Charges when Selling or Buying Leasehold Property

In the world of Residential Conveyancing, there are two kinds of properties – freehold and leasehold. Freehold properties consist of a property whereby the owner owns the entire property as well as the land that it is on. A leasehold property, however, is more complicated. Leasehold properties are typically flats or shared buildings. The ownership of the land that the property is on is not so straightforward, and this necessitates the need for an entity to take responsibility for the shared land or space.

The leasehold of a property is usually managed by a management company, agency, or a landlord, and they are normally paid charges on a regular basis as well as when you are buying or selling the property.

Regular Charges

Whilst you are living in a leasehold property you will almost certainly be required to make regular payments to the management company and/or landlord. These payments usually come under either the category of ground rent or service charges.

Ground Rent

Ground rent is usually paid monthly to the landlord or management company. This will normally be a fixed amount, but it is important that, before you buy the property or move in, you check whether there is a clause in the agreement for the management company or landlord to increase this ground rent.

The conveyancing solicitor will be able to check this ground rent, potential increases, and what this would mean to you.

Service Charge

The landlord or management company is usually responsible for the maintenance and communal areas of the property. This will normally include things like communal repairs, cleaning of communal areas such as staircases, upkeep of the garden area, structural work, and building insurance. Of course, this does not come for free, and this will be paid for through a service charge.

The service charge will usually vary according to the work that is carried out by the management company or landlord. If you are looking to buy a leasehold property you should speak to your conveyancing solicitor to find out how the service charge will be calculated as well as whether the landlord or management company is planning on carrying out any substantial work on the property before you buy.

If you are Buying a Leasehold Property

If you are buying a leasehold property, there will almost certainly be some administrative charges that you will be required to pay. These can include:

Deed of Covenant

The buyer is sometimes required to sign a Deed of Covenant which confirms that they will comply with the terms of the lease. This charge is paid for by the buyer.

Notice of Assignment of Transfer and Charge

When ownership of the property changes hands, it is the buyer’s responsibility to advise the management company and/or landlord of this change, as well as details of the new mortgage lender if applicable. This is so that they can send invoices and notices to the correct names and addresses, and the buyer will normally have to pay for this.  If there are separate companies who collect the ground rent from the service charges there may be two sets of fees applicable.

Certificate of Compliance

The landlord or management company may need to send a Certificate of Compliance to the Land Registry to confirm that the changes in the lease have been made relating to the ownership of the property.  The buyer will be responsible for any fee applicable.

Share or Membership Transfer Charge

Some management companies or landlords will require you to become a member. If this is the case, they may ask you for a payment to cover the cost of transferring the share or membership certificate into your name.

If you are Selling a Leasehold Property

If you are selling a leasehold property, there may be a different set of charges to pay. Some of these can include:

Seller’s Leasehold Pack

A leasehold pack usually comes in the form of an LPE1 form and must be completed by the landlord and/or management company when a leasehold property is sold. This pack will give details of the lease to the buyer and their mortgage company and must be paid for by the seller.  If there are separate companies who collect the ground rent from the service charges there may be two sets of fees applicable.

License to Assign

In some cases, permission is needed from the landlord or management company for the new owner to buy the property. In this case, a License to Assign is required and the seller will usually be responsible for paying the fees of both the landlord, management company and their solicitor.

Transfer or Exit Fee

If you are selling a retirement flat, sometimes a transfer or exit fee is payable from the proceeds of a sale. This will normally be a percentage of the value of the property.

If you are buying or selling a leasehold property and would like to be sure about the additional charges that you will have to pay, the best thing that you can do is speak to your conveyancing solicitor who will be able to articulate the details for you.


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