Leasehold Conveyancing FAQ

Guide to Leasehold Conveyancing

Leasehold conveyancing tends to be more complicated then freehold. If you are buying or selling a Leasehold property, it is likely that the property is a flat, maisonette or a house under the Shared Ownership Scheme.

The sections below deal with the most frequent concerns when dealing with a Leasehold property. If you have any queries that are not dealt with on this site, please do not hesitate to contact us on free phone 0800 1071 207 or email us at 

What is Leasehold Property?

Leasehold Property arises when a Lease is created from a Freehold Title. A Lease is a long tenancy, typically between 99 and 999 years for an extremely low rent. The Lease will contain conditions of use and ownership, which need to be looked at carefully.
This is the contract between the Landlord and the purchaser of the Lease (Leaseholder). It is difficult to change the conditions of the Lease once it has been bought so it is important that the conditions are acceptable and can be complied with.
Usually flats although in some areas (such as Sheffield) houses can be Leasehold.
Usually a tenant would be required to keep the flat in a state of good repair, pay the Ground Rent on time, pay Service Charges (if required) and to seek the Landlord’s consent before making alterations to the property. Sometimes there may be restrictions on letting.
As solicitors, if you are purchasing property under a Lease we check that the Lease complies with standard Legal Requirements and advise you of the implications of signing the Lease and what conditions you will be bound to. We also carry out the general conveyancing work such as applying for searches and raising enquiries that arise from the documentation that is sent. For more information see Step by Step Guide to the Conveyancing Process.
There are usually 2 types of landlord:

Where the Landlords are Tenants. How this normally works is that each tenant owns a share in a company, which owns the Freehold. The Tenants therefore have control of the building.

There is a separate Landlord who owns the building and manages (although they will often use Managing Agents). Sometimes a Landlord will actually own and live in the building.

About Managing Agents

A Managing Agent acts for the landlord to deal with the general management of the Apartment block.
No, some older blocks of flats do not have any form of centralised management.
They have to have regard for the current terms of the Lease and to relevant legislation and codes of practice. The Managing Agent should take account of the Leaseholder’s wishes although essentially they are instructed by the Landlord. The Leaseholder may also be the Landlord.
The agent is paid a fee, which is usually deducted from the Service Charge. If there is significant repair work or alterations needed there may be an additional fee.
Their duties will vary but they will generally include the following:

  • They will deal with the buildings insurance
  • They will maintain the structure of the premises and any common parts (hallways etc), including external grounds
  • They will pay for lighting of the common parts and heating, if appropriate
  • If there are lifts in the building, they should be maintained by the Management Company
  • They will pay staff if need be.
  • They will maintain accounts of all the payments and they will also deal with any requirements of Companies House
Yes, under the law as it is Managing Agents can be challenged and can be taken to a tribunal. In the event of a dispute they have to justify their position. In certain cases they can be dismissed and new Managing Agents are appointed.

Responsibility for repairs & costs

Repairs and maintenance are normally split between the Landlord and the Tenant. In such cases the Landlord will take responsibility for the structure and common parts, which include grounds, corridors and staircases.
There are two different ways this can be covered:

  • Service Charge

This is a charge that is usually made in advance. This is an amount set by the Management Company or Landlord in advance, normally at the beginning of the financial year.

  • By payment as required

In this case, the Landlords would ask for payment as and when payments are to be made. This is relatively unusual and would only apply to small developments.

It is usually the responsibility of the Landlord, although they will recover the cost from the tenant. In some older blocks the Tenant may be responsible.
The tenant has responsibility for this.

Ground Rent, Service Charge & Reserve Charge

Ground Rent

Ground rent is the rent paid for the flat by the owner. The rent is not affected by the value of the property and is usually a nominal amount.
It is generally no more than £150.00 per year. If the rent is likely to increase, the increases must be set out in the Lease or there must be a clear formula as to how it can be increased.

Service Charge

This is a charge which covers the maintenance and upkeep of the shared areas in a block of flats such as corridors and grounds.
It depends on the contents of the Lease. Sometimes an “on account” payment is made either quarterly or half yearly in advance and sometimes it is paid monthly.
It is decided by the Landlord and has to be considered “reasonable”. If they are not considered reasonable action can be taken at the Leaseholders Valuation Tribunal (LVT).
There are usually three situations:

  • That the Tenant has not paid the Ground Rent or Service Charges. In this case we will ask for a Binding Undertaking from the Sellers Solicitors to pay that money on completion. An Undertaking is a written, signed promise to do something.
  • That the Tenant has paid the Ground Rent and Service Charge in advance. In that case they will require reimbursement by the purchaser. If this is the case the money will be needed before completion.
  • That the Tenant has paid up to the date of completion. In those cases no money needs to be paid to the tenant and they do not need to pay anything to the purchaser.
Yes. We need to check that the tenant has not been undercharged. If they have been and a further demand is made, then you as flat owner would become liable. If, after enquiry is made, we discover this is a possibility, we ask for the money to be retained from the sale price to cover this.

Reserve Charge/Fund

This is a charge where reserved funds are built up to cover any future expenditure such as the cost of repairing a roof etc.
Unfortunately you are not entitled to reclaim the money contributed.

Buying the freehold title

In certain circumstances, the tenants of an Apartment block can buy the Freehold Title, owned by the Landlord. This is known as “Collective Enfranchisement”. This section deals with this process.

The Freehold Title basically gives the owner complete ownership of the property. It also gives the owner the right to sub-let and Lease parts of the property.
You qualify if there are tenants of flats under a Long Residential Lease.
The following do not qualify to purchase the freehold title:

  • Owners of Business Leases
  • Owners of three or more flats in the same building
  • Leaseholders who live in a building owned by a charity
There must be a minimum of 2 flats
At least two thirds of the tenants must be qualifying tenants (see above);
No more than 25% of the internal area should be in non-residential use.
It is recommended that the tenants should form a group. It is also highly advisable to create a legal agreement setting out the aims of the group, the negotiation progresses they will use and any specifications as to costs.

A “nominee purchaser” should then be appointed. The nominee purchaser will be named on the Initial Notice and who will become the new Landlord. The nominee purchaser is usually a company formed by the Leaseholders.

It is strongly recommended that the initial value is ascertained by a professional valuer or surveyor. They should be somebody with expertise in this area. The valuer will usually provide a ball-park figure which will then be negotiated between the parties.
  • Market Value (i.e. what the value of the property would be as a freehold on the property market)
  • Half the Marriage Value (i.e: the value of the combination of the Leasehold and the Freehold Title)
  • Compensation (i.e. a payment made for any loss or damage caused to the Landlord by the collective enfranchisement).
The Tenants have to serve a Notice on the Landlord. The initial steps before preparing and serving this notice are to:

Gather the information required in the notice

The tenants will need to obtain the following information:

  • Details about the freeholder, i.e. whether it is a person or a company and their name and address
  • Details of any head leases or intervening leases granted by the Freeholder, i.e. to a person that has a Lease who then sub-leases to the tenants;
  • The full names and addresses of the other Leaseholders and details contained in their Leases.
  • Details of any flats let by the Landlord on periodic tenancies
  • The Tenants will already know most of this information. If not the Tenants are entitled to this information from the Land Registry provided they can prove their Tenancy and by making the right application.

Ensure that the right landlord is being served

The block may be sub-let to another Leaseholder and in this case it is the overall landlord who has to be served.

It is important to remember that Tenants are responsible for the Landlord’s costs once the Notice has been served and therefore it is essential that the Notice is correct as further amendments will incur extra expense.

We would recommend that you seek advice from a solicitor about the notice and that they prepare it. If you wish to discuss this with us then please contact us.

  • The Landlord is entitled to request evidence of the Tenants’ ownership of the flats and has 21 days to make this request.
  • If this is not provided then the Notice would be considered to be withdrawn with the Landlords costs still payable. It is therefore important that documents relating to the ownership of the Lease are provided as soon as possible.
  • The Landlord must then serve a Counter-Notice within a time limit stated on the Notice. This would agree with the notice, disagree or argue that an application should be made to the court on the basis that the block is due to be demolished or refurbished.
  • If the Landlord does not serve the Counter-Notice within the correct time the Tenants can then apply to the County Court for an Order that the matter is decided without the Landlords input. This is called a Vesting Order.
  • There is then a period of two months where both parties negotiate the price and other aspects of the application. If matters are not agreed then either party can apply to the Leasehold Valuation Tribunal (LVT)for an independent review.
Once the value is agreed and the offer put in the matter then proceeds more or less like a normal conveyancing transaction. (see Guide to the Conveyancing Process for more details).

Indemnity Policies

An indemnity policy is a type of insurance policy, which is taken out against any loss arising from a defect in a Lease. It is a policy that would normally last for 25 years. It should cover mortgagees and “successors in title” which means that when the property is sold, a new policy will not be required.
Leases have to conform to Guidelines set out by the Council for Mortgage Lenders (CML). Most Leases created since the 1990’s do conform to the Guidelines and therefore will be acceptable to mortgage lenders.

However, Leases drawn before the 1990’s frequently do not conform to guidelines and therefore are regarded as defective. With most defective Leases however it is possible to take out an Indemnity Policy that would be acceptable to the mortgage lender. There are therefore 3 categories that Leases fall into:

  • Leases which conform to the Guidelines
  • Leases which do not conform to the Guidelines but where a policy will normally be acceptable to a mortgage lender
  • Leases which do not conform to the guidelines and where the defect is so serious that indemnity policies will not solve the problem
  • In some circumstances if there is a defective Lease an indemnity policy may not always correct the problems for the following reasons:
  • There can be practical difficulties caused by the defect which may put buyers off
  • There can be a genuine debate between solicitors as to the interpretation to the guidelines
  • If there is a range of difficulties it may affect saleability
  • If there is a weak property market it is more likely that a potential purchaser might be put off by defects in the Lease.
Common defects in a lease can include:

  • Type of Title (ownership)

Most title is called Absolute Leasehold Title which guarantees that the Lessor has ownership to grant the Lease. In some cases you can only acquire Good Leasehold Title which means that the Lessor’s right to grant the Lease is not guaranteed, usually in cases where some of the documentation has not been registered at the Land Registry.

If the Lease is held as Good Leasehold Title then an Indemnity Policy will probably have to be obtained.

  • No right of access or right for services

A flat requires rights of way over two different areas:

  • Within the building
  • Outside the building to the nearest public highway

If either is missing then an indemnity policy will be required.

Very occasionally there are no rights for services to cross other parts of the building and if this is the case an indemnity is required.

  • Maisonette Indemnity

Defects that can occur in a maisonette could include:

  • Where the landlord does not promise to enforce any breaches against other Tenants should the other Tenants default in carrying out some requirement under the Lease.
  • No adequate provisions for repair or maintenance.
  • Defects in Buildings Insurance Arrangements

If the building insurance arrangements are not adequate then this insurance will be required. However, normally, the reason why the Insurance arrangements are not adequate is because the landlords do not enforce requirements against other Tenants.

Blocks of flats will have one of the following arrangements with regard to buildings insurance:

  • The freehold owner or Management Company insures the whole block and each Tenant pays towards insurance. This is the arrangement with almost all modern Leases and is the best arrangement.
  • Each flat owner has to ensure his or her own flat. There is a covenant or requirement by the Freehold owner to enforce compliance with the Lease. This is not as good as the first option but no indemnity is required.
  • Each flat owner has to insure his or her own flat and there is no covenant or requirement by the freehold owner to enforce compliance with the Lease. In this situation an Indemnity Policy is required.
  • Absentee Landlord

There is a special policy that can be taken out if the Landlord doesn’t exist. Some mortgage lenders regard this as being so serious that it has to be reported to them. Almost invariably, the reason why the landlords do not exist is because the companies have gone out of existence.

If you are a cash buyer then obviously you are not dependant upon your mortgage lender requiring an indemnity policy. However, you may chose to take out a policy to insure against problems in selling the property or any expenses or difficulties that may arise because of the defect in the Lease.
If the need for a policy is identified by us when we are acting for the buyer, we will normally contact the sellers’ solicitors and ask that the seller pays.

Most sellers do pay but not always and in some cases there can be a debate between solicitors as to whether an Indemnity Policy is actually required as there can be different interpretations of the CML Guidelines.

Yes, if an indemnity policy were needed we would deal with this although of course you would have to sign the forms.
Policies vary both as to the type of policy and to the value of the property. Typically, a policy with Aviva for a property below £200,000.00 would be £250 or less. If there are a higher amount of defects the policy could be more expensive.
If a policy is required it will be obtained at the time of completion. If the mortgage lenders require it then the policy will be sent to them. If not, the policy will be released to you along with the rest of the surplus deeds. You must make sure you keep it in a safe place since you will need it on a sale.
There are conditions of the policy. The main one is that you do not let any third party know of the existence of the Policy. This is because if somebody else was aware of the Policy they could take advantage.
Yes, for instance if you were selling a property and were unable to provide details of Building Regulations or consent or if you were buying a property and the searches provided are over a year old.

Legal Requirements of a Lease

Legal requirements in respect of a Lease are set out under the Council for Lenders’ Guidelines. These guidelines are sometimes interpreted differently by Solicitors although not as much as they used to be. This section deals with these guidelines and what is required of a Lease.

In our experience there are three standards of Leases:

Leases which are of an extremely high standard and conform to every requirement of the guidelines. Most modern Leases in big city centre developments are of this standard.

Leases which in some respect do not conform to the Guidelines but will be acceptable if an Indemnity Policy is obtained (a special type of Insurance Policy)
Leases which are drawn so badly that there would be difficulties in obtaining a mortgage and the property is therefore unsellable. This is extremely rare.

The lease should be at least the mortgage term and 30 years. However, we would normally hope for a longer lease than that. In addition, bear in mind that a Lease is more expensive to extend if there is less than 80 years outstanding.
They should be the same or similar.
This type of ownership guarantees that the Landlord has the ownership to grant the Lease and is the owner of the Freehold Title.If the freehold title was missing or was inadequate at the time the Lease was first registered, this is called Good Leasehold Title. This type of Lease ownership is common in leasehold houses in Northern cities like Sheffield.

Just because the Lease does not have Absolute Leasehold Title, it does not mean it is entirely defective although you should only purchase this type of lease if:

  • Your Solicitor confirms that the Title is acceptable;
  • You have obtained an Indemnity Policy (a type of Insurance), to protect against any future problems that may arise.

Leashold Expenses

View our guide to Leasehold Expenses here.

For a payment of £60.00 including VAT upon instruction, you can rest assured that should your conveyancing transaction fall through, for whatever reason, you will not be charged any solicitors fees. This fee is payable per transaction and therefore if you had a sale and purchase with us you would need to pay £60.00 for each.

Should your sale or purchase fall through without having taken the No Move/No Fee option we will charge a fee as is reasonable for the amount of work done by that stage.

A discount of £20.00 plus VAT (£24.00) is available on all transactions if you are one of the following:

  • First Time Buyer
  • Cash Buyer
  • Buy to let Landlord
  • Previous client (where we acted for over the last 3 years)

If you qualify for this discount, simply deduct this amount from your total online quote and advise us of your circumstances on instruction.

Terms and Conditions

Only one deduction per transaction (e.g if both cash buyer and buy to let landlord we deduct £24.00).

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