a look if there are any other clauses, but on the face of it, without the licence you will be in breach of the lease. So you don't really have a choice.

The second paragraph you've quoted is not relevant - thats to do with selling the leasehold.

The additional fees - the annual consent and property management company fee - I'd want clarification of exactly what they are, but they are in the driving seat. Your lease says you cannot sublet so you are caught between a rock and a hard place.

mandy is quite correct. Ask if you can have sight of the standard licence to sublet to have a read through and understand what you will be asked to agree to.

I think the property management fee is quite high if that's an annual fee, on top of other management fees you pay as the leaseholders. I too would query it.