Leasehold Conveyancing Explained - Paying off Arrears of Ground Rent and Service Charges

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.