Sometimes you come across some issues between different landowners that need some careful legal documentation to get things all clearly laid out.
This is not for the faint-hearted, and requires advanced legal-help and some out-the-box thinking.
Therefore unfortunately as you try and sift through the issues to see what needs doing, you can easily get too bogged down with standard property management ways that just won’t cut the mustard here.
So the regular use of, say, leases and licences often just won’t suffice, as you’re not in a landlord-tenant situation, and one party is not necessarily actually using the other land to benefit from this.
A Clearer Example
So let’s take an example property where there is a row of offices in a terrace, all separately owned. There may be a shared car park at the rear, and each office-unit owner has a respective under lease to use this car park area.
Just to spice things up, you then have a separate management company involved for many years, and they have been arranging the actual building insurance for everyone’s own office unit as well as the car park.
Practically this may work out best, as it’s all under one construction and so easier to insure under one policy. And everyone can just pay the premium through some form of, say, service charge.
Alas the problem comes with the legal situation, where one unit owner suddenly has their own property being insured by a separate management company of the rear car park, but there’s no paperwork to say how this is done.
So what happens if the building burns down and was underinsured?
This owner is going to be trying to sue this management company, but what legal document existed to say they should even be doing this?
Big problems, and even bigger potential losses.
The Right Perspective
You therefore need to take a step back and have a reality check, as in this situation you basically have one separate landowner agreeing to insure another next door neighbour’s land, which is separate to any other agreement like use of the car park on more usual landlord and tenant principles.
This therefore needs correctly documenting between two different parties, and not automatically bringing in classic landlord-tenant principles for the sake of it.
So here are five factors to consider in this process to ensure you’re covering all the bases:
1. The Basic Agreement
First suss out what form of agreement this may need to be, and whether it’s more to do with the properties or the parties holding the property interests.
So a standard company agreement may suffice but do be clear whether this is between people or properties, however most of the content in these standard agreements can probably be deleted out, after all you’re just after one or two issues being documented.
2. Understand the Parties
Then clarify who is doing what here, maybe the ‘owner’ of the property with the benefit and then the other property/land owner being an ‘agent’ for them.
So they’re sort of carrying out a service through normal contractual law principles and not forming a legal property contract as such.
You then need to see if this whole arrangement is personal to just them now, or if one of them sells their property interest to another, then whether the whole agreement stops or is passed onto new parties.
3. Still Correctly Log
Once you have such an ‘agreement’, then see how this needs to be formally noted by each party, and more importantly their property interest.
As well as being referred to within other usual leases or property documents, it may be worth having registered with Land registry as a formal document to the title.
4. Paying Up
If there’s a form of payment involved, then get this crystal clear as to what it is, when and how it’s paid, and what happens when it isn’t.
Even little things like VAT registration, and interest payments may also need including.
5. Mirroring a Lease
A property lease is a classic document that covers a lot of detail, therefore although you may not be using a lease in its formal sense you may be able to use standard clauses in this new ‘agreement’.
So if you’re looking at one owner arranging insurance for another, then there’s some good detail in a lease you could add in there.
And service charges are also a good mechanism of arranging costs that could be referred to.
Documenting the Detail
As you consider the daunting prospect of resolving a land-to-land issue, then take a step back and see what you’re trying to achieve.
This will often boil down to one party offering a benefit to another as a form of payment.
Once you have that, then build up the detail into just the right agreement. This probably won’t be a classic landlord-to-tenant lease, but you may well need to apply similar principles.
And as a final point, make sure it’s all done as easily and quickly as possible to stop everyone’s time and costs racking up.
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