For some people, a leasehold property is much more desirable than a freehold. It may be due to budget, lifestyle choices, convenience, a city centre location or just the property that appeals to you when searching. Whilst they can be advantageous to some, leasehold properties need carefully scrutinising before you commit to buying the property, therefore it is important to arrange good conveyancing solicitors in Liverpool to help guide you through the process.
When approaching your conveyancer, you should obtain an initial quote which outlines all legal fees, supplements and disbursements you will be expected to pay for the full conveyancing process. Conveyancers can give you a good idea of these fees, however there are some property specific costs that cannot be accounted for. For example, certain fees are set at a fixed rate by the third party. So, for Stamp duty, this is set at a percentage rate of the purchase price dependent on your circumstances and there are clear criteria on what this rate should be, therefore providing your circumstances or property price don’t change as you proceed through the transaction, this figure should remain the same. The same with Land Registration fees, this follows a set fee scale and so is unlikely to change. However, with properties such as leaseholds or new builds, there can be fees written into a contract or lease which fall outside the scope of your conveyancing quote. The reason for this is that they vary between property to property and not all fees are applicable to all properties, so they cannot be predicted at the point of quoting. These fees are often only revealed after a conveyancer completes their initial enquiries and produces your report on title. For some, if you were not expecting these, it can come as a shock.
With leasehold properties, some of the common leasehold fees seen include:
Leasehold Information Pack – This is also known as a Management Company Pack. The pack includes information from the Freeholder of the building about ground rent, service charge, proposed remedial works to the building, budgets and accounts. There is usually an administrative cost associated with this that the freeholder or management company will charge to produce the pack. A buyer’s conveyancer will require the pack and the cost of which is usually covered by the seller. It is important to note as when you come to sell the property, you will also have to cover this cost for your buyer.
Notice Fees – Some leases have specific provisions written into them which require an incoming property owner to notify the freeholder/management company of their new ownership. In some cases, this is the same for an incoming mortgage lender, including if you were to re-mortgage part way through ownership of the property. There is often an administrative charge which is passed to you by your mortgage lender.
Service Charge & Ground Rent Apportionments – In most cases, ground rent and service charge budgets are managed annually, with contribution collections at set intervals in the year. As an incoming owner, if you take over ownership of the property part way through the year, then you may need to pay a proportion of the ground rent and/ or service charge to the seller or directly to the management company for your portion of the year. These amounts can vary as some properties have a very low ground rent (peppercorn), whereas some are higher. In addition, service charge budgets can vary year on year depending on remedial works and arrears in the previous year.
Insurance Contribution – In most cases, it is the responsibility of the freeholder or management company to arrange block insurance for the building, however the cost is passed to the leaseholders. This cost usually forms part of the service charge.