Welcome back. Following on from my last article, where I discussed the delays associated with deeds and titles, there are yet even more issues leading to delays in the conveyancing process that need to be addressed. This week, I shall be looking at delays caused by leasehold properties.
Leasehold properties
This is a real beauty for causing delay.
It goes without saying that leasehold properties require more investigation than freeholds. This is because of the obligations on both the landlord and the tenant need to be studied by the incoming tenant’s solicitors. Now, all leases tend to follow the same basic format and while solicitors are accustomed to finding their way around leases, there is no alternative but to read the lease from start to finish – that is the case even if the lease has passed through many different hands since it was first granted.
This is because the law is not fixed in time and what was acceptable or not considered a problem 10 or 20 years ago could now be considered a defect. Let me explain. Lenders collectively confirmed a few years ago that if there was no obligation on the part of the landlord to enforce tenants to comply with their covenants, or if the landlord wouldn’t or couldn’t because they were absent, and there was no right for the tenants to be able to enforce covenants against themselves, then either a Deed of Variation would be needed for a lease or insurance to protect them would be needed. That’s fine and quite right – although I would question how often it is a problem in practice – but because the lenders published their handbook setting this out, all solicitors are now much more wary of taking a view on such matters. Therefore, not only are landlords benefiting financially through charging handsomely for providing Deeds of Variation, and insurance companies enjoying increased business from indemnity policies, but clients are frustrated that what didn’t seem to be a problem when they bought the property now seems to be a major stumbling block.
I have had clients who have had to pay many hundreds of pounds to have this rectified and I have a great deal of sympathy with the frustration they face.
Now, I’m on dangerous ground when I say that I wonder in reality how often, in practice, these ‘defects’ cause a problem. You see, lawyers are trained to protect their clients against all eventualities and therefore cannot ignore a defect when they see it. So, even if I don’t think it will be a problem in practice, I just can’t ignore the problem – I have to think not only of my lay client but also the lender. If I didn’t rectify the problem, I would leave myself open to a negligence action in the future.
Pitfalls
There are lots of other pitfalls that solicitors need to guard against when considering a lease on behalf of a client:
- The existing term of the lease – there has to be at least 60 years to run to get a mortgage, but what about when the client wants to sell in 10 years time?
- Does the new client need to be approved by the landlords and what are their requirements?
- Are there any unreasonable restrictions in the lease that need to be pointed out?
- What are the repair obligations of the tenant in a large multi-let property? Will they move in one day and then be told that they have to pay £5,000 towards repairs to the roof?
- Are there likely to be any problems with the general maintenance of the common parts?
Of course, the lease may be perfectly fine but there could still be problems with extracting information from the landlords. Whereas additional enquiries on freehold cases can run to 20 or more questions, you can double this when it comes to leasehold properties. All sorts of questions need to be answered by the landlord in respect of payment of service charges, ground rent and a vast array of questions about compliance with the lease.
Okay, so that doesn’t sound too bad, but a common problem is that the original landlords interest will have been bought by a specialist company who may not have an interest in actually managing the property but does have an interest in profiting from answering such enquiries and then dealing with all manner of notices and consents under the terms of the lease. There are some companies out there who are frankly dishonest and unscrupulous in the way in which they extract large sums of money from tenants needing to obtain their approval for all manner of events under the lease.
This causes delays, ill will and the clients are left with the feeling that some one out there is to blame and the worst thing is that they don’t know exactly who. But guess who is in the firing line? Their own solicitor.
So, we have investigated title and dealt with the lease, now comes the really fun part – dealing with the chain. I think a natural break is in order to build up courage before we take on this ogre of a conveyancing delay.
