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      Purchasing a New Build Property

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      Purchasing a New Build Property

      If you wish to buy a property under construction or be the  first occupier of a recently built or converted property then there are different considerations from the purchase of a second hand property.  The seller should offer background documents and information because standard enquiries  will not deal with all the issues likely to be relevant. Also it may be advisable for the developers or builders to be asked to provide warranties in the contract to protect against some of the possible issues that could arise once you occupy and use the property.

      Where the Consumer Code for Home Builders applies then it provides requirements for builders and gives some assurances for buyers.

      Builders

      1. We will need to establish that the building and any development of which it forms part has been constructed and complies with all terms of any planning permission; and has been constructed to final completion to the satisfaction of the Building Inspector under Building Regulations.
      2. There may be ongoing planning obligations and costs that need to be clarified especially if charges have not yet been paid. (s106 obligations under a Planning Agreement). The developer may also have a liability to pay a Community Infrastructure Levy (CIL).
      3. The property may benefit from a new house warranty or certificate where completed to standards agreed with a home warranty provider. NHBC is the most well-known, but there are other warranties that may be available.  This will give insurance backed protection from major defects for 10 years and with limitations, for other matters for up to two years after the completion of the development.
      4. Where property has not yet been constructed then the contract will detail the size and specification of the property and suggest allowances for deviation in measurements of the finished building – sometimes with a price adjustment.
      5. In some cases you may be invited to engage with the builder in deciding the final finishes, the level of those finishes and type of finishes or in the final decorations.
      6. Boundaries and plots should be checked on site and compared with any plans.
      7. There will need to be rights for access to be to go to and from the property through private roads or other parts of an estate or building that is in multiple occupation. There may also be loading and parking restrictions or other access arrangements.
      8. Roads, open areas and parking will be of importance. There may be estate roads, and the right of use will need to be unrestricted.  Searches will be made to establish whether roads are adopted by the public authority for maintenance at public expense.  In some cases roadways are intended to remain private and maintenance costs are then a matter for frontagers to bear.
      9. There may be parking arrangements specified for general visitors or in relation to a particular parking space.  Estate regulations may be imposed for these and other matters.
      10. Additional enquiries should be made where the property is being built in a flood zone or in an area which has been shown by environmental searches to have been (potentially) contaminated land.
      11. The completion of the property, if it has taken place, should have been authorised by an independent surveyor (such as NHBC) and if completion has not yet taken place then arrangements to ensure that all snagging or incomplete works receive attention will be needed.
      12. Even when there is an agreed snagging list, you may find that problems arise during the first seasons of occupation. Serious matters may be covered by a third party warranty, but other issues such as shrinkage may require repair or redecoration and so the obligation to repair these should be sought from the builder or developer.  This may not be forthcoming.

      Surveyor

      1. In all cases, you are advised to appoint your own surveyor to inspect the property and report to you. It is important for you to know that all services are fully connected and boiler and other appliances are commissioned and tested.  There will have been no prior occupier and so testing of appliances is advised.
      2. The availability and connection of all utilities and other services such as broadband will be a matter of importance. You may need to make contact with all relevant utilities to ensure they are willing to connect and to ascertain any fee payable.
      3. Completion dates are often open-ended where the date of completing building work is not known. This will be of importance to you if you are coinciding a sale of an existing property.

      Deposit

      1. It is quite usual for builders to ask for a deposit to be released to them in advance of completion. That is not the standard position and we do not advise you to accept it.  Once a deposit has been released to a builder or developer then, if the building is not completed, the deposit will be irrecoverable in the event of liquidation or bankruptcy.  The standard position on a sale is that the deposit is held by an independent stakeholder and is not released until completion.

      Mortgages

      1. For most lenders for a property to qualify for a mortgage, it will need to meet certain standards and provide specified minimum facilities. For example, certain forms of construction or building materials are not acceptable and there are restrictions on the height of flats.
      2. For leasehold property, lenders will also generally require a specific provision to enable leaseholders to enforce the obligations of other tenants contained in other tenant’s leases.
      3. Incentives – New homes are often sold with discount packages which may be cash backs or allowances for contents and appliances. These must be reported to us and to any lender in full where the buyer is proposing to obtain a mortgage loan.
      4. Insurance of the property will be important and will vary in each case as to when the risk passes to the buyer. Normally, the risk will not pass to the buyer until completion and you will need to be ready to place the buildings on cover.  We will tell you if the position is different in your transaction.

      Estate

      1. If the building is on an estate there are often terms covenants and rules that restrict future development, alterations or use of the property. These may affect your plans to alter the property or change the layout of a flat or its gardens, or external appearance -affecting doors and windows.
      2. The transfer or lease signed by you may contain restrictions to bind future buyers of the property. This is in order to ensure that the estate is effectively regulated and managed so that rules and obligations remain enforceable.

      Jointly Owned Property

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      Jointly Owned Property

      This note covers important points that arise when any property is bought by more than one person.

      We explain

      • two methods of owning property jointly
      • why you should record your decision on paper or in a suitable legal agreement

      If you buy any property e.g. house or flat, jointly with somebody else, such as a Husband/Wife, a (Civil) partner, friend or a relative, it is IMPORTANT that you agree with your co-owner(s) on:

      • who is to inherit the property if an owner dies;
      • the contribution that each person will make to the price;
      • the contribution that each person will make to any future running expenses, including mortgage repayments;
      • the split of the net proceeds between the co-owners when the property is sold and how the value of any improvements is to be dealt with

      You should record your agreement in writing.  The arrangement can usually be altered at a later time by agreement between all the joint owners.  Similar rules apply to joint bank accounts or joint purchases of items such as cars, furniture, computer and TV equipment, etc, not just to a house or flat.

      With a written record, you can avoid an unintended outcome in the event of any dispute with your co-owner(s) when you come to dispose of the property, e.g. to sell/buy something else, or on divorce/break-up of a relationship, or on death.

      Why is a written agreement so important?
      A large number of disputes and court cases turn upon the intention of co-owners of the property.  This is particularly relevant where the financial contributions of the named owners are not the same or where somebody contributes to the purchase price or purchase expenses but is not named as an owner on the deeds.

      If a dispute arises which cannot be settled, any Court trying to resolve the matter will review the agreement to see what the parties agreed at the time of purchase.

      Different presumptions are made by a court in the case of different types of property and different types of relationship.  So business partnerships may be treated differently from domestic arrangements concerning the matrimonial home.

      Which method of Ownership?

      Below are two ways of holding property owned by more than one person  – you should decide on the type of ownership suitable for you.

      Method 1: Beneficial Joint Tenants

      No single owner on their own has a defined share of the property; every person named on the title owns the property jointly.  This means that on the death of any owner, the ownership of the whole property  automatically passes to the survivor(s)This will happen despite any provision to the contrary the deceased owner has included in a Will, or under the Rules of Intestacy.

      This is a typical arrangement with married couples/civil partners or partners in a permanent relationship, who want the property to pass automatically to the survivor.

      You cannot transfer your “share” of the ownership separately from the other joint owner(s).  If you try to do so, you might in some circumstances convert the joint ownership into a ‘tenancy in common’ (see below).

      If you intend to convert the ownership to a tenancy in common, we can help you to do this.   It involves giving written notice to any other joint owner(s) and is called “severance”.

      Method 2: Tenants in Common

      Each owner has a specific share; this can be equal or unequal.  The shares are usually stated as a percentage or as a proportion of the whole.

      Each person’s share should be agreed and recorded.  This may be in the Transfer deed or Lease, e.g. “as tenants in common in equal shares” or “as to one third to X and two thirds to Y”, or in a separate trust deed.

      If asked (and sometimes automatically) the Land Registry will place a note on the Property Register of the title. This is called a Restriction.  In that case, neither a single owner nor a sole survivor alone can deal with the property.

      If you choose to be tenants in common, we strongly recommend that you complete a Declaration setting out the proportion in which you own the property and what the shares will be if the property is sold. We can help to prepare an express declaration which will be conclusive as to the interests of the tenants in common.

      Please remember you may need to adjust the sharing proportions if there is subsequent capital expenditure on the property, such as for improvements, and the contributions are not the same as the original shares you agreed.  We recommend recording any agreement is in writing.

      Because a tenant in common owns a defined share of the property, it forms part of the Estate of a tenant in common who dies. The share will pass to whoever the deceased chooses if there is a Will. This may include the surviving tenant in common.  If the deceased has no valid Will, the share passes under the rules of intestacy.  It will NOT pass automatically to the survivor.

      Upon the death of a joint owner, because a tenant in common owns a defined share of the property, it forms part of your Estate and will pass to whoever you chose (if you have made a Will), including the survivor or, if you have no valid Will, under the rules of intestacy.  It will NOT pass automatically to the survivor.

      If the tenants in common are not married (or registered civil partners) it is important for each owner to make a Will that deals effectively with what is to happen to their share of the property after their death

       

      If you do not make a Will, the rules of intestacy dictate who will inherit your interest in the property.  

      It is important for you to be aware that, at least for the present, the intestacy rules take no account of unmarried relationships (other than registered civil partnerships.

       

      Without a Will, there may be unintended and irreversible consequences for the surviving owner, e.g. the deceased owner’s share will pass to his/her family and not to the surviving partner.).

      Where land or ‘real’ property is held by more than one person, all the owners will hold the property on trust.  The trust will be what is called a “trust of land.”  Under a trust of land, you may hold the property with others either as joint tenants or as tenants in common (as explained above).

      There are detailed rules that govern trusts of land.  For example, if one of you wants to sell a jointly owned property and the other does not, there are statutory provisions that ultimately allow the Courts to decide what should be done.

      OCCUPIERS

      If you are the sole owner of a property but another adult is living with you (wife, partner, parent, child), the other person may be able to claim a right to occupy and to make other possible claims.  Also, if that other person contributes to the upkeep of the property, (mortgage, household bills, etc) or provides money for, e.g. improvements, or makes some other contribution as a part of a family or other arrangement, he/she may acquire a financial interest in the property or be able to claim a share.

      If that is not your intention, then we can advise you how to deal with the situation.

      Whatever is agreed should, of course, be recorded in writing and kept with us or in another safe place.

      MORTGAGES

      If you intend to allow someone else to live at the property (who is over 17) we need to know.  If you are borrowing money to pay for the property, you MUST inform your lender if you intend to allow ANYONE over the age of 17 to live at the property, otherwise than on a temporary basis and strictly as a guest.

      PLEASE NOTE that this applies whether you are a joint owner or a sole owner.

       

       

      What to do as an Executor of Estate

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      “If I am the executor of someone’s estate, what will I have to do?”

      This  checklist is designed to be a short but useful useful guide through the complexities arising at a difficult time.  The legal procedures are a framework that can support your efforts to deal with many of the questions that remain unanswered once a living soul has departed.

      The Administration of an estate affects people in different ways depending upon the circumstances of the death and the nature of the web of relationships that survive.

      What needs to be done?

      1. Locate the current Will – if the Will does not appoint an executor, or there is no Will, then you may apply for Letters of Administration if you are the next of kin. You need to be sure that you have the most recent Will and that it is valid.
      1. If there is an unoccupied property, secure it, and ensure that all the utilities (gas, electricity and water) are safe; deliveries stopped and if necessary, redirect mail. Check the safety and insurance of important assets e.g. House/flat and contents.
      1. Unless an inquest or post mortem is necessary, register the death within 5 days with the Registrar for the area where the death occurred. The hospital or doctor will be able to provide the address of the Registrar.
      1. Tell family/friends about the death, arrange the funeral in accordance with any known wishes and place obituary notices in local/national press if required.
      1. Find out about the deceased’s assets and liabilities and the date of death value by informing any asset holder (Bank, Insurance Company etc.) and any creditor (Utility companies etc.) and sending a certified copy of the death certificate to them. Obtain professional valuations of any significant property (house/flat, jewellery, stocks and shares, collections etc.)
      1. Stop payment of any salary or pensions; advise the appropriate Passport office, DVLC, TV Licensing, credit and charge cards and act on their directions.
      1. Contact the deceased’s tax office to settle tax affairs up to the date of death. Prepare self-assessment tax returns from the date of death until the end of the administration period.
      1. Inform beneficiaries of their entitlement, giving those entitled to the residue of the estate information regarding the assets and liabilities, and providing a copy of the Will where appropriate.
      1. Check the Inheritance Tax (IHT) position by seeking professional help. This tax is not payable on smaller estates – under £325,000 net, a figure which may be enhanced by gifts to charity, spouse etc and a transferable nil rate band from a deceased spouse.  Executors have personal liability for underpayment and proper enquiries must be undertaken to establish the position concerning dispositions prior to death.
      1. Other than estates where no single asset exceeds £5000, which can be dealt with under the Small Estates Act, probate forms must be prepared. It may also be necessary to prepare an Inland Revenue Account.
       
      1. If necessary, arrange an executor’s loan account with a Bank to pay any IHT that cannot be funded, or paid by instalments.
      1. Submit probate forms to the Probate Registry with appropriate fee for grant and copies.
      1. When the grant is received, send office copy grants to asset holders with withdrawal or encashment forms and instructions, except where an asset is specifically left to a named person/organisation.
      1. Pay the funeral account, unless already paid and any other outstanding bills, including tax. Where considered necessary, insert statutory notices advertising for creditors, allowing 2 months for claims to be notified.
      1. Pay any legacies and transfer any assets left by the Will – whilst you do not have to wait for probate before transferring bequests, you must be sure that the Will is valid and that no one else will claim them. Many assets cannot be collected until a grant is obtained.
      1. Pay any administration expenses and obtain clearance for any IHT, administration income tax or capital gains tax liability.
      1. Having settled any valid claims on the estate, prepare estate accounts and submit them to the residuary beneficiaries. Once approval is obtained, distribute the residue to those entitled.
      1. Provide each residuary beneficiary with a tax deduction certificate ( Form R185) for each year of administration income – this is especially important for charities that can reclaim the tax paid.

      General Comments and handy tips

      Photocopies of death certificates and grant of probates should be certified by a solicitor.

      A grant may not be required for jointly owned assets, which pass to the survivor.

      Keep beneficiaries regularly informed to maintain goodwill.

      The IHT threshold can change in the Budget –see the HMRC website or the Capital Taxes Office have current information.

      This guidance note is produced by Kagan Moss and is intended as a general guide only.  It should not be relied upon for advice in relation to the specific circumstances of an individual case.In case of difficulty, obtain professional help – professional fees are usually expenses of the estate. 

      The legal position is recorded as at the date of publication in January 2019 and is liable to change.

      Looking For Probate solicitors, Teddington?

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      Probate Services Teddington

      Meeting your needs

      When you need help with Wills, Probate and Estate Planning in the Teddington area, you need search no further!  We can arrange to visit if you are housebound or not mobile or fit to travel.

      We can help you create or change your Will. Also, we can assist you with other services, such as arranging a Power of Attorney.

      The partners in our firm are experienced experts in the wide variety of real-life situations that arise. This can help you save time, money and tax.

      The importance of leaving a Will

      If you or any of your family members do not have an up-to-date Will, then how will you guarantee that your last wishes will be honoured after passing away?

      Should you die unexpectedly and without leaving a Will then there is a risk your family members will not be adequately taken care of in the way you would have wished.  That is why you should make it a priority to ensure that you have a secure, up-to-date Will in place. Other arrangements can also be made to ease the transition for those you leave behind by considering all aspects of your estate -there is often more to consider than you might think!

      The alternative situation where there is no effective Will may put a family through stress in dealing with a difficult probate process.  This can make an already challenging period of time even more difficult.

      Estate Planning

      We are available to help you or your family plan for the future. In doing this we can take account of your property and business needs and any potential tax liabilities. We understand that everyone has their own personal situation and will respect your choices and keep your matters confidential.

      Administration

      Where you need advice about acting as an executor, or would like reassurance to work through the administration of an estate our friendly support team is here locally for you. The work can take a while and we can help you save costs by helping you through this on your own.

      Professional probate solicitor

      You don’t need to worry if you don’t understand the probate system. Our friendly team can help to support you and make sure that all the accounts and returns are checked through.

      Services for you

      Our services include:

      • Wills and Codicils
      • Gifts and Inheritance tax planning
      • Probate and estate Administration
      • Trusts and lifetime planning
      • Court of Protection Deputyship
      • Lasting Powers of Attorney
      • Inheritance disputes and contentious probate
      • Intestacy

      We are qualified regulated and insured. Our fees are reasonable and provide good value. We will provide an estimate of likely costs and expenses upfront. Our team have been supporting families in the Teddington area with all aspects of their retirement planning for many years. Feel free to talk to us today. We are here to help!

      How to Extend Your Lease

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      How to extend your Lease of leasehold house or flat under various Acts and regulations – Leasehold Reform Act 1967, 1993 and later.

       

      A specified form of Notice may be served under the Leasehold Reform Act 1993 by a ‘qualifying tenant’ with the right to acquire a new lease of a flat. s42/1993.

       

      A ‘qualifying tenant’ is a tenant of a long lease who has been the owner for the period of two years before the relevant date of notice. s39(3).

       

      The notice may be withdrawn or can be deemed to be withdrawn and then will cease to have effect.  Where there is withdrawal of a s42 notice then no subsequent notice may be given within twelve months of the date of withdrawal.

      This may have consequences where there is a change of tenant or a movement in price. s42(7).

       

      The form and content is important and notice must be addressed to the landlord and any other third party referred to in the tenant’s lease and must:

      • give the full name of the tenant and address of the flat
      • give details of the flat to identify it and details of the lease to identify it
      • specify the premium which the tenant proposes to pay for the grant of a new lease
      • specify any other terms that the tenant wishes to have included
      • state the name of the person who will act
      • give the date by which the landlord must respond by giving counter-notice under s45
      • be signed

       

      In the case of the death of a person who was a qualifying tenant then the personal representatives have the same right within two years of a grant of Probate or letters of Administration.

       

      Where a notice has been given by a tenant the right can be passed to another party by assignment. s43.

       

      If the flat is assigned without the benefit of the notice then the notice is deemed to be withdrawn.

       

      After notice is served
      The landlord must serve a counter-notice by the date specified in the tenant’s notice and either admit the right to the grant of a new lease set out in the notice or indicate that the landlord either wishes to redevelop or has other grounds to oppose.

      In respect of any opposition the landlord should set out a counter-proposal. s45(3).

       

      The landlord has a right to inspect the premises for the purpose of getting a valuation of his interest. s44.

       

      The landlord can require a deposit of 10% of the price set out in the tenant’s notice.

       

      Refer regulation 3(2)

      Schedule 2 of The Leasehold Reform Regulations 1993

       

      An application must be made to the Court not later than two months from the date of the counter-notice if the landlord’s counter-notice does not accept the right of the tenant to apply for a new lease.

       

      Where there is a dispute relating to the terms of a new lease then either the landlord or the tenant may apply to the court within two months of the date of the counter-notice but not later than six months after the date of the counter-notice.

       

      It is vital that this time limit is not overlooked by either party. s48.

       

      Where the tenant’s notice has been given but the landlord fails to give a counter-notice the Court may on the application of the tenant make an order dealing with the proposals in the tenant’s notice.  Similar procedures apply where terms are agreed and the new lease has not been concluded. s49.

       

      The tenant’s notice is deemed to have been withdrawn at the end of the period for application to the Court if no application has been made. s53.

       

      The right to a new lease is for a lease in substitution for the existing lease on payment of a premium at a peppercorn rent for a term expiring ninety years after the term date of the existing lease. s56.

       

      The terms of the new lease will be the same as the existing lease but with modifications as necessary to the circumstances or subject to modification for redevelopment.

       

      Where the interest of either party is subject to a mortgage then the new lease is deemed to be binding and authorised against the mortgagee. s58.

       

      The costs payable by the tenant include the costs of the landlord for dealing with the notice and obtaining a valuation of the flat and the costs of the grant of a new lease. s60.

       

      In addition to the premium, the tenant must pay additional amounts for any intermediate landlords.

      Leasehold Property – Frequently Asked Questions

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      What is a leasehold property?

      As a purchaser of a leasehold flat, it is in your interest to understand the legal nature of the ownership and be clear on your rights and responsibilities.  Leasehold flats can be created in purpose-built blocks, in converted houses/buildings or above commercial/retail premises.  The terms of the lease may be in one core deed and varied by reference to other deeds or leases.  You should read carefully all the relevant deeds to the property you intend to purchase.

       There is quite a bit of jargon used in leases-especially older ones and the words ‘lessor’ and ‘landlord’ are interchangeable as are ‘tenant’ and ‘lessee’.

      What is a lease?

      Simply a contract that grants rights to occupation and use of property for a period of time – the “term” of the lease – in return for a rent that is fixed or variable amount.  The lease is an interest in land granted by a freehold owner or by a landlord with an existing  lease who wishes to grant a sublease of shorter duration than his own lease.  Typically the owner or landlord might grant a lease to another person who develops the property and then lets it for occupation in units that may be for residential or commercial use.

      A residential lease may be for 99, 150 years or longer term and the property, a flat, duplex or maisonette, may be bought and sold during that time so long as the lease permits this.  The term is fixed and so decreases year by year until it expires (unless extended).  The length of the unexpired term of the lease is important to both buyer and any lender.  Most lenders will require in excess of 60 years left to run on a lease – but some lenders permit shorter periods.  The length of the lease has less of an impact on value in certain Central London estate locations. 

      Both the landlord’s interest (the reversion) and the tenant’s term will have a value in the open market and may be transferred subject to the terms of the lease.  When a leasehold flat is sold, the seller transfers (assigns) all rights and responsibilities of the lease to the purchaser, including any future charges which have not yet been identified.

      Leases of longer than 7 years are registrable at the Land Registry, and there are specific requirements as to the format for leases and their plans in order to be registered.

      What’s in a lease?

      The lease of the flat usually relates to everything within the boundaries of the dwelling and may include plaster to walls and ceiling, floorboards and windows – but does not usually include the external or structural walls.  The Landlord usually retains ownership of the structure of the building and the land it stands on and in the lease takes responsibility for maintenance and repair of the building. 

      The lease is a private contract between the Landlord and the Tenant and may include other parties such as a Management Company.  The original tenant retains contractual liability after the lease is passed on although where the asset has a capital value the landlord will initially take up other remedies such as forfeiture (cancellation) against the current tenant rather than revert to the original tenant.

      The lease contains promises by both parties. These will be in relation to insuring, repairing and maintaining the physical premises.  Other terms govern conduct and use of the property and prescribe those situations in which landlord consent may be needed such as making alterations or applications for planning consent.  The terms of a lease can only be changed by mutual consent, or a Court or the Residential Property Tribunal Service or Upper Tribunal (replacing the Lands Tribunal), so if any of the lease terms are unacceptable or onerous, the Landlord’s co-operation is required to make changes or variations.  Such co-operation may be given at a price or not at all where the landlord has the power to refuse agreement.   

      Although the form of many leases will be acceptable to both buyer and to Lenders, there are many matters where specific requirements of lenders require clarification or change.   In particular, some leases have poor quality plans or unclear description of the extent of the property. 

      Where available, you should inspect the property with a copy of the lease plan and the Land Registry filed plan.  

       Some leases contain general clauses about tenant rights to use common areas such as forecourts, communal gardens, communal/visitor parking, washing/airing areas and the like.  Your solicitor will need to know that the plans accurately reflect the physical extent of the property you intend to buy and any garden, garage or parking space and refuse bin area.  

      You should also check for internal and external access and further enquiries will be needed where you may need to gain access over parts of the building that are not within your lease.

      The lease sets out the obligations of the parties, what the tenant has contracted to do and what the landlord and/or management company is bound to do.  The tenant’s obligations will include payment of ground rent and contribution towards the costs of insuring, maintaining and managing the building, and the lease will place certain conditions on the use and occupation of the flat.  The Landlord will usually be obliged to insure and maintain the property and to manage and collect contributions from all tenants and keep the accounts.

      What about the other tenancies in the same building?

      It shouldn’t be assumed that all flats in a building are let on the same form of lease and this should be verified.  Tenants are not generally entirely free to do whatever they want in or with the flat, but every tenant has the right to “quiet enjoyment” meaning peaceable occupation of their flat for the term of the lease,

      A tenant has no direct contractual relationship with other tenants in the building; whereas the Landlord does.  So if one tenant wishes another tenant to do or stop doing something, then provided the other tenant has lease with a relevant covenant or prohibition then the Tenant will have to rely on the Landlord to enforce that lease against the offending tenant. 

      Unless there is a clause in the lease in which the Landlord covenants to do this, the Landlord is under no obligation to take any action and cannot be made to do so by the complaining tenant.  This is commonly called ‘mutual enforceability’ and where such a provision is missing from older leases it is unlikely that lenders will accept the lease as good security.  It may then be necessary to obtain a deed from the Landlord to add the clause to the existing lease.  However, a Landlord cannot be compelled to agree to this, or may only agree on onerous terms, such as the payment of a lump sum, plus costs and expenses.

      If the Landlord does not agree, then an insurance policy may be an alternative acceptable to lenders.  There are policies available that require payment of a single premium and such policies may be transferable from one buyer to the next.  The average premium is between £300 -£500, and both the lack of the clause and details of the proposed policy must be reported to the Lender for prior approval.  In these cases, the payment of the Landlord’s costs or the insurance premium is a matter for negotiation between the seller and buyer.  We can assist with this if it arises. 

      What is ‘ground rent’?

      Any leasehold tenancy is subject to payment of a rent to the Landlord.  It may be nominal such as a peppercorn or a rent of the ‘ground’ that is more substantial – payable once, twice a year, or four times a year on the usual quarter days which in England and Wales are 25th March, 24th June, 29th September and 25th December.  Ground rent is a specific requirement of the lease and must be paid on the due date whether or not invoiced. Isomer leases provide for review or increase in ground rent of fixed amounts and in others the amount is fixed by a formula and remains uncertain. Where a high ground rent may affect the value of the lease this can bee problematic and government intervention with legislation is under active consideration. 

      Who insures the building?

      This is important and there are several ways in which this may be covered in the lease.  We tell you about the insurance provisions, which are applicable to the property you intend to purchase.  It is usual for the freehold owner to insure the structure of the building its boundaries and grounds and any central services such as boilers and drains.  It is important that the value covered will be sufficient to enable any damage by insured perils to be reinstated.  The landlord’s policy will usually cover standard risks but should be inspected for exclusions, disclaimers and conditions as well as an excess.  The interest of the tenant and lenders should be noted so as to give protection under the policy.

      Internal fixtures and contents of the dwelling owned by the tenant should be insured through the tenant’s contents policy for insurance.

      Lender’s insurance requirements

      We report on the property’s individual insurance arrangements to your Lender who may insist on approving the general insurance arrangements, the amount and type of cover and the insurance company.  If the lease does not provide for insurance monies to be laid out in the replacement or rebuilding of the building and does not oblige the Landlord to insure the building for the full reinstatement value, satisfactory arrangements must be made.

      Where the tenant is required to insure, your Lender may require you to add the property to the Lender’s block arrangements.  We will be concerned to establish that all parts of the building are covered.

      What is covered by the Policy?

      The scope of the insurance should be carefully analysed to establish precisely what is covered e.g. the roof, foundations, boundaries and common parts.  In blocks of flats, equipment (lifts, boilers, etc.) must also be considered.  You will need to check that the list of risks covered is satisfactory as will any Lender.

      Having considered what is covered and the risks included, the value of the cover will need to be established.   Certain lenders insist that a flat is covered for a minimum rebuilding figure.  If the current insurance does not insure the flat for the amount advised by your Lender or your surveyor, arrangements can be made to increase the cover to the amount required.  You will need advice from a suitable expert on the appropriate figure.

      Excluded risks may need to be covered separately along with personal possessions and fixtures, which are classified as “contents”.  The disclaimer and excess on the policy will also need to be noted.  Building insurance policies do not include cover for any contents.  It is therefore essential that you arrange appropriate cover to take effect as soon as you move into the flat. 

      What are Internal Repairs?

      Most leases oblige the tenant to keep the interior of the flat in a good and tenantable condition, including cleaning the windows regularly, and keeping the sanitary fitments in good orderThere will usually be a requirement for redecoration to be carried out periodically.

      Who is responsible for External, Main Structural and Common Parts Repairs?

      The description in the lease of the flat and the block or building are critical in establishing which parts of the internal and external surfaces belong to the Tenant or the Landlord. In a well-drawn lease, the Landlord will be responsible for the roof, main walls, foundations, common parts, lifts, chutes, drains, pipes etc.  The cost of repairs and maintenance is spent by the Landlord and then claimed from the tenants, usually through the service charge collected  by the Landlord or the landlord’s agent.

      However, in houses converted into flats or maisonettes, there can be many permutations of who owns what, and sometimes, it may be difficult to resolve this with certainty.  Sometimes the lease may specify ownership, but not make it clear who is responsible to carry out repairs.

      For example, the ground floor tenant may own the foundations, but there is no obligation on him to carry out repairs; or, there is a responsibility to carry out repairs and no provision in the lease to recover any part of the cost from the upstairs tenant. 

      Who is responsible for the exterior decoration of the building and common parts?

      Some leases impose a strict repainting schedule such as . every 3 years.  Others say that repainting should be carried when in the Landlord’s opinion it is necessary or desirable.  The cost may arise in the year when expenditure is incurred or may be provided through a sinking fund which is built up each year for such types of periodic expense.

      Who pays for major repairs?

      Some leases make provision for a sinking/reserve fund into which tenants must make an annual payment.  This will be necessary for buildings where roofs and boiler or lift replacement can involve large amounts.  The fund is usually held in an interest-bearing account until monies are withdrawn to pay for major repairs.  Where there is no such fund, a Landlord may refuse to carry out works until and unless it first receives either the full payment or an ‘on account’ payment from all tenants. 

      What are ‘Common Parts’?

      ‘Common parts’ are those areas of the building of which a flat forms part that are used in common by more than one of the tenants.  Pathways, entrance hall and stairs, communal garage forecourt, communal standpipes and washing/airing facilities, rainwater goods, lifts, corridors, access ways and parking areas are all typical examples.

      Decoration – What will my responsibility be?

      Most leases impose an internal repainting and redecoration schedule such as once every 5 yearsSome older leases may even specify the type of paint to be used!

      Exterior redecoration is usually the Landlord’s responsibility – costs are recovered through the service charge, but sometimes the tenants are required to decorate the exterior of their own flat.  This is obviously not as satisfactory.  Some leases delegate the repairing and maintenance responsibility to a management company.  The lease will usually make the party responsible for works also liable to reinstate any damage at their expense. You should ensure your contractors carry suitable insurance. 

      Service Charge – What is a service charge?

      These are payments to the Landlord or Management Company for services provided collectively to the tenants in a building or development.  Service charges can vary from year to year; they can go up or down without limit but they may be open to challenge under various Housing Acts to establish that they are reasonable.  Before major expenditure is incurred a notice giving details of cost must be circulated to tenants and most well-organised blocks will provide a budget of the current and next year anticipated expenditures.

      The charges may include:

      • the building and third party liability insurance
      • the cost of repairs, painting and maintenance
      • communal light and heat
      • communal carpeting and decoration
      • cleaning
      • main gate/door security
      • gardening
      • porter/caretaker and his salary, and accommodation (if on site)
      • garden tools and plants
      • communal water rates
      • lifts
      • water tanks etc.
      • communal heating and hot water
      • management fees and charges
      • payment towards a sinking/reserve fund
      • a ‘sweep up’ clause that enables the Landlord to make a charge for items not specifically mentioned elsewhere. 

      How is service charge contribution calculated?

      The amount of the service charge may be formulated as a percentage or fraction of the total number or area of flats in the building, or the lease may provide for a specified amount of money to be paid during the year ‘on account’ of the charges.  In the latter case, when the accounts are audited at the year-end, tenants are credited with any overpayment or asked to pay an ‘excess’ for the previous year to cover any under collection.

      Will I be responsible for my seller’s unpaid contribution?

      The service charge year is not necessarily the calendar year but will be specified in the lease.  It may be necessary for the sellers’ solicitors to retain an agreed sum of money to cover the payment of the excess charge (when known) for the period of the seller’s ownership.  It is unlikely that the seller or buyer can be told the exact figure by the Landlord or the managing agents, as this will only be ascertainable when the complete year’s accounts are finalised.  The amount of the retention therefore is a best estimate based on available information.

      It can be many months before the true position is known.  When you receive the accounts for the year in which you purchased the flat, you should send us a copy so we can agree on the amount payable with the seller’s solicitors.

        How will I know the historic service charge position?

      Before you commit to buy the flat we will obtain for you to see:

      • audited service charge accounts for the last 3 years
      • the current ground rent and service charge demand
      • an estimate for service charges for the current year, if available.

      These may not be available quickly, but we will send you on what we receive.   Please inspect these carefully and raise with us any items/entries of concern. Problems may be encountered with absentee landlords or where there has been insolvency or the landlord entity has been struck off or is otherwise uncooperative.

      What are reserve funds?Many leases provide for the Landlord to collect sums in advance to create a reserve or ‘sinking’ fund to ensure sufficient money is available for future scheduled major works, such as external decoration or lift replacement.   The lease will set out the sums involved and when regular, cyclical maintenance works are dueUnspent contributions to the reserve fund are not repayable when the flat is sold.  

      Will I be allowed to alter the property?

      Some leases forbid structural alterations altogether or changes to external features, windows and colour schemes.  Others allow alterations after plans have been approved by the Landlord and/or his surveyor.  The application is always at the Tenant’s expense, and if the plans are rejected, or approved subject to onerous conditions, there will be no refund of fees/expenses paid to the Landlord/agents/surveyor.  If the seller has made unapproved alterations to the flat, this will need to be investigated. 

      Who else might have a right of entry to the property?

      Every lease contains a right of entry (and forfeiture) for the Landlord and his agents to inspect the flat to ensure that the tenant has complied with his repairing and other obligations.  Most leases also give the Landlord the right to enter the flat in order to carry out its repairing and maintenance obligations, usually by appointment, except in emergency.  Other tenants may also have this right on the same basis.  In a well-drawn lease, you should have the same right in relation to other flats and the common parts of the building.

      Most leases will also grant and reserve rights known as ‘easements’ to enable the freeholder to manage the building and facilitate repairs for other occupiers and to adjoining premises and to enable the tenant to gain access to facilities and amenities.  We would also expect to see cross rights of support and shelter, between flats or maisonettes.

      Will I be able to Sell, Sublet or Mortgage the flat?

      Most leases contain some regulations relating to disposal and require notice of change of ownership and/or mortgage to be served on the Landlord – there is usually a registration fee payable with the notice that can range up to £100. 

      Many leases prohibit subletting for a term longer than 3 years, or for a term shorter than 1 year.   If the Landlord’s consent to a sub-letting is required, this may involve the Landlord’s solicitors, references, a formal written licence to sublet and payment of costs.

      Selling the leasehold interest may require the Landlord’s licence.  The landlord may have the right to approve the incoming tenant and be entitled to be satisfied that the person is financially able to make all payments reserved by the lease.

      Non-UK nationals and foreign registered companies may also have to provide a UK address for service of documents or a deposit for the service charge.  

      Where the Landlord’s consent is not necessary, the lease may still require the buyer to enter into a deed with the Landlord to perform all the tenant’s covenants in the lease.   This is called a ‘deed of covenant’. 

      What happened if I fail to pay the rent or service charge?

      Where a tenant fails to pay the rent and service charge or persistently breaches the terms of the lease, then ultimately the Court can allow the Landlord to ‘forfeit’ the lease and repossess the flat.  There is now much legislation that affects this topic to protect the tenant who will be at risk as a minimum to costs should the Landlord be forced to take enforcement action.

      What other restrictions and obligations should I expect?

      You should read the copy lease very carefully in the light of your intended use of the property and raise any queries or concerns.  Most leases have a list of Do’s and Don’ts, which covers everything from not making noise between specified hours and prohibiting pets/animals to requiring carpeting in main rooms, inhibiting electrical equipment and not storing bikes or pushchairs in common areas or on landings/hallways.  The Landlord usually reserves the right to change or add to this list in order to preserve ‘good estate management’.

       What are the Landlord’s obligations?

      These usually include:

      • repair and maintenance
      • insurance
      • provide services cleaning, lighting etc.
      • preparation of service charge accounts
      • employment of agents and contractors
      • enforcement of one tenant’s obligations to benefit another

      What is a Managing Agent?

      A managing agent is appointed by the Landlord to manage and maintain the building on behalf of the Landlord in accordance with the terms of the lease and current relevant legislation and Codes of Practice.  The agent takes instruction from the Landlord not the tenants, but should be aware of the tenants’ wishes and requirements.  They are not necessarily part of the Landlord’s organisation or company.

      The agent will receive a fee which will usually be paid by tenants as part of the service charges.  This may be based on a specified percentage of the service charges, but a fixed annual fee is becoming more common.  Where major works are involved, the agent may charge an additional fee, which would normally be a percentage of the total cost of such works. 

      What other rights do Tenants have?

      Information – the landlord must provide his name and a contact address within the UK which must be stated on every demand for service charges.  Tenants can demand summaries of the service charges, details of the insurance cover and have the right to inspect accounts and other documents.

      Consultation on major works – the landlord cannot carry out major works to the building without first consulting the tenants in the proper fashion: if he fails to do this, he may not be able to recover all the costs. 

      Challenging service charges – tenants can apply to the Leasehold Valuation Tribunal (LVT) to seek a determination of the reasonableness of the charges.

      Appointing a Manager – if the Landlord’s management is deficient, then tenants can apply to the LVT for the appointment of a new manager.

      Extending lease under the terms of the Leasehold Reform Housing and Urban Development Act 1993 (LRHA)  – an individual tenant who satisfies conditions (such as owning the property for 2 years as a principal or main residence) can demand a lease term extension of 90 years in addition to the term already granted.  There are statutory provisions for calculating the purchase price and each case depends on its facts.  If the price cannot be agreed, it will be set by application to the LVT.

      Buying the Freehold – groups of tenants who satisfy conditions can get together and enforce the purchase of the freehold of a block, although some blocks of flats are excluded.  This is called ‘Collective Enfranchisement’.  There may be little or no advantage to exercising this right if the Freehold is owned by a Management Company where the tenants already own the shares of that company.  Each case depends on its facts.  Again the price is agreed between the parties or, if this is not possible, set by the LVT.

      Right of First Refusal – where the landlord proposes to sell his interest in the reversion of the building, he must offer it to the tenants first.

      Right to Purchase the Freehold of Houses – Under the Leasehold Reform Act 1967 and the LRA, it is possible to acquire the right to purchase the freehold of your house after the tenant has owned the property for a period of 2 years.

      Useful address: ARMA – The Association of Residential Managing Agents, 178 Battersea Park Road London SW11 4ND, Tel 0207 978 2607 or email info@arma.org.uk.  This professional body focuses exclusively on matters relating to the block management of residential property, whether for landlord or residential management companies.  Members agree to adopt and comply with the principal objectives of the Association and undertake to follow the ARMA Code of Practice and the RICS.

      What is a Residents Association?

      This is usually an informal tenants grouping, which acts as a pressure group monitoring and checking the performance of the Landlord and any managing agents.   Unless the association is registered, it has no legal standing, but it can be effective in making representations to the Landlord and in local affairs, e.g. road proposals/planning applications.  Membership of such associations is usually a matter of choice.   A nominal charge may be made for membership to cover running costs and administration expenses, but the committee is normally unpaid.

      Management Company

      The Landlord may delegate all or some functions to a Management Company.  This maybe connected to the landlord and is likely to be limited by shares or by guarantee.  This is distinct from an agent appointed as a Managing Agents or a Residents Association.  Please see below the note on Management Companies. 

      The landlord /tenants may be the shareholders and officers of the company, but not always.  Where the tenants are shareholders, the lease will normally provide that on the sale of a flat, the incoming tenant must become a shareholder.

      Although a non-profit making concern, a management company is still subject to all the provisions of Companies Act legislation, including filing annual returns, AGM’s and electing and notifying appointment/retirement of directors etc.  In some cases, the freehold may been purchased by the management company and so the freeholder and the company will be the same.

       Management Company controlled by Tenants

      This can be advantageous if all tenants are active cooperative members – it gives them collective control over their own building, but it is a responsibility and important that all flat owners appreciate and understand that the company needs to be run properly, efficiently and in a legally correct manner.  It may be helpful to retain a firm of solicitors to act for such a management company, who can advise on disputes and legal queries.

      Dealing with insurance obligations – Insurance requirements will be set out in the leases and the risks covered by the block policy must include all the risks mentioned

      Through its directors, the company should annually review the amount of the insurance cover and increase it in line with the cost of the rebuilding index – this is not the same as the rate of inflation referred to by the media.  This information can be obtained from a surveyor, or insurance broker.  Please note that if the leases do not allow for the cost of a professional insurance valuation, it will be necessary to obtain the consent of all the tenants before incurring the cost.

      It may be appropriate to pay an increased premium to delete the “excesses” which normally apply to damage caused by certain risks, to try and avoid disputes about who bears the excess in certain cases eg if a pipe bursts in one flat and causes damage in another.

      It is vital to pay renewal premiums as and when they fall due, before cover expires.  If a tenant’s contribution is delayed, cover must not be allowed to lapse, and it may be necessary for other tenants to cover the extent of the delayed premium. 

      Who will deal with repairs and decorations?

      The company should aim to maintain the whole building in a way that not only supports and enhances the value of each flat, but keeps them readily marketable as well.  In deciding what work to carry out and how much to spend, two points should be borne in mind:-

      • if any costs are incurred which fall outside the service charge provisions of the leases then the agreement of all the tenants will be needed, and
      • compliance with Landlord and Tenant legislation (see later) is necessary.

      What do I need to know about Statutory Controls on Service Charges?

      Landlords and management companies are required to observe some formalities in collecting service charges; otherwise a tenant’s contribution may be impossible to recover legally under the Housing Acts 1985 onwards.

      Even if work is carried out with the unanimous approval of all the tenants, the formalities should be followed in every case to avoid subsequent disputes and protect the company and other tenants from the difficulty that might arise if a flat changed hands before payment.

      “Reasonableness” – Reasonable costs may only be recovered if they are reasonably incurred, advance payments must be reasonable and the work must be carried out to a reasonable standard.

      “Estimates and notices” – Where the cost of proposed work exceeds a certain prescribed amount, then:-

      • at least two estimates must be obtained, one of which must be from a completely independent contractor, and
      • a notice referring to the estimates, describing the proposed work and “inviting observations” (with a name, address and final response date at least one month hence) must be given to each tenant, either personally or by display in the building where all tenants will see it, and
      • the company must “have regard to” the observations and unless the works are urgent, they must not be started until after the specified date referred to above.

      “Information” – There are detailed provisions enabling a tenant to require the Landlord to supply a written summary of costs – where there are 4 or more flats the summary must be certified by an accountant.

      “Effect of failing to comply” – Non-compliance with these formalities not only makes members and directors liable to a fine, it also makes some or all the costs incurred impossible to recover from the tenant.

      Service charges are not legally enforceable unless the costs to which they relate were incurred in the last 18 months. However, this does not apply if within that 18 months period the tenant was warned that the costs had been incurred and that he would be required to contribute.

      So a management company should: Send out service charge demands before 18 months have elapsed from the date of the work.

      If this is not possible, ensure that each tenant has been notified that the costs have been incurred and of the requirement for their contribution. This is especially important when advance payments have been made, but additional monies are needed at the end of the year in a balancing statement.  If the final statement with demand is not made within 18 months of the expenditure, the warning needs to be given within that 18-month period.

      NB This is a brief summary only and in the case of a dispute, legal advice should be taken.

      What do I need to know about the Companies Acts?

      Although company law is complex, the parts that apply to a well-run management company should be reasonably straightforward. There is set out below an incomplete summary and if problems arise, legal advice should be taken on the specific issue.

      Meetings

      • Directors meetings should be held regularly to make decisions, especially about insurance and maintenance.  Such meetings may be combined with shareholders’ general meetings.  Directors meetings can be relatively informal but enough notice should be given to all directors to give them a reasonable chance to attend.
      • An annual general meeting (AGM) (21 days notice required to all shareholders) must be held each year.  If every shareholder signs a consent form, this period of notice can be shortened.   Functions of the meeting should include approval of the accounts and (re)appointment of the company’s auditors.
      • General meetings may be called at other times, e.g. to pass special resolutions.

      Accounts

      Formal audited accounts and a directors’ report must be prepared each year not only for each tenant/shareholder but also for filing at Companies House. The requirements are complicated and the accounts will require auditing by an independent accountant who is appointed at each AGM.

      Companies House

      Each year it is necessary to file a form of annual return within 42 days of the annual general meeting together with the accounts.  Delays can result in the company being struck off the Register.  If this happens, legal help may be required to put things right and it is likely to take time and be expensive.  In the meantime, the flats may become unsaleable and the management system cannot operate because the company has ceased to exist.  So even if you are not personally involved in submitting returns, it is worth making sure that whoever is responsible is up to date.  Changes in directors and the company secretary should also be registered when they happen and forms for this can be obtained from Companies House.

      Company Secretary – often, but not necessarily, one of the tenants who: –

      (a)           attends all company meetings and keeps minutes,

      (b)           issues notices,

      (c)           deals with correspondence,

      (d)           makes Companies House returns,

      (e)           issues share certificates and registers transfers, where the company has a share capital,

      (f)            keeps company records,

      (g)           sends out copies of balance sheets and auditors and directors reports,

      (h)           may keep the company’s cheque book, bank statements and accounting records, and

      (i)            may keep copies available of the companies deeds, including the counterpart leases, the insurance policy, the memorandum and articles of association and any guarantees which relate to the common parts, e.g. rising damp or timber treatment guarantees and reports.

       

      Directors

      Generally Directors must use reasonable care (with qualified advice where necessary) to run the company in its best interests.  They should ensure there is no conflict between their personal interests and that of the company and must disclose any interest they have in any proposed arrangement with the company.

      It may be convenient to delegate certain management functions, e.g. responsibility for day-to-day maintenance or cleaning, to a smaller group, an individual or even a managing agent.   It is however normally sensible to require at least two signatures on company cheques.

      Directors are responsible to see the company’s accounts present a “true and fair” view.  Directors will be personally liable for the company’s debts where they allow the company to incur obligations when it is not able to pay its debts when they fall due – even though the assets may exceed liabilities.  Director’s and Officer’s insurance is advisable.

      It is also the company secretary’s duty to notify the directors on becoming aware of impending or probable insolvency, and of the consequences of continuing to operate.

      Failure to Comply

      Company directors and the Secretary may become personally liable and/or liable to fines for compliance failure.   Major omissions or delays imperil the working of the management scheme and company and hence the marketability of the flats.

      Summary of Lease terms – Lease terms may have considerable impact on value, use of property and value.

      ItemComment
      1The propertyBoundaries may be set by description in the lease or on a plan and should be compared by inspection
      RightsRights of access or use of essential amenities such as gardens, refuse, parking, storage should be checked
      2Length of lease

      A term of  years starting from a date and expiring on specific date

      Most leaseholders will qualify for statutory extension rights after 2 years ownership.

       

      The price payable for extending or buying freehold are fixed by statute and court rules unless is agreement is reached.

       

      The valuation rules change once the lease term is less than 80 years but the impact may affect value before then

      3Remaining years of term from 1st January next yearThe length of remaining term may not meet lender requirements that vary between lender companies
      4Initial annual rentThe level of rent may affect lender requirements
      Review and dates of rent increase

       

      What is the basis for increase in the rent?

       

      The frequency may impact on the amount of the increase in rent- e.g .doubling every x years.

       

      Some leases provide for rising rents and others for reviews by reference to index

      Where ground rents exceed £1,000 p.a. in Greater London and £250 p.a elsewhere in England an unintended consequence of increasing levels of ground rents is that leases are classed as an ‘assured tenancy’ under the Housing Act 1988. This means that the landlord can seek to end the occupancy by an order of the court, and attempt to evict the tenant.

      The Government is considering amendment to the Housing Act 1988 to exempt leaseholders from this legislation that was intended for assured tenancies.

      Where ground rent is more than three months in arrears then a landlord can automatically seek a possession order. The mandatory nature of Ground 8 means a judge cannot refuse to make the order.

      5Building insurance and services for property and estate amenities.

      How are actual costs certified each year?

      Who approves budgeted estimate of costs each year?

      Are payments on account required

      each half year on fixed dates?

      Services may be supplied by landlord or delivered through a variety of possible structures and arrangements each with own governance

       

       

       

      There may be mechanism for payment on account based upon estimated charges

      is there any sinking fund for future expenditure or repairs?Major repairs and replacement will be required from to time and the arrangements including cost may or may not be pre -planned
      6Responsibility for repairsSome repairs will be responsibility of tenant.

      The definition of premises leased is relevant and should specify who is liable for windows, balconies, roof spaces and external doors, cellars, common or shared spaces

      7Transfer or underletting

      What restrictions apply?

      Whose approval is required?

      8Any restrictions on permitted use of the premises and any necessary access and services
      9Obligations on use of premises are enforceable between leaseholdersLenders will not accept lease as security unless this is confirmed
      10Other consents – alterations, pets, etc.Consent may be needed from the landlord and others for certain activity or changes
      11Forfeiture on bankruptcy clause.Affects capital value and Lenders will not accept a lease as security unless this is confirmed

       

      12Any Restriction placed on registered title?May need to be  removed or replaced in order to sell the property

      Leasehold title

      When buying a long lease you need to be aware of all the implications of this type of title and how it compares with other properties that may be available for sale or purchase both now and in the future. 

      Generally speaking, a property held with freehold title has a higher value than the same property with a leasehold title.  The difference in value will be a reflection of the length of lease, the rent and any other charges payable under the terms of the lease together with the impact of all other obligations (covenants) owed to the landlord(s).  The restrictions on leaseholders in relation to alterations and method of use of the property are likely to be more onerous compared to the type of restrictions or reservations which may apply to a freehold but only in some cases.

      The duration of a lease will be a major factor in determining its value and this is highlighted by legislation that enables qualifying owners of long leasehold interests in houses and flats to extend the lease or buy the freehold.  In each case a valuation fixed by statute will establish the price to be paid and this can vary significantly based upon the remaining lease term and the rent payable to the landlord over the remainder of the lease.

      In this context concerns have been raised in Parliament and legislative action is likely to set new restrictions that will apply to new leases where none exist at the moment.  This is likely to impact on the amount of the rent that a landlord of a long leasehold house or flat can charge initially and on review as well as the frequency of increases in rent.

      The (ground) rent payable on the grant on a new lease varies widely but now averages over £300 a year and legislation may bring that down to £10 p.a. maximum for future leases.

      On a property marketed at £500,000 that reflects just 0.06% of the price at which the property is sold. However, if that rent significantly increases after each period of 10 years then it will quickly escalate and represent a much higher proportion of the market value of the property. Legislation may in the future limit rents to 0.1% of the value.

      There is a complication where the rent exceeds or comes to exceed £1000 per annum in Greater London or £250 per annum elsewhere.  In this situation the lease becomes an Assured Tenancy and subject to the provisions of the Housing Act 1988.  This gives the landlord rights to end the lease in certain situations. That places the property in a different category from most long leases and will not be acceptable security for borrowing from lenders.

      The acceptability and reasonableness of lease terms and conditions are important to enable you to evaluate the long-term value and appreciation of your property compared to other properties on the market today, your ability to mortgage the property and your ability to sell property without difficulty in the future.

      The position stated as at October 2018 in government consultation on this matter is available at on the Internet at www.gov.uk/government/uploads/system/uploads/attachment_data/file/632108/Tackling_unfair_practices_in_the_leasehold_market.pdf

      Summary of General information on statutory rights for long leasehold tenants

       (A)          The right to extend a Lease

      You may have the right to purchase a new Lease for a further ninety years from the Landlord.  This right will arise if you can show that you have owned the property for a specified period and comply with any other qualifiers.  There are complicated provisions for calculating the purchase price.

      (B)           Right to Purchase the Freehold

      You may have a right to “collective enfranchisement” – this is a right to purchase the Freehold jointly with other long leasehold tenants in the block/building.  There are qualifications to be met and certain blocks of flats and Landlords are excluded. There may be little or no advantage in exercising this right if a Management Company owns the Freehold and you own shares in the Management Company.

      (C)           Right to Purchase the Freehold of Houses

      You may be entitled to or acquire the right to purchase the freehold of your leasehold house after you and/or your predecessors fulfil certain occupation/ownership requirements.

      (D)          Tenants’ Right of First Refusal to Purchase Freehold

      Under the terms of the Landlord and Tenant Act 1987 the landlord may not sell the freehold of the building without first giving the tenants collectively two months’ notice.  If notice is not given, the tenants may have certain rights to purchase the freehold at the same price within a limited period.

      (E)           Statutory Rights relating to Service Charges

      In certain circumstances, there are a number of statutory protections for tenants relating to service charges.   Items of service charges may be challenged if considered unreasonable and where a service charge item is demanded before the costs have actually been incurred by the landlord (subject to a certain limit) the landlord must first supply the tenants with at least two estimates for works to be carried out and invite observations from the tenants and any recognised Residents’ Association.

      Tenants have the right in most cases to require the Landlord to provide a written summary of costs.  Where there are more than four flats in the building (or the costs also relate to another building) the summary must be certified by an accountant.

       

       

      MAKING YOUR WILL

      150 150 mattd

      PLEASE READ THESE IMPORTANT NOTES WHICH ARE EQUALLY APPLICABLE TO A CODICIL

       Commonly used terms

      • A person making a Will is called the Testator or Testatrix
      • A person benefiting under a Will is called a Beneficiary
      • A document that makes changes to an existing Will is called a Codicil
      1. In order to be valid, your new Will must be executed in a particular way. It must not be witnessed by your spouse or civil partner or by a beneficiary or a spouse or civil partner of a beneficiary.  We recommend that it is executed at our offices, in the presence of two independent witnesses who we will provide.  Please note that a gift to a beneficiary will be void if that person acts as a witness to your Will.
      2. We offer to keep your executed Will in safe custody. Two certified copies will be forwarded to you with our receipted account.
      3. If you have ask us to send you the new Will as you wish to deal with its execution, we will send you written instructions about signing it. If you have any difficulty understanding those instructions, please let us know.  If you wish this firm to hold your Will, then please return it to us after you have executed it either by personal or recorded delivery.  If we do not receive the Will back within 28 days of sending it to you, we will assume that you have decided not to sign it or have signed it and that you have retained it.
      4. You should make arrangements to ensure that your final Will can be found.  Please note that if you do not sign your Will at our office we cannot offer any evidence to support the valid execution of the Will.
      1. We will ask you to satisfy us that the provisions proposed in any new Will are made of your own free will and not as a result of undue influence by any other person. The person claiming the benefit of a gift may have to prove that no undue influence was brought to bear if they are in a position of trust.  We therefore prefer to take instructions from a client in private, and not in the presence of the person who is or may be a beneficiary.
      2. We will not act on the instructions of anyone else regarding a person’s new Will except in special circumstances. In all cases, we insist on some form of personal contact.  If this is not possible because of geographic distance, we may refer you to another solicitor local to your address to handle the matter.  In the case of ill health, or disability we will attend at home, nursing home or hospital unless we are told that this is not medically appropriate.  Additional charges may be incurred for additional time out of the office and travelling costs.
      3. You must have the necessary mental capacity to make a Will or it can be set aside. We will not take any steps to obtain confirmation that you have the necessary mental capacity unless you ask us to do so.  There will be an additional fee for this service.
      4. If you have any reason to believe that your health is or will be impaired or compromised, please make sure we are aware of this and any timescales relevant to your condition or medical treatment. Where appropriate, and in order to avoid the risk of a challenge to your Will on the basis of lack of capacity, we will ask for your authority to contact your doctor in order to obtain confirmation of your capacity to make a Will and for the doctor to witness your Will.  There will be an additional fee for this service and a doctor’s fee.
      5. Where you have chosen our Standard  Service (Level One) , we will ask you to let us have a cheque for our fixed fee before we send a draft Will for your approval. If the information you give us suggests that we cannot deal with your wishes as a standard level service  we will tell you and ask for your further instructions.
      6. If we prepare and send you a draft Will, but do not receive any response within four weeks, we will assume that you do not wish to proceed. We will close our file and will not remind you that you have not responded.
      7. We are sometimes asked to make a ‘temporary’ Will – typically because the testator is about to go abroad or into hospital. Please note that a Will once properly executed is permanent and can only be revoked by physical destruction by the testator, (e.g. tearing/burning) or by the execution of a new will or by marriage or civil partnership.  (See below)
      8. Foreign Assets – if you have assets outside England and Wales, please be aware that your Will may not be effective to pass that property. We do not offer advice on foreign assets as part of our Level One Will drafting service.  If you require advice in relation to a property abroad we will let you have an estimate of fees or help direct you to alternative specialist advice.
      9. Tax – we do not offer advice on Inheritance Tax as part of our Level One Will drafting service. If you require advice as to the Inheritance Tax implications of your Will, please inform us and we can provide such advice for an additional fee, which we will agree with you.
      10. The Inheritance (Provision for Family and Dependants) Act, 1975 may enable certain persons to seek additional provision out of your estate after your death. If an application is made under this Act, it is likely to involve your estate in expense and may result in a variation of the gifts made in your Will.  We rely upon the information which you provide to us for the purpose of preparing your Will to indicate whether there could be a potential claim arising on your death.
      11. No provisions you make can prevent any persons bringing any claim they wish to  against your estate.  No matter how lacking in merit that claim may be and even if it is defeated there will be be a cost your estate in delay and legal fees and expenses.

      JOINTLY OWNED PROPERTY

      Assets such as Goods and Property may commonly be held in more than one name or ownership.

      If a dispute should arise, the Courts as a guide to resolving the dispute will look to see what the parties agreed along with other relevant circumstances at the time when the property was acquired

      There may be a clear agreement expressed in writing as to the ownership share of each person.  Otherwise the intentions of the parties to the original purchase may be relevant. In some cases the financial contributions of owners to the purchase or later expenditure may be relevant. By itself this may not provide clear evidence as to the proportions of the ownership of each person and their share of the value of the property or of any income arising from it.

      It is important that you reach agreement with co-owners as to how the property is held so that your executors know the share and value that forms part of your estate.

      There are two types of ownership please refer to lour Note on this topic here