On completion of the Conveyancing for the purchase of a flat, as leaseholder a buyer will take on the legal liability for all maintenance/service charge and ground rent payable for the flat even if amounts become due relating to periods prior to the buyer’s ownership.
A buyer's Conveyancer will ask the sellers' Conveyancing Solicitors to ensure that all amounts known to be outstanding on the completion date are settled on completion of the sale. Difficulties can sometimes arise when invoices are sent to the purchase later relating to periods prior to the purchaser’s ownership. Service charges are generally collected in advance and therefore there is often a financial reconciliation at the end of the accounting year. The buyer will have to settle the amounts demanded and will then have to decide whether to try and recover the sum from the previous owner.
A purchaser of a residential leasehold property has several options which should be discussed with his or her conveyancer :-
- Do nothing, after all the purchaser will be the one receiving the benefit of the works carried out. If further money is demanded the purchase may be prepared to pay for any excess. Or
- The Sellers conveyancing lawyer could be asked to hold back a sum of money, usually in the region of £300, on completion pending the end of year service charge accounts being finalised. If there is a shortfall which is due for the Seller’s period of ownership, it should be either partially or totally covered by the sum retained. This is known as a retention. If there is no shortfall the seller would get the money back. Please note that many conveyancing forms charge for the additional work involved in administering a retention after completion. Or
- The purchaser could ask the Seller for an allowance from the purchase price of a fixed sum which the purchaser would receive on completion. This would be a final settlement between the buyer and the Seller. The conveyancing lawyers would reflect the agreement in the conveyancing contract.
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