Forward
Our
business attaches a high value to training and as such we actively encourage
all of our junior staff to compile articles on subjects which are of interest
and which contain elements which will be of interest to consumers.
In
the first of these articles which forms part of our current training programme
running for the next two months involving leasehold Kris has chosen a topic
dear to any one which has purchased a leasehold property in the past.
The article focuses on the hidden costs of purchasing
a leasehold flat or house and of the efforts being made to bring about the long
overdue changes needed to ensure this sector of the housing market is
adequately regulated.
Kris
would welcome your feedback and can be contacted at KristianN@mjpconveyancing.com
David
Pett Director
5/3/2014
Kris
writes:
As
conveyancing business with over 100 live leasehold transactions at any point in
time, a major conflict which we attempt to placate and pacify on a daily basis
is the freeholder versus leaseholder battle of power.
We
act as a bearer of bad news for both buyers and sellers alike. Buyers often lambaste the service charge budget as a ‘hidden cost’ before they've even made
it over the proverbial threshold, whereas sellers grumble at the expense and
length of time it takes the autocracy like institution that is their management
company to produce a standard sales pack.
As
a neutral in the on-going saga, I have always felt that it is the freeholder
who dictates the balance of power. The seller is unable to sell without the
freeholder’s intervention and likewise, the buyer is unable to register their
purchase without seeking the infamous ‘certificate of compliance’ from the management
company. However, much like the Boston Tea Party signified the beginning of a
turning of the tide in the American War of Independence, it appears that the
Office of Fair Trading have sparked a similarly rebellious (but considerably
drier) attitude among leaseholders.
Times are changing
The
Office of Fair Trading (OFT) will fully investigate the love-hate relationship
at the centre of the leasehold property market and has pledged to issue a
report by the end of 2014. In particular, the OFT will seek to identify:
1. Whether managing agents and freeholders have the same
interests as leaseholders in, for instance, keeping down costs for maintenance
work or building insurance;
2. Whether leaseholders have adequate interest on decisions
taken by freeholders on the appointment of managing agents and the supply of
residential property management services;
3. Whether there is true competition between property
managers;
4. Whether the choice of contractors and services to
leasehold properties may be unfairly influenced by links with associated
companies;
Rachel
Merelie, Senior Responsible Officer for the investigation comments that
“Service charges for the maintenance of a building can be substantial and we
want to make sure that leaseholders are getting a fair deal”.
Monopoly
In
my opinion, the current market is far too slanted in favour of the freeholder
and whether leaseholders do get a ‘fair deal’ is largely dependent upon chance.
As responsible conveyancers, it is our duty to alert any potential leasehold
purchaser of the added (and often unexpected) costs that they will be liable
for throughout the entire term of their ownership. Does the building require a
new lift? Yes – then as a leaseholder you will be expected to pay for this.
What about landscape gardening? – check, decoration of the lobby? – check,
tropical fish for the aquarium? – check.
A competent conveyancer should flag up the service charge budget in the
management pack for you to study in depth, and the decision about whether this
is fair and reasonable should be made well before, returning to our cliché, you
‘cross the threshold’.
The
same should be said of selling a leasehold property.
A
complaint we often find levied upon freeholders is that leaseholders are not
made aware of the substantial (almost always triple figure) costs and
turnaround times involved in obtaining a leasehold management pack – the notorious
skeleton key when it comes to selling a leasehold property.
Relying
on best practices we always seek to obtain this figure for prospective purchasers
prior to completing their transaction so that, in years to come when they
decide to sell the property, they do not find themselves burdened with this
unexpected and untimely cost.
Again, this serves as a further example of when
you should push your conveyancer to seek all the information on your behalf
rather than neglect due diligence in favour of a quick completion.
Advantages amongst the autocracy
Buying
a leasehold property should not be considered a completely wasted investment
however:
1. There are clearly defined rules in place which will
prevent neighbours devaluing your property;
2. If you are ‘time-poor’, it makes perfect sense for
somebody else to address maintenance issues on your behalf;
3. There is a clear agreement upon what proportion you are
to pay if urgent remedial work is necessary on the building;
4. Statutory protection for leaseholders does exist;
5. Historically, leasehold properties are marginally cheaper
than their freehold equivalent.
At MJP, we utilize an online case management system called Quick Conveyance that puts all those ‘need to know’ facts figures
into one place at your fingertips for you to consider and weigh up prior to buying your leasehold
property. We make sure the lease, the management pack and all leasehold
enquiries are made available to you online in PDF format so that the only time
you are truly ‘in the dark’ with your leasehold purchase is when you turn the
lights off to settle down for your first night’s sleep post-completion.
For a competitive quote, please call our
New Business Team, available 24/7 at www.mjpconveyancing.com .
By Kristian Nelson, Trainee Solicitor at MJP Conveyancing
