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ask tom ...
Resident Agony Uncle, Tom Entwistle,
answers readers’ questions.
Tom Entwistle is a founding director and editor of LandlordZONE.co.uk
He has been a private investor in residential and commercial property
for over 30 years.
Q
Agreeing Legal Fees &
Costs – How can I limit the
legal fees I will have to pay
to my head landlord, when I request
permission to make alterations to a
leasehold flat I own and rent out?
Dealing with professionals and their
fees can often be a frustrating business,
whether this is for conveyancing or other
matters, so it is almost always a good
strategy when dealing with lawyers to
try and negotiate not a specific fee, but a
maximum amount from the outset.
A common irritation for leaseholders (and
this includes many landlords as well as
commercial tenants) when seeking consent
under the terms of their lease, relates to the
fees demanded by head landlords, their
solicitors and managing agents.
Most commercial leases and longleaseholds contain requirements for
leaseholders to obtain a landlord’s
consent to carry our various activities,
for example; lease extensions, lease
variations, assignments or subletting, or
making alterations to the premises.
Understandably, restrictions are in place
to give freeholders a degree of control
as to what happens to the premises.
However, to the leaseholder’s benefit
these requirements are caveated by
the requirement for the landlord to
act reasonably when considering
the leaseholder’s application, with
permission not to be unreasonably
withheld or delayed.
such fees can be justified as ‘reasonable’,
and it is often fair to say that, in some
cases, they may have a point.
Rather than the amount being agreed
as a specific figure, it should be limited
to maximum amount.
It is usual that leaseholders are asked
at the outset to provide assurances to
cover fees (usually by way of a solicitor’s
undertaking) when at that stage the
head landlord (or their agents and
advisors) has done no administrative
or legal work.
That way it ensures that a leaseholder’s
liability is capped and also provides
some leeway for argument in the event
that the quoted figure subsequently
appears excessive, given the amount
of work actually carried out.
Is it fair that the head landlord’s solicitor
should ask for its costs to be covered in
the sum of some high amount, when
it may turn out that only a couple of
hours’ worth of legal work is needed
for drafting and agreeing a simple
form of licence?
It is common in these circumstances
for a leaseholder to eventually receive
a bill from a head landlord’s solicitor for
the exact amount of the fee quoted,
which often bears no resemblance to
the time spent - money for old rope for
the lawyers involved!
This is a real problem for leaseholders
involved in an application, but they
should be careful.
Leaseholders are often in a weak
bargaining position as it is usually the
case that time is pressing and they
need to act quickly, otherwise they
would delay matters unnecessarily by
querying the level of costs.
On the other hand, head landlords have
a statutory right to require a leaseholder
to pay any reasonable costs incurred in
connection with such an application.
In
these
circumstances,
most
leaseholders come to the view that it is
better, on balance, to agree to pay the
raised costs rather than risk delays, not
to mention adding even more costs by
arguing with the lawyers.
There will usually be a reference to
‘reasonable costs’ when a leaseholder
makes an application for consent, but
often the fees appear excessive. Faced
with this, leaseholders will be asking how
However, it is worth bearing in mind in
these circumstances that any assurance
to cover fees (either by way of solicitor’s
undertaking or otherwise) should
never be carte blanche approval.
The leaseholder is then perfectly
entitled to request a breakdown of the
head landlord advisor’s time spent in
dealing with the application, because
a head landlord is required to justify
that the costs incurred are ‘reasonable’
in the circumstances.
However, bear in mind the advantage
is with the head landlord and his
advisors, as it is usually not too difficult
to justify a fee as being “reasonable in
the circumstances” given the amount
of variables involved, particularly the
hourly rate of the particular advisor. A
London solicitor may charge twice as
much as, say, one in the provinces; fees
can vary considerably.
At the end of the day, head landlords or
their advisors often have little difficulty
with the burden of proof in establishing
reasonableness given the variables
involved. Furthermore, given the overall
amounts involved and the possibility of
increasing the bill, it is usually not worth
the time, effort and costs involved in
going to court over the matter and trying
to convince a judge who is in the right.
A leaseholder does have recourse
to challenging the head landlord’s
costs, both at the outset (i.e. prior
to providing an undertaking) or at
invoice stage. However, as has been
said above, from a practical and
evide