Bridges every landlord needs to cross before letting their property.
A prudent tenancy agreement will require the landlord to confirm that they have obtained the mandatory consents, before entering into the lease. Without these consents, a landlord, by renting out the property, may be in breach of the agreements they have with other parties, which may put the tenant in a precarious position. Read on to learn about the various parties a landlord should get consent from before they can grant a lease.
Does the landlord have a mortgage?
A mortgage is the collateral given for a loan from a bank or a building society (known as a “mortgagee” or “mortgage lender”). If a property is under a mortgage, the landlord must check the terms of their loan agreement to see whether they need to obtain the mortgagee’s consent before they rent the property or they risk being guilty of mortgage fraud. It is likely that they will need to get consent, but there is also the possibility that the mortgagee has already consented to certain leases, such as those for a certain length of time or at a certain level of rent.
Once the mortgagee grants the required consent, usually by issuing a letter of consent, then the lease may be granted. This typically happens after the landlord has provided the mortgagee with all the information they have requested for. The landlord may have to give the tenant notice of the mortgage before the tenancy starts.
Does the property have shared ownership?
A shared ownership scheme is one which lets someone (“leaseholder”) buy “shares” in a property and pay rent on the remaining share at a reduced rate. Ownership of the remaining shares stays with the seller, be it a housing association or private developer, until the leasehold buys all the shares in the property.
Since the leaseholder under shared ownership does not have the freehold in the property, and the seller has a valid legal interest, the leaseholder ought to obtain consent from the seller before renting the property. In fact, housing associations usually do not allow leaseholders from parting with the possession of the property until they have bought all the shares. This consent ought to be written and the leaseholder must keep a record of it.
Does the Landlord Superior Landlord?
If the landlord does not own the property they want to rent, but is also leasing it from someone else, then there will be a superior lease. Also known as a “head lease”, this sets out the promises that the landlord has made to the superior landlord. The landlord will need the superior landlord’s consent in order to sublet the property. In a typical case, the superior landlord cannot unreasonably withhold or delay giving this consent.
Once the superior landlord grants this consent, usually by issuing a formal license to sublet, the landlord can go ahead with the lease. The superior landlord may have made certain requests such as permitting only part of the property to be subleased or insisting that certain terms be included in the proposed tenancy agreement. The subtenant will be bound to the promises made by the landlord in the superior lease if they have prior knowledge of them.
Legislate is a contracting platform where landlords and letting agencies can create tenancy agreements which take into account the different consents needed to grant a valid tenancy. Read our tutorial to learn how to create your tenancy agreements in minutes with Legislate. To start legislating today, book a demo or sign up here.
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The opinions on this page are for general information purposes only and do not constitute legal advice on which you should rely.