What is leasehold conveyancing?
Leasehold conveyancing is the legal process of transferring an interest in a leasehold property from one person to another, usually on sale but possibly on inheritance or as a gift.
We have a longer article about what conveyancing is.
A leasehold property is one subject to a lease, where the owner has the right to live in it for a specific period as per the lease term, typically several decades to hundreds of years, but doesn't own the land it stands on. You can think of it as a long-term rental, where the majority of the rent is paid upfront.
The converse of leasehold, is freehold, where the owner, the landlord, has outright ownership of the land and usually the building. Read more about the difference between the two types.
Leasehold properties are usually flats, but they can be houses on an estate or on a terrace.
The conveyancing process for leasehold properties
Step 1: Find and instruct your conveyancer
The first step in your leasehold purchase is to find and instruct a conveyancer.
Your conveyancer guide you through the legal process, identify risks and liaise with the seller's conveyancer, mortgage lenders and other relevant parties.
Conveyancing work can be done by the parties to the transaction, but usually both the seller and the buyer engage the services of solicitors or by licensed conveyancers. This is particularly so with leasehold conveyancing - the process for leasehold residential property is often more complicated than for freehold property because the terms of the lease need to be considered.
Your conveyancer should give you an engagement letter setting out their fee estimate and the likely costs of the transaction.
If you accept their terms, you'll need to provide proof of your mortgage deposit and valid identification documents, such as your passport or driving licence. This is necessary to ensure that the legal process aligns with financial regulations and anti-fraud measures.
Step 2: Review of the lease and report on title
Once instructed, your conveyancer will embark on a series of checks, primarily focusing on the lease contract. They will write to the landlord or the management company appointed by the landlord to obtain documents and information. These are known as the leasehold property enquiries.
The lease is the contract that gives you the right to occupy the property. Importantly, it sets out your rights and obligations as a leaseholder, the term of the lease (the length of time for which it runs), the ground rent payable, and any restrictions on your use of the property.
Your conveyancer will check for planned improvements, such as enhancements to communal areas in an apartment block or the building's structure, the cost for which you could be liable to pay a share, and which could increase the service charge in the future.
They will also confirm whether there is a buildings insurance policy, and who pays it. You will want peace of mind that the property is adequately insured against risks such as fire or flood and that risk assessments have been carried out by the managing agent. It may also be a requirement of your mortgage lender.
At the end of the preliminary investigation, the conveyancer will give you a report on title - a detailed document prepared by your conveyancer, which outlines their findings. Within this is usually mentioned:
Ground rent: the payment you'll make to the landlord for the rental of the property. It's important to be clear on the amount and the frequency rent is paid. It might be next to nothing, or it might be several thousand pounds.
Service charges: these are fees that you, as the leaseholder, need to pay towards maintenance costs of the building and communal areas, such as an entrance hallway or garden, and for management costs.
Sinking fund: this is a reserve fund set aside by the management company for significant repairs or refurbishments. You'll need to know whether there is already a sinking fund, what plans there are to use it, and how much you'll be expected to contribute in the next few years.
Administration charges: these are costs that you may need to pay to the managing agent or management company for services carried out at your request, like providing information or giving consent for alterations.
Responsibilities of the freeholder: the landlord will have certain obligations under the lease. Your conveyancer will clarify these responsibilities, such as maintaining the structural integrity of the building or insuring it.
Restrictive covenants: the lease may include restrictive covenants - rules you must follow as a leaseholder. These could include restrictions on pets, alterations to the property, or subletting.
Remaining lease length: an essential aspect your conveyancer will check is the remaining length of the lease. A short lease can be problematic, affecting mortgage eligibility and the property's value - most lenders require a minimum lease length for a property purchase or remortgage. However, provided certain criteria are met, a leaseholder has a right to a lease extension. But these are best carried out well before the lease ends.
Step 3: Conveyancer searches
Once the lease review is complete, your conveyancer will undertake several searches. These checks provide essential information about the property and can uncover potential issues.
The Land Registry search confirms the details of the current ownership, the boundaries of the property and any rights or restrictions associated with it.
Local Authority searches will reveal information about planning permissions in the nearby area, building control history, and environmental health notices. Read more about local authority searches.
A Water Authority search checks whether the property is connected to the mains water supply and sewerage system.
Environmental searches investigate any potential environmental risks, such as flooding, land contamination or radon gas presence.
Finally, location-specific searches may be carried out to investigate circumstances unique to the property's area, such as mining activity or a history of subsidence.
Step 4: Review the management pack
Your conveyancer will request information, known as a management pack from the managing agent or management company. This document provides information about the management of the leasehold property and a draft contract for sale and purchase.
The management pack should contain accounts for the last three years, giving a clear picture of how the service charge has been spent and how it might change in the future.
Your conveyancer will check the details of the buildings insurance to ensure it offers adequate coverage.
The management information should also include any necessary safety assessments and reports. These could encompass fire risk assessments, asbestos reports, and health and safety evaluations of the building's communal areas.
If you are buying a commonhold property, that is one where the leaseholders together own the freehold, then your solicitor will need to review the company documents - the articles of association and any shareholders agreement. These two documents set out the rules of management - particularly how the leaseholders vote on matters relating to the upkeep of the building.
Step 5: Signing of the mortgage deed and contract
After all checks and searches have been completed, you have a mortgage offer and you are happy to proceed, you will then sign the mortgage deed and the contract. If a new lease has been prepared, you'll also sign this.
These documents commit you to the purchase and to the mortgage agreement.
Step 6: Exchanging contracts
Contracts are then exchanged between the buyer's and the seller's solicitors. Once this happens, the agreement to buy the property becomes legally binding.
Step 7: Completion day
Completion day is the day when you become the legal owner of your new leasehold property.
On this day, a number of final things happen.
Payment of stamp duty: your conveyancer will calculate any Stamp Duty Land Tax due and make the payment on your behalf to HM Revenue and Customs.
Receipt of the transfer deed: the seller's conveyancer will send the transfer deed to your conveyancer. This document transfers the ownership of the leasehold property from the seller to you.
Post-completion requirements of the landlord: you may need to notify the landlord or management company about the change of ownership and pay any associated fees. Your conveyancer will do this for you.
Register the change of ownership: your conveyancer will register the change of ownership with the Land Registry, marking the final step in your journey to becoming a leasehold property owner.
Payment of fees: any other fees associated with the purchase, such as those relating to the landlord or management company, will need to be settled. Your solicitor will provide you with a summary of fees to pay, known as a completion statement.
House move: the previous owner should have given you vacant possession, meaning that you can pick up the keys from your estate agent and move into your new home.
How long does leasehold conveyancing take?
When you're eager to move into your new home, time becomes a precious commodity. Knowing how long the conveyancing process might take can help manage your expectations.
The average time for leasehold conveyancing can range between 8 to 15 weeks, but this is dependent on various factors. The requirement to deal with both the managing agent and the seller's solicitor can make the process longer. As a rough guide, expect the steps to take the following amounts of time from the time you appoint your conveyancer:
By the end of week 2: your solicitor should have started the necessary searches, requested and obtained the lease and either have already provided a report on title, or be close to doing so.
By the end of week 4: you should aim to have submitted all the documents required by your mortgage lender to them, and hopefully the lender has provided an offer.
By the end of week 12: having reviewed the survey results, the Management Pack, the lease, and searches, and having received replies to outstanding questions, your solicitor should have reviewed the draft sale contract and proposed amendments to it.
By the end of week 14: Contracts should have been signed and exchanged.
By the end of week 15: it's usually about a week from the date of exchange of contracts until the completion date.
Leasehold conveyancing fees
When you are considering buying a leasehold property, you'll want to understand the various costs involved.
Conveyancing fees for leasehold properties can often be more than those for freehold properties due to the additional legal work involved.
Legal fees: £850-£1500
Conveyancing fees are a primary expense. For leasehold property, the conveyancing solicitor's expertise is invaluable in carrying out the conveyancing smoothly and with minimal risk to you.
While you might consider undertaking leasehold conveyancing yourself, hiring a professional significantly reduces risk and saves time, making the expense worthwhile.
Searches fees: £250-£300
Search packs provide important information about the property and its surrounding area.
Mortgage lenders will require them, but also, since they highlight risks to the value of your property, their results can help inform you whether you want to continue with the purchase.
Land Registry fee: £200-£300
The Land Registry charges a fee to register the property in your name. This legal requirement ensures that the public record accurately reflects your ownership.
Bank transfer fees £20-£30
This is the cost of your conveyancer transferring the purchase money to the seller's solicitor.
Stamp Duty Land Tax: varies
The amount will vary significantly depending on the purchase price of the property and your circumstances.
Notice of transfer £100-£200
When a leasehold property changes hands, the managing agent or management company must be notified. They typically charge a fee for updating their records.
Do I need leasehold indemnity insurance?
Leasehold indemnity insurance provides an extra layer of protection when buying a leasehold property.
It covers potential costs and legal fees arising from specific issues with the property that weren't apparent or disclosed at the time of purchase.
In many instances, your conveyancing solicitor might suggest obtaining leasehold indemnity insurance if, for example, there's a lack of clarity or dispute over ground rent, service charges or breaches of lease terms.
It can also come in handy if certain permissions or consents from previous owners were not properly obtained or if the landlord is absent.
While it might seem like an additional cost, leasehold indemnity insurance can provide peace of mind. It's a safety net, ensuring you're not left out of pocket should any covered issue emerge in the future. As always, the decision should be made after thoughtful consideration and professional advice, balancing potential risks and costs.
Keep in mind that every leasehold property and every buyer's circumstances are unique. It's crucial to obtain advice specific to your situation and the particular property you are interested in.
By doing so, you'll navigate the conveyancing process with confidence, well on your way to enjoying your new home.