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Buyer beware! Lease provisions to be aware of

Napthens - July 25th 2017

If prospective buyers are looking to purchase a leasehold property, whether a flat or a house, it is essential that they review the lease terms as early as possible. The lease may contain certain restrictions and regulations which could potentially affect whether the buyer actually wants to proceed.

It is no good for the buyer or the seller to get close to an exchange of contracts, spending time and money on the conveyancing process and then suddenly discover that the lease prevents the buyer from dealing with the property as they would like.

The lease may contain a number of regulations. However, please note that each lease is very different, depending upon the type of property and the size of the estate. Below is a simple non-exhaustive list of the types of provisions which are commonly found within leases:

  • Carpeting: The lease may contain a provision to keep the floors carpeted. However, if there is no requirement for this, the leaseholder could lay wooden or laminate flooring. Any buyer may however, need to obtain consent from the landlord, in respect of this alteration;
  • Pets: The lease may prohibit the leaseholder from keeping pets at the property, or the lease may state that consent is required to do this. Some leases include a provision allowing consent to be revoked should the pet cause a nuisance to neighbouring home owners;
  • For one family only: Some leases restrict the use of the property for one family unit only, which would then not allow the buyer to let a room to a lodger. Also, there may be provisions relating to sub-letting the property, and only being able to use the property as a private residence. This would then restrict the property’s use. Holiday lets and letting the property under an assured shorthold tenancy may not be allowed;
  • Alterations: If there are no provisions contained in the lease regarding alterations, then the leaseholder may be free to make any alterations they wish, provided they do not damage the building or cause a nuisance. However, there may be provisions restricting alterations and additions altogether. If this is the case, the landlord could withhold consent for the alterations for no reason. More commonly, alterations and additions are usually allowed on the basis that the landlord’s consent is obtained in advance. However, plans may need to be fully disclosed first, together with a fee to be paid. It is worth checking with the buyer as to what their plans are in order to put them on notice, that consent to works may be required.

There are many other lease provisions which are important, however the above list simply gives a flavour of how the provisions can effect a prospective buyer personally and any future plans they may have in relation to the property.

It is essential for the buyers to be given the correct information at the start of the transaction, rather than getting to the point of exchange and finding out that the family dog cannot move in with them! Imagine all the time and expense which would have been expended up to this point. If a provision within a lease is breached, in some leases the landlord may exercise the forfeiture clause. In brief, this means that the landlord can take possession of the property. It is therefore imperative that buyers are fully informed of the restrictions imposed on the property they are planning to purchase.

We are happy to review the lease terms in advance of a purchase, and advise the buyer of any potential issues or regulations they may need to be aware of.

If you would like any help on the above, then please do not hesitate to contact me or a member of the residential property team.

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