Legal jargon in lease throws spanner in the works for property sale – The Crusader

Leasehold Packs LPE1 forms explained

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A query from a potential buyer over a condition in the lease has “left us going round in circles,” owner Patricia Brown told Crusader.

“We asked for further guidance on what more information was needed, but just got the same, stonewalling response – “when will you provide the information?”

“The sale has fallen through and future ones could be affected. Please help us get to the bottom of this.”

++ If you’ve been affected by this issue or feel you’ve been a victim of injustice, please contact consumer champion Maisha Frost on [email protected] ++;

Her home is one of five in a property in south London. She and her neighbours own the freehold through a small limited company and manage it themselves.

Last year the group extended their lease to 999 years, maintaining the same terms and conditions with just small amendments to reflect updates in mortgage requirements.

The stumbling block this time, raised by the buyer’s solicitor, concerned the LPE1 (leasehold properties inquiries) form that covers information held by landlords and managing agents about ground rent, insurance and service charges.

In January there was an update and it now includes who deals with the deed of covenant, contributions to the service charge and access to insurance. It was regarding covenants that Patricia and her group became totally lost.

“Referring to the form’s transfer section they asked whether a deed of covenant is required in and about any charge,” she explained.

“There’s no charge and this had never been asked before. Now we’re worried there’s something missing that means we have to get a new lease drawn up, involving a lot of cost.”

Time, Crusader thought, to bring in lease supremo Alastair Frew who leads the business property team at law firm Lodders Real Estate group.

Red herrings and red tape are red meat for him. And having trawled through the old and new leases, it was his opinion that: “this relates to service charges, always a contentious area in sales as new buyers are always worried they can end up with huge unforeseen costs.”

Deeds of covenant are legal promises, he explains: “In the old lease there was no deed of covenant with the landlord, and the new lease says it picks up the existing wording of the previous one.

“A deed of covenant is not necessary. But when completing the LPE1 form Patricia could have said “yes” and asked the buyer to provide one with agreed wording such as “I promise to the freeholder …”.

“The company was entitled to ask them for that and let the other side do the work.”

Queries like this often put a spanner in the works of a sale. “Two-minutes-to-midnight complications provide leverage so an unprepared owner is pressured into lowering the sale price,” says Frew.

“There are any number of ways to confirm about charges, a covenant is just one.

“When faced with this complex wording, people can feel very undermined.

“But sellers can help themselves by being prepared and always having the accounts and payments ready so they can respond to any query quickly and not feel bamboozled and forced on to the back foot.”

The advice for the flat owners has raised their spirits and confidence.

“This is so reassuring and removes a weight from our shoulders,” responded Patricia when thanking Alastair and Crusader.

Partner in law firm Lodders’ Real Estate group Alastair Frew advises commercial developers, business owners, housebuilders, private investors, and the banks and institutions that fund them. [email protected], 01789 206117, www.lodders.co.uk

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