The next instalment in our FAQ series sees us advise a homebuyer who is in the process of buying a leasehold property, and has been surprised by unexpected costs.
Q: I am buying a leasehold property and understand that there are additional charges payable that were not on my initial quote. Is this correct and why is this?
A: Leasehold transactions often incur fees that are payable to the management company/landlord and your solicitor should have advised you of this. The fees that are payable are often unknown at the time that you would have received your initial quote as the fees come to light once contact is made with the management company later on in the transaction.
When you buy a leasehold property it is likely that you will have to serve notice on the landlord/management company on completion to confirm that you have purchased the property and/or mortgaged the property. There is nearly always a fee for this and the fee varies between management companies. There may also be other fees payable such a deed of covenant fee. Upon receipt of the management company information pack from the seller’s solicitors, your legal adviser should explain the fees to you.
If ground rent and/or service charges are payable, then these are often apportioned on completion between you and the seller so you may pay back to the seller any monies which they paid but relates to a period of time after you have purchased.
Buying a Leasehold Property: The Costs
When you purchase a leasehold property, you won’t own the land it is on or building it is in. This means that you won’t be responsible for maintaining or running it.
This means that the landlord, or freeholder, will either do this themselves or appoint a managing agent. The cost of this, however, is usually shared by the leaseholders. In addition to this, leaseholders may also be asked to pay into a ‘sinking fund’ in order to cover any unexpected maintenance work that may be needed in the future.
These service charges will vary from property to property and will cover things like upkeep of communal gardens, payment of electricity bills for communal areas, and repair of exterior walls. It’s important to make sure that you are aware of the service charges payable before you make an offer on a property as they can impact on its affordability.
Challenging Service Charges
When you buy a leasehold property, you will have rights that stop the landlord from taking advantage of you financially.
To ensure that service charges are fair, you can ask to see:
- A summary of what charges are being spent on
- How they were calculated
- Supporting paperwork, such as receipts
The landlord must also consult leaseholders:
- About building work that will cost more than £250
- Before doing work that will lasting over a year
- Before doing any work that will cost you more than £100 a year
If you are unhappy with your landlord’s charges and want to challenge them, you can do this through a Leasehold Valuation Tribunal (LVT).
LVTs can settle most financial disputes and may also be able to sort out disagreements about the quality of services provided. However, an LVT can't usually force the freeholder to refund any money you have already paid or order them to pay your legal costs. If you have problems like these you may need to go to court.
As LVTs are a type of legal hearing, it is always worth getting professional advice before you start. Howells Solicitors has a wealth of experience in all issues relating to leasehold properties and can help you ensure your voice gets heard.
Call us today on 0808 173 2773 for more information.