When purchasing a Leasehold property, buyers are often aware of the Service Charge, Ground Rent and Insurance fees payable on completion.  However, many are unaware of additional administration charges which directly relate to the legal processes handled by Management Companies/Agents, on behalf of the Freeholder.

These extra fees can include costs for various documents that are not always clear at the outset of the purchase. They can include Notice of Transfer/Charge, Deed of Covenant, Compliance Certificate, License to Assign, or Consent Fees (such as obtaining consent for alterations, pets or subletting the property). It is often necessary to explain the reasons for these additional documents in more detail, together with additional charges. In order to explain a few of the key terms and documents that may be required, we outline them below:

Deed of Covenant – This is a formal legal document outlining obligations or restrictions between parties, often concerning land or property.  In this document the Freeholder/Landlord and the Leaseholder agree terms and clarify the rights and responsibilities of all parties involved.

License to Assign – This is a legal document granting permission from a Freeholder/Landlord to a leaseholder, to allow them to transfer their leasehold interest to a new leaseholder.  This only applies where there is a specific clause in the lease that limits assignment without consent of the Freeholder/Landlord.  The document ensures that the new leaseholder takes on all responsibilities outlined in the existing lease, including rent, repairs and other covenants.

Notice of Transfer – This is a formal notification that informs the Freeholder/Landlord/Managing Company/Agents of a change in ownership.  The notice is issued by the new leaseholder and includes details such as the name and address of the new leaseholder; the date of the transfer and the title number registered at H M Land Registry. The Notice of Transfer is essential for updating the Freeholders/Landlord/Management Company/Agents records and ensures that the new leaseholder fully understands their obligations as outlined in the lease.

Notice of Charge – This is a formal notification served on a Freeholder/Landlord/Management Company/Agents to inform them that a lender has a legal charge (usually a mortgage) over a leasehold property.  It is essential for recording the financial interest of the lender and is typically required during the purchase or remortgage process. 

Compliance Certificate – This document is provided by the Freeholder/Landlord/Management Company/Agents to verify that the buyer has met the necessary conditions relating to the property’s title, including the execution of a Deed of Covenant.  The Certificate is essential for complying with any restriction placed on the leasehold title by the Freeholder/Landlord, allowing the buyer to officially register their ownership with the Land Registry.  It serves as proof that all obligations under the lease have been complied with.

Consent Fees – The lease may specify a particular amount that can be charged for administrative charges the Freeholder/Landlord is entitled to charge for, such as granting consent regarding alterations, renting out your property, or keeping a pet.  The Landlord/Freeholder may be permitted to charge you a reasonable fee to offset their costs in processing these requests.

Details of these fees are provided by the Management Company/Agents when the Leasehold Property Enquiries Form (LPE1) is received by the Conveyancer, which could be several weeks into the transaction. Neither the Estate Agents, nor the seller, are likely to have any prior knowledge of the fees charged, and therefore, this is the reason they often come as surprise to any potential buyer.

Buyers also need to check that the Ground Rent/Service Charge is collected by the same Management Company/Agents on behalf of the Freeholder/Landlord, or whether it is managed by two separate Management Companies/Agents.  The latter may result in a buyer facing double administrative fees, as each Management Company/Agents will have its own fee requirements to comply with.

We would always advise that as soon as your offer has been accepted we immediately request a copy of the Lease,  along with a copy of the Leasehold Title, to see whether any Deed of Covenant or Compliance Certificate is required to deal with any restrictions noted on the Leasehold office copies. 

Upon receipt, we can review the documents and advise you of any additional fees that will be due upon completion of the transaction.

It is therefore advisable that any buyer considering the purchase of a Leasehold Property prepares themselves financially for any additional administrative fees which may be due upon completion.

Next Steps: Get in touch

If you would like to discuss anything relating to the above then please don’t hesitate to reach out to our team of legal experts at John Hodge Solicitors, conveniently located throughout the South West, with offices in Bridgwater, Bristol, Clevedon, Wedmore, Weston-super-Mare and Yatton.

You can contact us either:

• by email
• via our website
• by calling us on 0800 097 8611