When someone in the block wants to sell and move on, their buyers’ solicitor or conveyancer will contact the freeholder, management company, or agents as appropriate to ask for more information about the block’s management and finances.
You do not have to respond to such a request, but it’s hard to imagine why not and not doing so might suggest incompetence or bad practice. Besides, getting the right information across is a good way of ensuring that new people in the block know exactly what they are committing to, and it can avoid later misunderstandings and disputes.
You can even charge a fee for answering the questions; although it should be reasonable and reflect the amount of work involved. In a well-managed block with good record-keeping, providing the answers should not be difficult or time-consuming.
The questions will cover important information that a potential buyer needs to know about the property including, for instance, service charges, ground rent, deeds of covenant, building insurance, and disputes. The answers will influence flat hunters’ decision on whether to go ahead with the purchase or not.
Of course, in a well-managed block with good record-keeping, providing the answers should not be difficult at all. Completing an LPE1 might also alert you to any gaps in your block management such as, for older buildings asbestos surveys.
What’s in a management pack?
The Law Society provides a standard Leasehold Property Enquiry form, called an LPE1 that is the backbone of a management pack. Using this standard form isn’t mandatory, but it can make life easier for everyone. Buyers or their solicitors may have other questions, but LPE1 offers a good picture of the block’s management and leaseholders’ obligations.
The leaseholder selling the flat, or their solicitor, will also be asked to fill out a property inquiry form, which will cover the specifics of their flat.
LPE1, the form that the block owners (freeholders) or managers (management company or agents) are asked to complete, covers administration and asks for contact and bank details for future payments, who notices of reassignment of the lease should be sent to, etc.
It also asks about service charge amounts and arrangements, with copies of the accounts going back three years, fire risk assessments, asbestos surveys, etc. You will be asked if there are any works or alterations (or Section 20 consultations) in the pipeline.
The form will also ask about arrears for ground rent or service charges relating to the flat being sold and also to any other breaches of the lease in the building (which will include arrears on the part of other leaseholders, although these will also show up in the accounts).
A copy of the management company’s Memorandum and Articles of Association will also be asked for. (If you don’t have these to hand, you may be able to find a copy online at Companies House, depending on the age of the company.)
Buildings insurance is also featured on the LPE1 form, and the buyer’s solicitor will ask to see a copy of the policy. The form also specifically asks about the last building reinstatement cost assessment, as it is all too easy to let a block become underinsured if you just rely on index linking year after year. Find out more about how to make sure you are appropriately insured and how we can help here.
It is to be hoped the buyers’ solicitors diligently inspect all these documents and make sure their client is fully informed – especially in the case of first-time leaseholders. There is a second standard form, LPE2. This is a buyers’ leasehold information summary which draws on the information given LPE1 but should be completed by the buyers’ solicitor and passed to them with an explanation as it covers the costs of purchasing a property, regular payments during ownership and any additional planned payments so there should be no surprises.
Buyers should also receive a copy of their lease from their solicitor with an explanation of clauses and covenant’s. If a new resident does not have this, it may be as well to offer them a copy or advise them to apply to the Land Registry. After all, this is the document you will ultimately rely on to resolve any future differences and disputes.
Disclaimer:
The sole purpose of this article is to provide guidance on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication. You should not act upon (or should refrain from acting upon) information in this publication without first seeking specific legal and/or specialist advice. Arthur J. Gallagher Insurance Brokers Limited accepts no liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein.
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