Leasehold Properties – The Related Costs – What You Need To Know
Purchasing a flat can be appealing to many. You may be a first-time buyer, looking for a buy to let property, or perhaps looking to downsize. However, the costs in respect of a Leasehold property are not widely known, particularly if you have not owned a leasehold property previously.
Unfortunately, Management Companies, Managing Agents, Residents Associations, and all of their related leasehold costs, are not regulated, meaning that these can vary drastically. Below are some of the charges that you may come across when purchasing a leasehold property :
- Ground Rent - this is the rent charged to you by the Landlord for your property being situated on their land. This can vary from a couple of pounds to hundreds of pounds. A Lease will also usually also have provision for periodical increase in ground rent.
- Service Charges - these are the fees charged in respect of maintenance and upkeep of communal areas and facilities. Again, these can vary widely, depending on what is actually maintained and how much involvement the Company has, as well as the costs charged. These costs should be split proportionately between all properties who have the benefit of the maintenance (for example, if there are 20 flats, then the share would likely be 1/20th, however on occasion this can be charged on the basis of the size of the properties also).
- Insurance - leasehold properties usually have their buildings insurance as a block policy. This can be collected as part of the service charges, but can also be charged independently.
- Certificate of Compliance Fee - with Leasehold properties, there is usually a restriction on the Title preventing any changes to ownership without a certificate being provided by the Management Company/Freeholder, which will confirm that the terms of the Lease have been complied with. The requirements could be the serving of a notice, becoming a member of the Management Company or entering into a Deed of Covenant (all as mentioned below). There will usually be a fee for the provision of this certificate and usually ranges from £50.00-£200.00.
- Notice Fees - it is a requirement in most Leases that when the property changes hands, a notice is served upon the Landlord to confirm the new owner's details. This inevitably comes with an administration fee. This is usually in the region of £50.00-£100.00.
- Deed of Covenant Fee - it can be a common requirement for a new owner to have to enter into this document, which confirms that you will abide by all the terms of the Lease. There is usually a fee for the approval of the draft Deed of Covenant which can be between £100.00 and £200.00. You may also be charged a fee for the preparation of this if one is not provided (for example, our legal fee for the preparation of a Deed of Covenant is £95.00 plus VAT).
- Fees related to becoming a member of the Management Company - if there is a Management Company, you may be asked to become a member, by completing a form and paying an administration fee for the updating of the Company records. You may also be asked to pay a fee for the issuing of a new Share Certificate to confirm your membership.
When you come to sell the property, there will also inevitably also be a charge for the provision of a Leasehold Information Pack (also known as a Management Pack or LPE1 replies). The cost of such an information pack again can fluctuate but is usually in the region of £200.00-£300.00.
If information needs to be obtained from or supplied to different Companies (for example, were Ground Rent is collected by the Freeholder and Service Charge is collected by the Management Company), there will undoubtedly be a duplication of charges due.
Please be aware that this list is not exhaustive and there may also be other costs payable. This is just a summary of the main charges that we experience on a daily basis.
For further advice and assistance then please contact:
Victoria Faulkner - Chartered Legal Executive