This article does not in any way set out all of an underleasehold owner’s or tenant’s rights or obligations contained in a lease, assignment or rental agreement, nor may it be constituted as giving legal advice or be relied upon as such. Any reference to an owner in this article refers to an underleasehold owner and not the reversioner (lessor or management company).
Most of us will either own or rent a property at some point in our lives here in Gibraltar. All property owners and tenants are legally obliged to adhere to the terms of their lease, which they would have legally contracted to do so by signing the lease, assignment or rental agreement. A lease, an assignment or a rental agreement are the most common documents that set out an individual’s rights to a property.
A lease is the legal document, that is registered at the Land Registry of Gibraltar, if it is for the duration of a term of three years or more, which demises a property to the lessee for a specified term of years. Most residential leases in Gibraltar tend to be for the period of either 99 or 149 years, calculated from a specified date, and outlined in the lease as the ‘Term’. Once the term of years of the lease expires, ownership of the property reverts to the landlord. There is no automatic right to renewal or an extension of the term in Gibraltar, however, it is common practice that upon expiry of the lease term, an extension is sought from the landlord, and such extension may be subject to a premium.
Do you know the common rights included in your Lease?
Leaseholders enjoy certain rights to their property. The most common rights which may be included in your lease (but not limited to) are for example: the right of passage and running of electricity, water and soil; and the right to use communal areas (e.g. swimming pool, if applicable), but are all subject to the payment and receipt of your service charges.
Case law in Gibraltar has established that owners do not have a right to light, which means that subject to planning permission, the landlord/management company can grant third parties in adjoining properties the right to build nearby, even if it affects or diminishes the light enjoyed by the property.
Do you pay your service charges, repair and maintain your property?
Covenants are either promises to do an act (known as a positive covenant) or promises not to do an act (known as a restrictive covenant). Covenants in leases tend to include, but are not limited to, rental obligations, payment of rates and other taxes, repair obligations, payment of service charges, sale conditions, alterations, insurance, consequences of failing to comply with the obligations and other general restrictions.
These covenants are usually outlined in one of the schedules to the lease, and the terms may vary from lease to lease.
Repair and Maintenance
Owners tend to be responsible for the repair and maintenance of their property (i.e. flat). The definition of the property can be found in one of the schedules to the lease. The lease should clearly state the parts of the property that the owner is responsible for, and the parts that either the landlord or management company (as applicable) would be responsible for.
Examples of the repair obligations of an owner are usually the window frames, the glass windows, the interior faces of the external walls that bound the said flat, but nothing that would fall outside of the demised property, i.e. common areas. Anything that forms part of any common area and outside an owner’s demise, tends to be the responsibility of the landlord/management company.
In addition to this, there is usually a standard to be upheld in respect of an owner’s repairing obligations, for instance either to that of a “good repair” or “satisfactory repair and maintenance”, “to the satisfaction of the landlord” or “good condition and repair”, and if such standard is not upheld (i.e. not satisfactory to the landlord/management company), the landlord/management company may serve notice on the owner specifying any necessary repairs, of which they would be legally obliged to carry out.
All owners will be legally contracted to pay all existing and future rates, taxes and outgoings imposed or charged upon the property.
Alterations
Most leases, if not all, tend to restrict the way in which owners may alter/make structural changes to their property. For instance, usually landlord written consent would be required for any external or structural alterations as well as any internal alterations that would require the approval of the Development and Planning Commission to the property.
Service charges
Service charges are payable for most leasehold properties in Gibraltar. Landlord’s/management companies will calculate the service charges payable in accordance with the calculation outlined in the lease, which may either be by way of percentage (%), specified amount or defined as a “proportion” (all with the ability to increase) being a proportion of the total expenses and outgoings incurred by a landlord/management company. Owners should be able to find a list of the outgoings and expenses usually incurred and outlined for the purposes of calculating the service charges payable, in one of the schedules to their lease. Service charges are payable so that the landlord/management company can carry out the listed obligations, for instance, maintaining and repairing common areas.
Landlord/management company approval
Should an owner wish to sell the property, the owner would have to ensure that the person they are selling to also enters into the direct covenants with the landlord/management company, which is usually done by including the landlord/management company as a party to the Deed of Assignment or by entering into a Deed of Covenant.
The Deed of Assignment is the document that transfers legal ownership of the unexpired lease term to a property, whilst ensuring the new owner is bound by the terms of the lease.
Prohibition of an assignment of part & exceptions
If someone owns a car parking space, store and flat which together constitute the “property”, it is standard for leases to prohibit the sale of “part” of that property, in other words, one would be unable to sell the store alone, or the car parking space alone (i.e. separate from the flat). This will, however, depend on the development and sometimes a landlord/management company will waive this restriction if the store/car parking space is being sold to another owner of the same development and/or in some cases, if the flat still has a car parking space connected to it. Usually, the decision to allow for an assignment of part, would be at the discretion of the landlord/management company.
Property to be used exclusively as a self-contained residence
If an owner is thinking about carrying out business activities from their property, it would be useful to double check the terms of the lease, as a standard prohibition, is that the property cannot be used for business purposes and instead can only be used solely and exclusively as a self-contained residence.
Do you have a dog? Do you clean your windows every month? Why these things may matter…
The above-mentioned covenants are those which most people would probably expect in a lease. However, did you know that leases usually contain rules as to how often your windows should be cleaned (for example, at least once every month), rules on pets, rules about noise levels and nuisance and rules about items being left outside (e.g. signs, clothes, other articles).
In most leases, it will state that owners may not do anything which could be considered “a nuisance”, but what actually constitutes a “nuisance”? Examples of nuisance are a barking dog, loud music, and noise at unreasonable hours.
If you have a dog, a cat or any other animal, there is usually either a complete prohibition or a restriction whereby an owner would be legally obliged to request the consent of the landlord/management company to keep their animal at the property. However, even if consent is granted, this can usually be revoked should the animal cause any nuisance to other owners or occupiers of that development.
Did you also know that it is a usual restriction in the lease “not to hang, place or expose any clothes or other articles outside of the property”. Not only is the display of clothing items and other articles prohibited, but many leases also include restrictions as to any name plate, placard or announcement that can be located on the entrance door of the property.
Most leases also expressly state that the property should not be used for any immoral or any illegal purposes.
This article outlines and explains only some of the standard terms usually contained in a lease here in Gibraltar which all tenants and owners would be legally bound by. It is always worth ensuring that you understand the terms of your lease and/or seek legal advice when required (e.g. upon the purchase of a property). Adhering to the terms of your lease is extremely important as in some cases, i.e. where there is a material breach, there may be a reason for forfeiture by the landlord. We, here at ISOLAS LLP, have the experience and knowledge in reviewing leases for a number of developments/properties here in Gibraltar and in drafting leases for certain developments such as King’s Wharf, One Bayside and CitiHomes.
Should you wish to obtain any legal advice in respect of your lease and/or require any assistance with any property/development related matter, please do not hesitate to contact us at ISOLAS LLP.
