01708 757575 mbs@ker.co.uk Enterprise House, 18 Eastern Road, Romford, Essex UK, RM1 3PJ

Leasehold Conveyancing Lawyers London

If the property you want to buy is leasehold  – a flat rather than a house – do you need specialist conveyancing solicitors? We believe that you do and that we possess the skills needed to guide you through this process.

We deal with a great deal of residential property work. Much of our work is based around not just conveyancing (transfer of titles between seller and buyer) but also niche leasehold work regarding flats with a share of freehold, lease extensions, loft conversions and consents to alterations. This puts us in a position to assist you more clearly on your leasehold purchase.

Why is leasehold conveyancing more complicated?

Broadly the reason for this is the lease – this is the document which sets out the manner in which you interact with your neighbours and the communal obligations which apply to your property. The lease itself may run to 30-40 pages. This means that the lease terms need to be considered carefully as they can have errors or be otherwise poorly drafted and of course if there is a management structure in place we need to investigate the nature of that structure and what plans are for works on the building.

Surely there is a standard form of lease?

Unfortunately not. The Land Registry did moot this idea a few years ago but all we ended up with was a standard set of information on the front of new leases called “prescribed lease clauses“. This does not really assist you in understanding the detail of the lease. That is not to say that leases cannot follow a particular pattern and broadly there can be a couple of types of leases.

What we consider to be “maisonette” style leases are often set up on smaller buildings of 2/3 flats whereby the landlord has not real function other than to collect ground rent (and sometimes insure). The tenants (flat owners) are responsible for the repair of the main structure for example the foundations and roof adjacent to their flats. Sometimes the cost is shared between the owners and sometimes the responsibility will fall solely on the owner whose flat contains the part of the structure needing repair.

Larger blocks tend to have a more complex maintenance structure where the landlord (or sometimes a residents owned management company who are also a party to the lease) take on the responsibility for insurance and repair of the whole structure of the building and collect a service charge.

You can see from the above that leases are often adapted to fit the circumstances of the building. We do see some obvious errors – for example maisonette style leases used for larger buildings where is difficult to ensure everyone can comply with their obligations.

In addition, because leases are drafted by individual lawyers and requirements of lenders or information about what is best practice change over time the lease formats all have variations within them caused by these changes. Leases are not updated each time the property is sold merely handed on in the same format as they were in the 1960s, 70s, 80s, 90s and so on.

There is therefore no perfect lease but it is a question of taking a commercial view of what is significant (and may require the lease to be varied or an indemnity policy to be put in place) and what is not significant.

Why can we not have a freehold flat?

Often there is criticism of the leasehold system however the simple truth is that it is the only clear way at present to ensure that these communal right and obligations work between owners in a simple way. Broadly, with a freehold property the obligations to pay money do not run with the land which means a new owner will not be bound to pay the debts of the old owner. In leasehold these obligations can run with the land so that the new owner can be held responsible for the old owners debts. This makes a real difference to the service charge regime which is often required under large blocks. If a flat owner sold their flat with £2,000 of arrears on their service charge account this would be a cost which may be difficult to recover if not tied to the title. Those arrears would would cause a shortfall in the accounts for the whole building and would have to be made up by other owners if the functions of the repair and insurance were to continue as budgeted. So you can see how quickly problems can arise (for further information on freehold flats see https://www.ker.co.uk/freehold-flats-what-is-the-problem-and-how-can-i-fix-it/)

What issues do you look for in leasehold conveyancing?

Clearly we will apply all the same enquiries as we would for a freehold matter, for example asking about disputes and obtain simple information you would expect such as the current level of the service charges and ground rent but there are a number of areas where leasehold can be more complex or problematic. They are highlighted below.

Lease Terms

As we mention about the lease is often complex – it needs to meet basic standards to be acceptable on behalf of a mortgage lender (even if you are a cash purchaser we often treat the conditions set down by lenders in the UK Finance Mortgage Lenders’ Handbook for Conveyancers as they industry standard for such matters). Poor drafting can create issues for example key provisions such as a landlord’s enforcement covenant in a ‘maisonette’ style lease.

Ground Rent

This is a “hot potato” at the moment with ground rent scandals caused by escalating ground rents partially noted in Taylor Wimpey leases 

The key is to look out for leases which cause unpredictable or high increases. This can impact on the lease extension costs.

Unexpired term of the lease?

‘Short Lease’ cause problems for resale and refinance. However what is considered a short lease is a moving target. This is again driven by lenders who have considerably tightened their requirements for leases since the 2008 crash. Anything around 75 years or less is considered to be short and the lender may not lend (particularly for buy to let) or the valuation may be affected.

Clearly a long lease is worth more. We can assist in advising on the possible routes to extent (formally or informally) as part of the conveyancing process and the possible premium payable to the landlord and additional costs involved.

If the block is a share of freehold there is a good chance that the lease can be extended without a premium – we do a lot of work in the share of freehold sector and can assist in asking the right conveyancing questions.

Absent Landlord

As part of the process we can find out simply who owns the freehold by looking at the title. However for the active management of the building the freeholder should be active and not absent.

Management

We need to look at the management structure in the lease and consider if this is reflected in actual practice. Sometimes it is not but this is not often a bad thing, for example, the freeholder may decide to insure the whole block under a single block policy rather then rely on tenants to insure their own flats (with the contingent insurance risk).

In addition we expect to be able to provide you with past service charge accounts and confirmation that there are no major or expensive works in the pipeline – this means specific enquiries need to be obtained from both the seller but more importnantly the landlord or management company running the block.

Any arrears of service charge also need to be investigated and clears (as mentioned above this would otherwise pass to you to pay).

Building Insurance

This needs to be checked so you can see if you need to insure you own flat or whether it is covered under a block policy which is acceptable to your lender. Sometime very high excesses due to past claims can cause problems.

Is there a Share of Freehold or Management Company?

Leases can contain a Management Company as part of their structure. This can give you a share and a vote in the way that the management is run. This share will need to be transferred to you.

On top of what some blocks have the additional benefit of a share of freehold. Again this share can be passed to you. Sometimes the share of freehold is owned by individuals so again additional steps need to be taken to ensure you obtain this valuable asset.

Restrictive covenants

Often the lease may contain a number of covenants including restricting the type of flooring, pets and underletting (which letting out the flat on a assured shorthold tenancy).

These may affect you and if too restrictive, especially in relating to underletting, may affect the value of the flat.

Alterations

As noted above there may be specific prohibitions on some types of alterations such as wooden flooring.

Further generally most leases contain prohibitions on internal alterations to the flat (this may be structural or non structural) without the Landlord’s consent. We advise many landlords in this regard. We need to see consents for past works and if you tell us about your specific plans for the property we can help advise on obtaining consent for the works.

Some alterations involve more complex issues relating to ownership of the space below and above the flats particularly loft conversions and basements.

Next Steps

We can provide an instant quote for conveyancing matters via our website or you can call or email me to obtain further details of our service mbs@ker.co.uk or 01708 757575

4 comments on “Leasehold Conveyancing Lawyers London

Reply

I am thinking of buying a leasehold flat with freehold share. The lease however is 75 years but the estate agent says it does not matter because of the share of freehold. I am concerned as this is my first purchase. What is your advice

    Mark Sadler Post author
    Reply

    The length of the lease is becoming more important to lenders and for reasons explained in other articles owning a share of freehold does not equate to a lease extension for free in every circumstance. The risk free approach is to ask the seller to extend the lease as part of the purchase but you need to assess this risk with the other circumstances of the sale i.e. is there another buyer waiting in the wings or is there a reason (which will not be a long term problem e.g. a lack of agreement between the freeholders) why this is cannot happen at the moment.

    Also it is better to ask for this from day 1 of the transaction rather than raising at the last minute because of course it will cause delays.

Reply

I am buying a flat with a 78 year lease is this too short to mortgage – my broker says he can get a mortgage for me but I am worried about resale or remortgage as the mortgage is only for 2 years fixed

    Mark Sadler Post author
    Reply

    It is not clear from your enquiry whether you are buying to live in the property or you are buying to let.

    The requirements for lending tends to be more restrictive for buy to lets and this is true of the remaining lease term. Some lenders in this sector are looking for 85 years unexpired so the options to remortgage in 2 years may well be more restricted. The owner occupied mortgage market seems at present less restrictive but your broker will be in the best position to advise you. The best rates may well be restricted to lenders who want a longer lease.

    Bear in mind however that lenders requirements change over time and the trend in recent years is to restrict or place more barriers on lending. Any buyer would be in the same position as you are now.

    The position is not insurmountable as of course you can take steps at the point of purchase to establish if the lease can be extended now and or whether the seller can start the statutory leasehold extension process.

    You should be looking at this cost in any event as part of the conveyancing process. There are changes afoot in this sector as the government are consulting in making lease extensions easier faster and cheaper but it is not clear at the present time how much impact this will make for tenants in monetary terms.

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