Preparing to Sell a Leasehold Apartment
Jane Witek of Hughes Paddison’s residential property team strongly recommends that you appoint solicitors as soon as you put your property on the market and request that they start to put together the leasehold information which will be required by the buyers’ solicitors.
A large number of Landlords or Management Companies make a charge for supplying management information for a leasehold property. Your solicitors will be able to find out the actual amount of the charges and they will ask for a cheque to cover this to enable a leasehold questionnaire to be sent to the Landlord or Management Company. The questionnaire can be sent as soon as you have a buyer thus avoiding delay in the progress of your sale.
In addition, you should also consider whether any of the following matters relate to your leasehold property:-
- Have you carried out any alterations to the apartment which may have required Landlord’s consent? In particular have you put down wooden flooring in the apartment? Any internal structural alterations or addition of wooden flooring requires a letter from the Landlord consenting to the alterations or addition of wooden flooring.
- Your Lease may require Landlord’s consent to the sale and approval of the buyers. If this is the case, you should notify your estate agents to make sure that the buyers put in hand obtaining references from their Bank as well as a professional reference. The reference from the Bank should confirm that the buyers are able to meet the annual service charge and the actual amount of the service charge should be quoted in the Bank’s letter. You will therefore need to provide your estate agents with the actual amount of the service charge so that they can pass this information on to your buyers.
- It is essential that you ensure that any disputes you have with the Landlord, Managing Agents or Management Company are resolved before you market the apartment. The buyers and their solicitors may well become very nervous about purchasing a property where there is an ongoing dispute. You will have to accept that you will have to pay any arrears of service charge or resolve the dispute prior to the buyers completing the purchase of the apartment. It is therefore preferable to have any dispute settled prior to the contract papers being issued to the buyers’ solicitors. You will still have to reveal details of the settled dispute to the buyers, but it is better to present the dispute as settled as opposed to unresolved.
- There is a strong possibility that on completion you will have to agree a service charge retention of several hundred pounds. In many cases service charge is collected in advance with the Landlord or Managing Agents reserving the right under the terms of the Lease to demand payment of any excess service charge once the Accounts are finalised at the end of the financial year. It is therefore common in leasehold property sales for the buyers’ solicitors to insist on a retention pending the finalisation of any outstanding service charge accounts. By agreeing to a retention you are not giving up the money as it is simply held in a solicitor’s bank account until such time as the service charge accounts are finalised. The solicitor should, following completion chase the Landlord or Managing Agents to enquire whether or not the service charge accounts are finalised and once they are any deficit service charge attributable to your ownership of the property will be paid by the retention and the balance released to you. However, the service charge retention may be held for some time and its release to you will be dependent upon the finalisation by the Landlord or Managing Agents of the end of year service charge accounts.
- If you hold a share in a freehold Management Company, you should ensure that you hold the original share certificate. Obtaining a duplicate share certificate can be a lengthy process and may delay the sale. If you need to obtain a duplicate share certificate, you should approach the Management Company or Managing Agents for this as soon as possible.
- You should ask your solicitors to advise you on the length of the remaining lease term. A buyers’ solicitor will not be happy to advise their clients to proceed with the purchase of a leasehold property where the lease term is less than 75 years. It is therefore important at an early stage that you identify whether the lease term for your property needs renewing. If it does, contact your solicitors before you put your property on the market for sale.
- If your property has a balcony or roof terrace you are strongly recommended to ask your solicitors whether or not the balcony or roof terrace forms part of your leasehold property or whether the Lease grants you a right to use it or not. In the event that there are no such rights or if it does not belong to the property then you can discuss with your solicitors the options available to you to rectify the situation. Having a solution in place prior to submission of the contract papers to the buyer’s solicitors will assist the transaction in proceeding smoothly.
If you have any queries or require assistance with the sale of a leasehold property please contact Hughes Paddison’s property team.