10 insider tips for preparing a leasehold property for sale


Wednesday 14th of March 2012 09:25:39 PM

1. Inevitably if you are marketing your property you would have an Home Information Pack provider in place who would be generating certain legal documentation in readiness for your sale. It is probably as important for you to note that this Home Information Pack does not contain a comprehensive set of legal documents for your sale, it only contains some. The most important documents that are missing from the Home Information Pack for a leasehold property relate to the management of the building which your property forms part of.

We strongly recommend that you appoint your conveyancers as soon as you put your property on market and request that they start collating all the management information and relevant documentation for the sale of the property without charging you until such time as the buyer is found. Many landlords or management companies charge up to £400 for supplying management information for your property but a lot of this can be obtained directly. You can save yourself a considerable amount of money by making sure that you have an up-to-date insurance schedule and policy relating to the building, up-to-date service charge accounts (you will need to have the last three years’ accounts available), details of any future works, details of any rules or regulations in place by the managing agent or freeholder, a clear ground rent and service charge receipt. Speak to the conveyancers that will be representing you on the sale and ask them if they have a standard questionnaire that they would like you to arrange for the freeholder to complete. Often by obtaining this information directly as opposed to the solicitor asking for this information the freeholder or managing agent may be slightly less inclined to charge you such high fees.

2. Consider whether or not you have carried out any alterations to the property which may have required the freeholder's consent. In particular, have you put down wood flooring at the property? If so, on the basis that you have a share of the freehold or you have a good relationship with the landlord and you are confident that the landlord or clear freeholders would not object to such works, you should obtain a letter from them consenting to the wood flooring or the alterations. Obtaining this consent prior to finding a buyer will save a significant amount of time. Make sure you speak to a conveyancer before embarking on this course of action though.

3. You may recall having needed the freeholder's consent when you purchased the property. You may have needed to supply references and to obtain the freeholder's consent to purchase the property. If you know that the freeholder's consent to a sale is required please ensure that the agents are aware of this when you are close to accepting an offer from the buyer. You should ask the agents to make sure that the buyer puts in hand obtaining references from their bank as well as a professional reference. This will save delaying the transaction later on. The reference from the bank should confirm that the buyer is able to meet the annual service charge. Please make sure that the reference from the bank quotes the annual service charge. You will need to give this figure to the agent who will in turn need to pass it on to the buyer.

4. Make sure that any disputes you have had with your current freeholder or managing agents are resolved before you market the property. Many buyers and indeed buyers’ solicitors become very nervous about purchasing a property where there is an ongoing dispute with the landlord or managing agent. The fact remains that, come what may, you will have to pay off any arrears or resolve the dispute prior to the purchaser completing the purchase of the property. In the circumstances given the inevitable conclusion, it is preferable to have any disputes tidied up prior to contract papers being issued to the buyer’s lawyer. Please note that you will still have to reveal the dispute to the buyer but at least you can say that it has been resolved.

5. Get used to the fact that you may have to agree a retention of several hundred pounds. Please note that in many cases service charge is collected in advance with the managing agents or landlord reserving the right under the terms of the lease to levy an excess service charge once the accounts are finalised. Therefore, it is very common in leasehold property sales for the buyer’s solicitors to insist on a retention pending finalisation of any service charge accounts. This often becomes a last minute bone of contention between sellers and buyers. In a market which currently favours buyers it is not worth losing the sale over a retention. Please remember that by agreeing a retention you are not giving up the money. The money is simply held in an escrow account such time as the accounts are finalised. The solicitor should, following completion, chase the managing agents and landlord to enquire as to whether or not the accounts are finalised and once the accounts are finalised either part of the monies will be released to the buyer or it will be released back to you (depending on the provisions within the contract).

6. If you have a share in the freehold company please make sure that you find the original share certificate. Obtaining duplicate share certificates can be a lengthy process and delay the transaction. If you need to obtain a duplicate certificate it makes sense to apply or it prior to you finding a purchaser as opposed to delaying the conveyancing transaction.

7. Just because you have share of the freehold does not mean to say that you should be not concerned about having less than 60 years remaining on your lease. Please note that a buyer’s lawyer and in particular any buyer’s mortgagee ( Lender ) will not want to proceed to lend on a property where the lease (please note your leasehold interest is where the significant value is on your property) has less than 60 years to run. Many conveyancers are concerned with leases with less than 75 years to run. The bank or building society and borrower will not be attaching a value to the freehold but rather the leasehold interest in your property. It is therefore important that even if you own a share of the freehold the lease is extended to at least 80 years. If you have a share of freehold it makes sense to extend the lease to 999 years as soon as possible.

8. If you have no intention of using your previous solicitor when it comes to selling your property you should still consider asking them to retrieve your file out of storage. This is because when you come to sell your property you may find that, even if you or your Lender hold the deeds, that they are not comprehensive and that some documents are left on your original file. Some solicitors take over a week to obtain old files out of storage. Many solicitors do not charge you for taking a file out of storage, and in such circumstances there is no downside in asking your solicitor that acted on the transaction to retrieve the file. Please make sure that you check the original Terms and Conditions that you signed to see whether or not they are entitled to levy a charge. If the original Terms and Conditions do not make any mention of the firm being able to charge for retrieving their file then they are not entitled to charge you (even if their new Terms and Conditions do make mention of a charge). Please note that many firms will destroy a file after 6 years. It is a good idea for you to write to your lawyers and specifically ask them not to destroy your file and send it to you instead.

9. If the property has a balcony or roof terrace please speak to the conveyancer you wish to instruct prior to finding a buyer as to whether or not the balcony or roof terrace is recognised as part of the lease or whether or not you have rights to use it. If there are no such rights or if it does not belong to the property then you can at least discuss with your conveyancer the options available to you to either rectify the situation or to provide indemnity insurance. Having a solution in place ready made for your buyer will hopefully smooth the transaction once a buyer is found.

10. If you are selling a mixed residential/commercial unit sometimes known as alive/work unit please ensure that you have planning documentation evidencing the percentage use of the commercial space. This is likely to be the fist question asked by a prospective buyer as lenders have specific requirements. One tends to find that most lenders do not like to lend on a property where more than 30% of the space is allocated by the Planning Authority for commercial use.