It is common for a managing agent to be used by a Freeholder to deal with the management of the building and collection of funds in relation to flats or leasehold premises. When selling a leasehold property, it is usually a requirement that the vendor obtains a management pack/Sales pack from the Managing Agent, or if one is not employed by the freeholder, then from the freeholder themselves. This pack varies in price but should contain as a minimum the last 3 years accounts for service charge, ground rent and insurance, as well as a statement of account and other relevant information about your leasehold property. The pack will show whether the accounts have been paid up to date or if there are any arrears that will be cleared on or before completion. It is important that an agreement to clear the account is reached as the arrears stay with the property post completion; albeit an apportionment of the current year’s charges will be payable by the buyer, the value of which will be calculated by the seller’s solicitor.
The pack also contains information of the post completion requirements. Sometimes a property may have a variety of Managing agents who deal with different aspects of the management, and more than one pack may be required for example if there is a Right to manage company.
The Law Society has put together some standard enquires to assist both Freeholders and/or their managing agents called LPE1 enquiries and often it is replies to these that are simply provided. A standard sales pack should effectively deal with all of the enquiries contained in the LPE1 form if a Freeholder and/or managing agent are not specifically replying to the LPE1 form.
Some potential requirements of the Leases Post completion
Once completion has taken place, there are a variety of potential different actions that may need to be completed. For example:
• Notice Fee – usually a leaseholder will be required to inform the landlord that there has been a change of ownership and if the leasehold property has been charged to a lender as security for a mortgage and/or loan this information is usually provided. There will normally be a fee required to be paid to the freeholder or their managing agent when the notice is given, but the amount will generally vary for each leasehold property and depend on the terms of the lease.
• Deed of Covenant – a covenant is a legal promise that an individual will carry out or refrain from carrying out certain things. With leasehold properties, under current legislation, the obligations of covenants contained in the lease will automatically bind their successors in title, and therefore strictly speaking a deed of covenant is not necessary but a number of Leases contain provisions for Deeds of Covenants to be entered into however; and indeed often the freeholder may have a restriction on the leasehold title preventing a transfer until this document is agreed. Generally speaking, the entering of a Deed of Covenant will become necessary for the granting of the required certificate to adhere to the restriction on the title and allow the registration to the new owner to be completed. Under the 5th edition of the standard form of sales contract if a Deed of Covenant is required any fees associated should be the sellers to pay, although this is often a point of negotiation.
• Licence to Assign/Certificate of Compliance – One of these may be necessary depending on the terms of the lease or if there is a restriction registered against the leasehold title. These documents are often used if there are specific fees required to be paid on the transfer of the leasehold title or for specific covenants under the lease, such as an age restriction. The landlord/managing agent will provide the certificate of compliance and or Licence to Assign on confirmation that the seller and/or buyer has complied with the specific terms of the lease which require either the certificate or licence. The production of such will then allow the property to be transferred to the new leaseholder. The fee payable for these types of documents is often negotiated but does commonly fall to the buyer. As with all management fees charged under a lease, they do have to be reasonable although in that regard reasonable is open to interpretation.
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