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Basement Developments Leasehold Flats – Legal Pitfalls

If you are thinking about adding value by expanding your flat by building down into the basement or building a new basement then you will need to be careful that you obtain all the legal rights and consents you need from the freeholder (even if you have a share of freehold) before embarking on the expensive process.

Even forums purporting to provide legal advice sometimes appear to miss the pitfalls.

 

 

1. You do not own the basement.

Most leases do not expressly include the basement space in the “demise” of the lease. Some refer to the basement by way of a plan which is a much smaller footprint than the basement you intend to create. For example you may have the whole of the footprint of the building within the space but if you need to insert light-wells which project slightly into the front garden (provided this is not owned by you) then you may have a problem.

Even if you use the basement for storage you may or may not have a right to do so under the lease terms. A right to use for storage does not lead you to ownership of this area even though you may be the only owner who physically has access to the space. If you do not have rights to use the space you could in theory claim ownership of the land by “adverse possession” but this is problematic and takes a number of years (and may not be successful).

A landlord will normally be aware of the potential value of the basement space (especially in London). There is no way of forcing him to sell. Sometimes it is worth considering purchasing the freehold with other tenants to obtain this space (before mentioning that you intend to develop)  rather than negotiate terms with a difficult landlord. Conversely, if you know your neighbour may be unfavourable to a basement conversion (with all the noise and disruption it may cause) you may be better of dealing with a third party landlord who may be motivated by money. Any deal with the landlord would of course be wrapped up with the consent to complete the works (licence for alterations).

 

2. You do not own the sub soil around the basement

Even if you own the basement space it is very unlikely that you own the sub-soil beneath the flat unless the lease is very specific on the point.  You  need to be very careful about converting an existing basement into a habitable space – quite often basements are not full height and in order to create the appropriate height for living space you need to dig down – the land below the current floor level is often not yours.

This is illustrated by Gorst v. Knight [2018] EWHC 613 (Ch) where the existing cellar was only five feet high, the tenant applied for and obtained planning permission to dig into the subsoil to increase the depth by another four feet to create a usable living space. The Landlord objected and said that he owned the subsoil therefore the tenant would have no right to excavate and any such excavation would, in the absence of the landlord’s consent, amount to a trespass. The Court decided that the sub soil did not belong to the tenant and hence the Landlord owned the space.

This decision illustrates that a lease having the words “and the basement or cellar” tacked on to the description of the flat is not necessarily sufficient to include the adjacent subsoil within that demise.

The Court did look at the detail of the lease to determine this which also placed the foundations of the building within the ownership of the tenant (together with an obligation to keep in repair). However as the landlord had a right of entry to keep them in repair if required and the landlord reserved right to pass services under the flat – this supported the landlord’s argument that there must be a lower limit to the flat demise.

This case follows a few decisions which indicates that in the absence of express terms the courts will not imply that a tenant owns the sub-soil beneath the flat and this can be compared with the approach to roof space developments where there seems a possiblity this may be implied (but again this is not guaranteed and is fact specific).

This is for policy reasons because the subsoil is key to the stability of the whole building – if the foundations become unstable the whole building is threatened, access to the subsoil is more difficult and will generally involve going through the lowest demise in the building; and the subsoil is not visible and open to the elements in the same way a roof is exposed. This means that a problem will not be easily noticed at an early stage.

 

3. You do not have Landlord’s consent for the required structural changes.

Most leases will restrict changes to the flat. Often minor non structural changes are  permitted with the landlord’s consent such consent not to be unreasonable withheld however structural changes (such as underpinning or improving foundations) may be prohibited or only permitted with the landlord’s consent. The landlord does not have to be reasonable in deciding whether or not to grant that consent.

Sometime changes to pipes and wires running though the building will also require consent.

The landlord will have legitimate concerns that any changes to the building will not have an adverse effect on the remainder of the building although any such changes are likely to require building regulations approval and the council will oversee the works.

 

4. You may be interfering with other rights in the building

There may be services or other communal systems e.g. meters in the basement space. These may need to be relocated interfering with the rights of other tenants.

 

5. You will need to consider the repair obligations for the building in particular concerning the new foundation structure

The foundations may be maintained at a communal cost. If you make changes to it the cost of repairing may increase because the structure is more expensive to repair. You may have underpinned the structure. Even though you may have a guarantee for the works this may not help the other flat owners if that work is defective.

In addition you are changing the floor area of the flat – sometimes doubling it – you would need to consider whether the existing division of the service charge/insurance is correct, for example, in a building with two flats will the old 50:50 split turn into 1/3 : 2/3. Both leases may need to be amended to effect this change.

 

6. You assume that a share of freehold equates to consent – it does not.

Even where you own a share of the freehold the other co-owners are not bound to consent to such an arrangement. You still have to deal with the lease and obtain the necessary consents from your co-owners. Some times this can be trickier than dealing with a third party landlord (who can usually be motivated by a monetary payment). For your neighbour this may be a personal disruption to their privacy which may not be easy to compensate in monetary terms. Even if the upper flat(s) are let there may be issues with tenants and potential loss of rent. You may need to agree strict timetables and sweeten the deal with offers to carry out redecoration to common or external parts.

 

7. You assume that you can turn the basement space into another flat.

Most leases are specific above sub-division – there is usually an express prohibition on sub letting part or assigning part of the lease. Often there is a covenant to keep the flat as a single dwelling. This means that you will need to deal with the landlord to vary your lease (for which he does not need to be reasonable). If you carry out the sub-division without consent he may forfeit your lease.

 

If you are considering such work it is important you obtain correct advice on the terms of your lease and the agreements you need to seek to achieve your goal. We provide initial opinions on your lease terms from £350 plus VAT and lease variations and licences for alterations from £650 plus VAT. For further details contact Mark Sadler on 01708 757575 or email mbs@ker.co.uk for further assistance.

 

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