The usual procedure is for the buyer’s solicitor to make a series of enquiries to the managing agent before a sale is agreed. This is so the prospective buyer can understand the “risk” of purchasing the property. There are many factors that can influence the risk and cost of ownership associated with leasehold property ownership including the following:
- What is the annual service charge?
- Is the annual service charge likely to change in the future?
- Who owns the Freehold and do they charge ground rent and/or other fees?
- Does the block/estate have a good insurance history?
- Do other leaseholders pay their service charge?
- Are there any disputes between any parties?
- Is the building well maintained?
- Are there any upcoming costs that the new owner would have to contribute to?
- Does the estate comply with health, safety and fire legislation?
This is by no means an exhaustive list but does highlight the “risks” a prospective buyer needs to be aware of prior to purchase. We use the LPE1 and LPE2 templates.
The packs are leaseholder-specific and are chargeable on a flat-fee basis as they fall outside the scope of our contracted responsibilities as a managing agent. The fee includes completed LPE1 and LPE2 questionnaires and responses to any additional questions that the prospective buyer may pose.
Mixed Freehold / Leasehold estates
It is common for estates to encompass a mixture of freehold and leasehold properties. In these cases, freehold properties may have to contribute to the following services:
Management of external communal areas such as gardens
Administration and running of a resident management company
Where a freehold property is part of such an arrangement, Common Ground produces a shorter pack called an FME1 pack.
LPE1 and FME1
LPE1 and FME1 are standardised forms designed to capture information about a property held by landlords, management companies and managing agents – for example, information about ground rent, insurance and service charges.
The forms were jointly developed by the Law Society, the Royal Institution of Chartered Surveyors, the Council for Licensed Conveyancers, the British Property Federation, the Association of Residential Managing Agents, the Association of Residential Letting Agents and others.
Using the LPE1 & FME1 forms makes it easier for solicitors to advise clients because they will receive information in a standardised and consistent format.