As a potential purchaser of a leasehold property, one of the things you must receive from the seller is the leasehold management pack. This is sent to your solicitor through the landlord or management company.
It includes necessary information such as ground rent, insurance policies and any asbestos surveys. Whilst this pack is not mandatory, most conveyancers and solicitors will strongly advise that one is provided.
Understanding these costs is also a good time to consider the long-term expenses of leasehold ownership, for example, the ongoing ground rent versus the potential cost of buying the freehold to own the property outright.
What is a Leasehold Property?
A leasehold property means you own the property for a fixed period of time, but you do not usually own the land it sits on outright. Leases are often created for terms such as 99, 125 or 999 years (999 year lease). This is unlike a freehold which is yours “in perpetuity” meaning forever. If the leasehold goes down to zero years, ownership reverts to the freeholder, and the leaseholder loses the right to live in or sell the property. Therefore know what happens when a leasehold expires before buying a leasehold property.
In the UK most flats fall under this agreement, whilst most houses will be freehold. Any changes to the property under a leasehold contract will need to be approved through the freeholder.
The management pack for leasehold properties covers a wide range of documentation. It provides a full breakdown of information on the property as well as the financial information associated with it.
In this section, we will discuss the key documentation included and explain why they are important.
1
LPE1 Form
This is one of the most important documents as it contains information regarding the freeholder, landlord and the management company. This form is prepared by either the landlord or the company responsible for managing the property. The LPE1 form is not always legally required, but it is commonly requested during a leasehold sale.
Some key information on the form includes;
Contact information for the freeholder, landlord and anyone else responsible for the property
Transfer and registration - registration deed, cost and license
Shared agreements, boundaries and disagreements
Insurance information including building
Deed of covenant including any costs associated
2
Ground Rent Statement
This is the rent that is provided to the owner of the freehold. It is the cost of the land that the property sits on and not the building itself. The average cost of ground rent in the UK is £366. It does not cover any additional costs made to the leaseholder for other services. This statement will confirm exactly how much the leaseholder will have to pay upon purchasing the property.
3
EWS1 Form
The EWS1 (External Wall System Fire Review) form helps lenders determine whether the external wall of a property is safe. It specifically identifies the presence of any combustible materials in the wall system. While it is expected for buildings over 18 metres tall, some lenders may require it for properties taller than 11 metres. This is particularly the case if there are concerns about fire risks.
The form is valid for 5 years but may need to be updated sooner if significant changes occur. Although it is not a mandatory form, most lenders will expect it as part of the leasehold management pack.
4
Service Charge Statement
This statement covers any additional costs required by the freeholder. What is included in this will depend on what type of building you are leasing and the shared areas within the property.
Some common services include:
Maintenance costs and repairs
Cleaning of shared facilities
On-site security
Insurances
5
Major Works Plans
When buying a property you will need to know exactly the condition of the property. This includes any future work planned for both your property as well as the building itself. So this should be included in the pack.
6
Copy of Buildings Insurance Policy
If you are buying a flat in a property owned by a freeholder, they will typically cover the building's insurance. Leaseholders usually contribute to the cost through the service charge or a separate insurance charge. This will either be split equally or proportionally depending on the size of the property. The terms regarding building insurance will depend on the agreement you have with the leaseholder.
7
Management Account History (Last 3 Years)
When buying a leasehold property it's important to know how the building has been managed. The last 3 years of annual accounts will give you a good idea of this information. These accounts help show how the building has been managed financially.
8
Asbestos Survey
For any property that was built before 2000 in the UK, an asbestos survey is likely to need carrying out. Whilst it is not legally required in residential properties unless in communal areas, homeowners expect one to be carried out.
The survey will detail
Where the asbestos-containing material (ACM) is located
The quantity and condition of the ACM
Any action required to treat the ACM
Checks should be carried out annually unless the risks are low and mitigated.
It is the seller’s responsibility to obtain the leasehold management pack and cover the associated costs. The average cost of a leasehold management pack is £355, but the final cost depends on the freeholder, landlord or managing agent.
If the property’s ground rent or service charges are handled by separate entities, additional fees may be incurred. Other costs might include administration fees from the freeholder. To understand the wider costs, read our guide, Solicitors’ Fees for a Leasehold Flat, or see How Much Does It Cost to Extend a Leasehold? if you are extending your lease.
How Long Does it Take to Get a Leasehold Management Pack?
It typically takes between 2-6 weeks for the seller’s solicitor to receive the pack from the management company. The timeline can vary based on the management company. One common cause of delay is the seller not paying the fees promptly. So it's important for the seller to settle this as soon as possible to avoid holding up the process.
Finding a Conveyancer
If you are looking to buy a leasehold property, you are going to want a conveyancer to help you with this process. In particular helping you gain the documentation you’ll need to make an informed decision.
Konnect You can help you find a conveyancer suited to your needs. Fill in our quick form to get matched with up to 5 licensed companies in your area. You can discuss your requirements, review their prices, and choose with confidence. You could also save up to 70% on your conveyancing costs.
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