Sellers could face hefty fees from estate management firms

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John Robson, Residential Property Manager, Milners Law, Harrogate. www.milnerslaw.com

Question: I own a town house situated on a development of similar houses, including a block of nine flats. There are communal walk ways, grassed and planted areas and visitor parking spaces within the development. The title to all units is leasehold. All property owners pay a service/maintenance charge and the flat owners pay more than the house owners.

All of the property owners have a share in the freehold title to the development. We have formed a committee to run the management and have outsourced the daily estate management to alocal company, which charges an annual charge for the service they provide. This is paid out of the funds collected from the property owners.

I have agreed a sale of my house, which is proceeding. However, my conveyancer has asked for a sum of £500 as an on account payment, enabling him to apply to the management company for a “legal sales pack”. As we already pay and annual fee to the management company, is it correct that I should now be asked to

pay a separate and rather hefty additional fee for the management company to collate this sales pack?

Answer: When selling a leasehold property, the seller is under a duty to disclose to the buyer details of the ground rent, service charges, insurance and other matters, including the charges paid towards the running of the development and maintenance of communal areas. This information is provided in a Leasehold Property Enquiry form.

Figures indicate that one of three property transactions are leasehold and management companies will receive about £70 million in fees per annum from seller home owners. These fees are charged not only for sales packs but also relate to transfer and notice fees, as well as contingency fees on some transactions.

Managing Agents carry out services for leaseholders and they are not regulated in respect of the fees they charge. A recent survey carried out by The Conveyancing Association reports that at least 60 per cent of sales transactions experience delays of more than four weeks due to the failure by management

companies to provide the information required by a buyer’s conveyancer in a timely manner. More than 40 per cent charge more than the £500 you have been asked for.

The Law Society introduced a standard form known as Leasehold Property Enquiries LPE1. This is approved by conveyancers and other practioners, such as ARMA. The form details all the standard management information required to be disclosed to a buyer. The majority of managing agents have now geared their businesses to provide the information set out within the LPE1, enabling the costs and timings to be reduced.

However, the Competitions and Markets Authority has also been collating feedback on this issue with a view to showing MPs that there is a valid case for regulation to control disproportionately large fees. There is a website with information on the subject - www.gov.uk/government/consulations/residential-property-management-services.

So yes, you will have to pay your conveyancer the money on account enabling the legal sales pack/LPE 1 to be obtained from the managing agent. The annual fee you pay to the agent is for a different service.

John Robson continues to be a regular columnist for Yorkshire Post having recently relocated to Milners Law in Harrogate after more than 25 years working for a large Leeds City Centre law firm.