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Selling or buying a leasehold house or apartment? Beware - further charges may apply

Napthens - March 28th 2017

Whether you are buying, selling or currently own a leasehold property, there may be a number of additional charges that apply.  Details of these charges will be set out in the lease.  The lease will also specify who to make any payments to, for example, to landlords, managing agents or management companies.  There can be a number of different companies/organisations named on the lease.  The roles and responsibilities of these different parties will be explained to you by your lawyer when your transaction is underway.

There are 3 types of charges which may be payable under the terms of the lease:

  1. Ground rent
  2. Service charges
  3. Administration charges

Ground rent

The lease may require you to pay ground rent on a yearly basis.  It is important to check the lease carefully, as although some leases state this payment is a fixed sum throughout the term of the lease, many leases include provisions for the rent to be increased over a certain period of time e.g. every 25 years.  If you are not sure how this will be calculated, discuss this further with your lawyer prior to proceeding.

Service charges

Service charges are payments made in relation to the upkeep of common areas such as hallways, lifts, garden areas and often the roof and external aspects of the building.  The lease will set out how these payments are calculated and it is important that these are quantifiable.  You need to ensure you will pay a fair and reasonable proportion of the service charge compared to other leaseholders within the building or on the estate.

Prior to purchasing the property, a question will be raised regarding whether there are any plans for major works to be undertaken to the property over the next 5 years.  As an incoming leaseholder, you will then potentially be responsible for additional charges of this nature.  It is important you are aware of these in order to budget accordingly and not receive any nasty surprises after your purchase has taken place.

Administration charges

The lease may also allow the landlord or managing agent to charge administration fees for the provision of certain services.  So for example, if you are selling a leasehold property you may need replies to a form known as Leasehold Property Enquiries.  A reasonable fee is allowed to be charged, but this sum does differ considerably depending upon the party involved and also the location of the property.  This type of charge may also be made for obtaining consent required under the terms of the lease, for example, changing its use, installing certain types of flooring, extending or altering the property, letting the property out or even the type of pet which is able to reside at the property.

As well as discussing these types of charges during the conveyancing transaction, please feel free to contact us if you would like us to review your existing lease, as you may require clarification on the provisions based on your own personal circumstances.