Where you are selling a residential leasehold property you will be asked to settle all service charge and ground rent arrears prior to completion of your sale or your conveyancing lawyer will be asked to give an Undertaking ( a legally binding promise ) to pay the outstanding amount on completion of the conveyancing transaction. Any apportionment of ground rent or service charge is calculated and agreed between the two conveyancing solicitors or property lawyer s prior to the completion date . Managing agent and landlords will not give consents, deeds of covenant or register sales if arrears are not cleared.
Many sellers are surprised when they are told that although they may have paid all arrears due at the time of sale there could still be a debt due afterwards. This is because if there is a shortfall for the fiscal year during which you owned the property but the sum is not finalised until the accounts for the block are issued some months later. The usual way to allow for such debts is for your conveyancing solicitor or property lawyer to agree with the purchaser’s conveyancer to hold back a small amount of money from the sale proceeds which will be passed on when the actual amount of the debt is known. The technical term for this sum held in escrow is called “a retention”. The conveyancing contract should specify the sum and how long the sum is to be held for.