While selling my flat, there are concerns about the landlord’s obligation to insure the building and I’ve been asked to vary my lease. Why?
This article was first published by City AM on Friday 15 June 2018.
Generally, the contents of the lease must be ‘mortgageable and marketable’ ie comprehensive and satisfy lenders’ requirements, to help with the sale of your flat. Subject to the nature of the defect, here are a few options:
- There are specialist insurers who can provide an indemnity policy to cover the inadequate insurance arrangements in your lease. A range of policies are available, usually for a one off premium, to insure against the risk that is posed by the defect in the lease. You will need to check the policy provides sufficient protection for a lender and the owner from future claims, for example. The policy will be subject to certain conditions and exclusions but is often a commercial and efficient way of addressing a problematic lease.
- You cannot vary the terms of your lease without the landlord’s consent. They are not obliged to consider the request and may ask for a premium and for his / her costs to be met. There is also the added concern that the landlord may be slow to respond. If there are other parties to the lease, for example a management company or you have a mortgage secured against the flat, then further consents will be required to vary the lease.
- Depending on the nature of the variation, you may be able to apply to the First-Tier Tribunal (Property Chamber) pursuant to Landlord and Tenant Act 1987 for an Order to vary the terms of your lease. Subject to meeting the relevant criteria and the application’s grounds, which includes provisions in a lease relating to insurance, a tribunal can make an order to vary the lease. The tribunal may also order the payment of compensation if it considers that the variation will cause a loss or cause a disadvantage. The process can take several months.
- Another possibility, is to apply to the landlord for a lease term extension under the Leasehold Reform, Housing Urban and Development Act 1993. This legislation is primarily used by a leaseholder to extend his / her lease by a further 90 years, but the process does allow a tenant to propose the terms of the new lease and therefore the chance to address defects in the old lease. A premium is payable for the new extended lease and you are liable for the landlord’s reasonable legal and valuation costs; the process can again take several months.