Is My Residential Property Lease Defective?

If you’re a leaseholder and you believe the terms of your lease aren’t fair, you may have what’s known as a defective lease. A defective lease can make it difficult to sell your property and seriously harm your relationship with your Landlord or Managing Agent.

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Defective Leases

So what kind of issues mean a lease may be defective and is leaving you open to potential problems?

A Short Lease Term

A good lease term should be at least 90 years plus. Around 85 years, enquiries should be made as to the costs associated with extending the lease term.

Insufficient Insurance Obligations

A good lease must clearly outline who is responsible for arranging the buildings insurance. This will need to be the Landlord or Managing Agent. Some older style leases, and those often for maisonettes, do on occasion state that it’s the lessee’s responsibility to insure. This would be unacceptable for lending purposes.

Insufficient Repair and Maintenance Obligations

A lease must clearly state who is responsible for the repair and maintenance of communal parts, including the roof, foundations etc. This will need to be the Landlord/Managing Agents, and if this isn’t made clear, then this would be deemed defective.

Insufficient Rights of Way or Access

A lease must have clear rights of way to get to the property, i.e. from the main public highway, and over any communal parts of the property to gain access to the front door. Without any such rights granted, the lease would be defective. Rights should also be apparent to use services and for support.

Unclear Description of the Demise and Plan

This may mean some older leases aren’t clear as to exactly what’s included within the property demise. The Lease Plan and/or description of the lease may not include, for example, a roof space, or the layout is incorrect and has been altered over the years by the removal of internal walls. Without clear and correct descriptions, the lease could be deemed defective.

Restrictions on Letting the Property

Some leases may have a restriction which prohibits a property being let (rented). This scenario would therefore be considered defective if a buyer was solely buying a flat for the purposes of a “buy to let” to rent the property out.

Restrictions on Suitable Flooring

Some leases have restrictions on the property having suitable carpet and soundproofing in all rooms. There can be occasions where the property has subsequently had wooden flooring installed or being considered for the future.

Enforceability Covenant

A good lease should also have a suitable “enforceability covenant”. This means that the Landlord/Managing Agents and the lessee can enforce the parties involved to adhere to and observe the covenants that are in place. Without this kind of clause, the covenants as listed in the lease cannot be enforced by any party and would be considered as defective.

How Can I Resolve a Defective Lease?

A Defective Lease Indemnity Policy

This is likely to be the quickest and cheapest method. This involves the seller funding and providing a suitable indemnity policy (usually priced at around £200-£300). This is similar to an insurance policy and covers for any defects that the lease has.

A Deed of Variation

This is the most thorough method of dealing with a defective lease, although this can be timely and costly. This is where the landlord and lessee enter into a Deed of Variation which is an official Deed that “varies” any defects that are contained within the lease. This would then get registered against the property Title on completion.

A Deed of Rectification

This method is used for amending incorrect Lease Plans, and is similar to a Deed of Variation.

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