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The pitfalls of DIY leases

"Oh, I just recycled one I've been using for years". As property litigators we hear these dreaded words more and more often. As we head into January with its sales, bargains and discounts, we have a friendly warning for landlords: beware of the DIY lease. Although it seems the cheaper option, we are often approached by landlords who have encountered a problem tenant but then find that their lease is not quite up to the job. The money initially saved on legal fees can be far eclipsed in trying to put things right, often with little to no prospect of recovery from the tenant.

It seems quick and easy to copy, cut and paste from the free and heavily discounted legal resources available online. However, it is all too easy to miss a step or leave out a key clause. Most landlords will recognise that their lease needs to allow them to take action if rent is unpaid, but what about repair, decoration, sub-letting… the list goes on. If your lease does not specifically provide for the particular issue, your options may be limited.

Your solicitor does not just draft a lease, they also add value in other areas. For example, who is (and who should be) the tenant? This sounds straightforward and sometimes it is. On other occasions there may be a complicated structure, with individuals, partnerships and companies. Is the person occupying the property the tenant under the lease? If not, has there been an assignment as permitted by the lease? Also, it is key to think about who is paying the rent. If you accept rent from someone other than the official tenant and rent arrears build-up, who do you demand the arrears from and take legal action against if they remain unpaid?  

The ultimate DIY pitfall might be the Landlord and Tenant Act 1954. Although this tenant-friendly legislation has been around for over 60 years it is often overlooked and the consequences can be far reaching. If a tenant occupies a premises for business purposes, they are likely to be entitled to renew their lease when it comes to an end, unless the parties have "contracted out". There are limited grounds that a landlord can rely on to oppose a new lease and the new lease will usually be on similar terms, unless there is a good reason to depart from this. While security of tenure can be attractive for tenants and may result in a slightly higher rent or premium, it can be a headache for landlords and often makes lenders nervous. If you do not follow the procedure to the letter, you could find yourself stuck with a difficult or undesirable tenant which could put off a purchaser or lender.

Although problems are easily created, there are often solutions to be found. However our advice is always that money spent on professional advice at the outset can help to avoid issues and save money in the long term.

If you have any queries at all please contact Sophie Michaelides on 01752 526028 or email s.michaelides@ashfords.co.uk.

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