Selling leasehold properties and why it can take so long

With the number of new flats built during the last housing boom in 2007 being added to the existing flat/apartment stock, as well as many developers now frequently protecting the interests of their newly created environment by selling leasehold houses, it is not too surprising to find that nearly 30% of the conveyancing work that myhomemove undertakes is to do with leasehold property.

Leasehold tenure is very sensible. It creates a mutual dependence between freeholder and leaseholder and is essentially a symbiotic relationship that should co-exist to everyone’s advantage.

However, the difficulties that it causes at the time of the Transfer of Title, which more often than not is between the seller and the buyer of the leasehold interest, do not help the speed of the transaction.

Let us also bear in mind that the chance of a second-stepper owning a leasehold property has to be quite high. After all, how many first-time buyers’ first home is a flat – mine was.

The difficulties arise when conveyancers need information about the current leaseholder’s occupation, and the need to reconcile such matters as ground rents, management and maintenance charges for their respective clients.

It’s at this stage that the conveyancer needs the information and the answers to the buyer’s enquiries – and no, the information doesn’t come free, and that’s even before the conveyancer gives the freeholder notice of the transfer.

Unfortunately, most buyers and sellers don’t understand what needs to be done, and after all why should they.

You can be reasonably certain that they will not have budgeted for some of the costs involved. We know how surprised they are when we have to ask them for the money; “How much?” and “What’s that for?” are common comments.

Sadly, little can be done until we have the management information – and you can be sure that the management company will do nothing until they receive their fee. Frequently 2-3 weeks can be lost in a transaction from having to ask for money (the fee), receiving it, sending it on to the management company and then waiting for it to clear, and that is before the management company’s internal SLA’s start to take effect.

Let us not forget that leasehold management companies (big and small) are not in any way regulated, so they can do pretty much what they want, when they want.

At myhomemove, we have run some relatively simple queries off our database regarding leasehold transactions in the last year – and the difference between the highs and lows, and fast and slow, can be quite startling. It is worth noting that the durations that I refer to from here on is the time taken from the point of our last chase, to the time of our receipt. It is not the period from when we first requested the information.

Let’s take the Notice of Transfer as an example. There are many landlords that charge no fee whatsoever, but those that do average £86.45. But it has been pointed out in previous PIE columns that averages can be misleading – well in this case the range is from £0, or commonly £10, up to £300, and there are some that are much, much higher (they are the exceptions).

Costs

*Picture cloud shows price of the Notice of Transfer. The bigger the number, the more cases there were in which the Notice of Transfer cost this much – myhomemove Management Information, August 2015.

How about a Deed of Covenant? They average £121.79 and can start from a low of £10 and go as high as £654 – although commonly between £150 and £300.

Stock transfers are similar – averaging £71.62

So let’s move on to the time that it takes to receive the information. The overall average is 40 days, with over a third of transactions over this average – and thank goodness that is calendar days because the range is from less than a week to well over a year!

To help remove the exceptions I have used Pareto and considered how long it takes for 80% of requests to come back to us from the date of request. Even excluding the worst 20%, the average is still over 20 days. You will also see from the picture cloud above that multiples of 7 are very common – which cannot be just a coincidence.

Duration

*Picture cloud shows calendar days for replies to requests, from sending the request to receiving a reply. The bigger the number, the more cases there were in which the reply took this time. – myhomemove Management Information, August 2015.

Although we regularly chase our queries and information requests, there are some management companies that do not publish a telephone number, and we know of one that was so busy that they turned their phones off for a week, just so that they could catch up, making it difficult to get in touch for an update.

It is worth mentioning, and hardly surprising, that there is no correlation between the cost of enquiries and the speed of delivery. Even though you might expect the biggest companies to be fully automated, meaning requests should be produced at the press of “enter”, it is often these companies that charge the most and take the longest to deliver.

Is there anything more that can be done?

Considering the effect that leaseholds have on transaction/chain timescales we should all be making an effort to highlight the issue, and trying to do something about it with people who have influence.

This, however, is in the longer term, but in the short term can I suggest that agents spend a bit more time with their seller clients and their buyers explaining that “Things take time”, particularly with leaseholds, and that the transaction is dependent upon information.

Ask your seller “Who is your management company?” or it may be easier to ask “Who do you pay ground rent to?” and “Are you up to date with your ground rent and maintenance charges?” and then make sure that you include these details on your sales memorandum, because if you don’t, you can be sure that things will be held up even more.

Finally, be prepared for the transaction to take longer – and here’s a hint, it will probably take longer than 28 days!

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13 Comments

  1. BrandNew

    As a Management Company we turn around leasehold packs on average within 48 hours.

    It couldn’t be the Solicitors or Conveyancers who are at fault…… could it?

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    1. Stephen Hayter

      Hi, I think you know that you are the exception.

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      1. BrandNew

        We like to think we are, but in our experience the leasehold pack is the last thing the Solicitor or Conveyancer thinks about. The number of requests we receive when the property is due to complete within the next 24 hours…….

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        1. smile please

          Spot on BrandNew, Most management companies take weeks to turn round and also solicitors tend to send them out as an after thought.

          If i was a convyancer and had a leasehold property on my desk it would be one of the first things i request.

          1. Because of time

          2. Because if the sale will fall through it will most likely happen due to some issue with the info provided, lease, maintenance, future works, rights of way, covenants etc

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  2. Mark Walker

    Colleague to Conveyancer “Hello, just chasing you for an update on the progress of the deal, which I tried you for last week.”  Conveyancer “Sorry, I forgot.”  I think that we are fast approaching the point where Heads of Terms / Notifications of Sale are returned to us by conveyancers marked “too busy to undertake”.

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  3. tombailey88

    Found this useful Stephen. We are trying to implement some new processes with management companies to turn around this information quicker for our auction stock. The difficulty as you mention is the non regulation with some offering zero response after weeks of chasing.

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  4. johnclay

    Good article.  After many years of conveyancing I can confirm that in most cases the conveyancer does ask for info from the management company at an early stage, but getting the necessary info from the seller can be slow and if payment is required (which it almost always is) then the seller has to pay this and it can cause further delay.

    As Stephen has said the delay can be reduced if the selling agent talks to the seller and gets the contact info at an early stage, even before a buyer has been found.

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  5. Anonymous Coward

    For some reason it is always the very last thing that the solicitors ask for.

    I guess that’s because it usually costs money and there’s no point until all the other questions like mortgage offer, etcetera, are dealt with first.

    Except that if you are a vendor and are serious about selling then you might as well get it straight away – it’ll save weeks and weeks and weeks.

    So we try and get our vendors to do that now because it is a nightmare to deal with later on.

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  6. Rob Hailstone

    Another issue could be that if the information is requested to early on, and the transaction is slow to proceed, some of it could be classed as out of date.

    Some Management Companies are very slow and very expensive and hold both seller and conveyancer to ransom. There should be some (enforceable) general guidelines on speed and cost.

     

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  7. Nixon92

    I am also planning to buy property abroad most probably in Dubai (Dubai Marina) , I have seen properties on https://www.allsoppandallsopp.com/property-sales/properties-for-sale-in-dubai-marina and got good idea of property price there. I am also looking for mortgage loan provider who can provide mortgage loan to UK national.

    Please share your experience of buying property in Dubai.

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  8. frustrated49

    With this being the 21st Century I fail to understand why this information is not held electronically and updated periodically as and when required, then when asked for it can be sent easily.

    I also fail to understand why managing agents take such a slow response to this issue, I am currently delayed by 3 weeks so far as our buyers live in an apartment and their buyers solicitor has requested the leaseholders information pack.  I gather our buyer has paid a lot of money for this and yet the managing agents are dragging their heels and failing to get the job done despite repeated calls from solicitors and our buyer.  It’s nothing short of unprofessional, I keep being told that this is normal behaviour – why is this accepted?

    I see excuse after excuse my managing agents on other forums but no commitment to improving the service.

    When paying a fee it is not unreasonable to expect the job to be completed – in any other industry this would result in an employee being disciplined but these people seem to be immune and behave as they please which is slow and unprofessional.

    Pretty disgusted by all this…

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  9. Benjy197921

    I completely agree with you frustrated49. The article above also talks of sellers/buyers being surprised at costs from the freeholder. Well my silly lawyer friends it’s because you probably said nothing about it up front, that is why. You quoted lower to get the job then added all the fees that you surely must have known were going to be added, later on. Then you just happily “update the financial statement” at will. There’s no common sense, no people skills, just plain cold bills and continue to let people drifting through the process like a boat in a storm without communication.

    The other thing, this industry is obviously trapped in the dark ages, this information in theory should not require forms to be sent back and forth. It could very easily be electronic, and dare I say it, free and quick. Absolutely NO reason for it to take three months, stop kidding yourselves that you’re doing something useful and start adding some service and people skills to the mix to take people through it. It reminds me of tourist business on teh seashore, no people service because they know you’re in and then you’re out.

    The whole thing is a racket to rip people off and it is in noone’s interest except the buyer and seller to improve the process therefore it will never happen.

     

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  10. Fozzy11

    Hey!

    I am in the process of selling my propety but we have hit a stumling block.

    Our development is still being built and has been handed over to a management company yet, although the estate his maintained by the developer.

    Our purchasers Solicitor has asked for a management information pack but as it is being managed by the developer, my Solicitor is struggling to get a pack.

    The develper has advised that not fees are going to be taken until the deveopment is complete, which could be years and at this is when it would be managed by another party.

    How do we move forward from here?

     

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