Hidden Costs in Leasehold transactions

Whether you are buying or selling leasehold property, there will very often be hidden costs that you were not anticipating at the start of the transaction. A solicitor will not be able to anticipate these costs either, until they are informed of them by the relevant third party such as the Landlord or Management Company.

When you are purchasing a leasehold property, the Landlord or Management Company (or maybe even both!) will more often than not have post-completion requirements of you and your solicitor, and their fees for dealing with these requirements can often be hundreds of pounds. There will usually be a fee charged for receipting the notices given to them to advise them that you are the new owner, as well as receipting or countersigning any deeds they have asked you to sign.

On top of these post completion fees, you also need to budget for the service charges that you may need to pay up front, even if they are usually charged on a monthly basis. Usually the Landlord or Management Company will require the seller of the property to clear any outstanding charges that have been invoiced for already, all the way up to the end of the accounting year. This means the seller may have paid for many months’ worth of charges, for which they will no longer own the property and you will be required to reimburse them for these charges upfront on completion. This again could be a significant cost that you as a buyer would need to consider and budget for.

When you come to sell, you will need to provide the Buyer with a management information pack (which is commonly known as the LPE1) which will contain information regarding the Building, charges and post-completion requirements. This will be a fixed fee determined by the Landlord or the Management Company and will typically be in the region of £250-£750.

A second LPE1 may also be needed where the Landlord is responsible for collecting ground rent and the Management Company is separately responsible for collection of service charges.

Your lease may also stipulate that the Landlord’s formal consent is required upon a sale of the property. If so, you will be responsible for the Landlord’s legal costs in providing their consent and the required documents that all parties will need to complete and sign.

With both sides of the coin, a Buyer or Seller can be blindsided by these costs and will have no choice but to bite the bullet to ensure a successful sale or purchase. It is important to ensure that you try to prepare for these hidden costs as early as you can by seeking as much up front information as possible from your agent or solicitor. You can also find a lot of information online and websites such as the Leasehold Advisory Service provide a lot of guidance for Sellers and Buyers of leasehold properties.