Is Your Leasehold Property Sale Currently Suspended?28th Apr 2020
If you were planning on selling your leasehold property only to see the chances of a sale scuppered due to Covid-19, this can still prove to be a productive period.
Owners could utilise the current lockdown to consider several key factors.
The latest government guidance is available here, while our detailed commentary is available here. In summary, a number of proposed sales have now been suspended. Furthermore a number of leasehold owners are waiting until the government provide further guidance, or for lockdown provisions to be relaxed – whichever comes first.
There are a number of issues that delay leasehold sales. Whilst ours does not constitute a complete list, we have outlined some of these below. Also shared are tips on how best to maximise the current lockdown, with a view to facilitating a future sale.
To Do List
Review Lease length
The length of your lease may be preventing a sale or depriving the market of potential purchasers. It is worth noting that a cash purchaser is not restricted in what they are able to purchase. As such there may be an untapped market of purchasers, whether or not you offer a short lease length. If a purchaser is buying with the benefit of mortgage lending, the mortgage lender is more than likely to have their own requirements.
A list of general requirements - from lender to lender - is kindly published by UK Finance (formerly the Council of Mortgage Lenders) and available to read here.
Scanning through that list, you might consider your lease to have a ‘short’ length. If this is the case, you may deem now to be a good time to extend it. You should give careful consideration to whether or not you approach your landlord. Alternatively you can exercise a formal lease extension claim.
Management and service charges: A common feature of leasehold property includes a responsibility on another person or organisation to carry out management functions, in return for a contribution from each relevant property within the wider development. These are better known as service charges.
You should gather any information you can about management services and service charges in advance of your sale.
Papers: You should collate all original papers you or previous solicitors may have had. Such paperwork may include leases, lease extension documents, deeds of variation, licences, planning or other consents. Certificates detailing shares or membership in any landlord or management company also fall into this category. All of the above will be required.
Your Enquiries: You will be asked to provide answers to the purchaser, which is likely to take the form of TA7. An example can be found here, courtesy of the Law Society’s website.
Management Enquiries: During the process it is likely the person responsible to manage will be asked to fill in form LPE1. This document contains a series of questions which need to be answered by a managing agent, management company or landlord.
An example is available here, again shared upon the Law Society’s website.
It may be you are able to answer some or all of these questions yourself. Likewise you may have some or all of the relevant documentation. If this is the case, you should consider gathering those answers and papers, as they will almost certainly speed up your proposed sale.
Review Your Lease
Your lease may be inaccurate or may now be inconsistent with current conveyancing requirements. Similarly your contract might include a restriction no longer enforced throughout the development. It may also include an unattractive ground rent or rent review mechanism. Any of the above can prevent a sale or restrict the market of potential purchasers.
The most common of these is a ground rent exceeding £250 per annum (or £1,000 per annum in London). For further details please see a recent Coles Miller blog here.
In accordance with your landlord or management company you may be able to agree a variation to your lease or remove/update the relevant aspects which require amendment. For full details, please see our pages on varying leases here.
A variation may be dealt with within the future conveyancing transaction, but this will likely increase timescales and jeopardise the proposed transaction. Dealing with this well in advance will provide some peace of mind. You can rest assured you have a corrected leasehold title, ready to sell both when the market permits and you are ready.
We appreciate that this is a very difficult time for all of our clients and, as your Law firm for life, are on-hand to support you through this period.
For more information on residential leasehold matters, contact Coles Miller Partner Matthew Lewis, 01202 293226.