Management Fees – The Bridge to and from Leasehold properties

Leasehold transactions often raise detailed questions with the landlord or whomever manages  the building or larger freehold; think of common areas that require maintenance, shared utilities or services, the roof, and things like that. We need information about service charges but also about the building itself, such as any alterations or safety considerations like fire risk or asbestos.

Take one current matter, I am acting for the seller of a flat contained in a building with several other flats. The leaseholder of each flat is also a director and shareholder with respect to the company that both owns the freehold and as landlord manages the freehold, so the building and grounds.

Taking this as an example, my client and her neighbours are putting their heads together to gather the information and documents I need to progress the transaction. In small buildings such as converted house, with a handful of leasehold flats where each leaseholder owns a share of the freehold, its not uncommon for neighbours to pool their paperwork collaboratively. I’ve heard of groups turning it into a pleasant catch-up, sorting through records over a glass of wine and nibbles.

In stark contrast however many leaseholders (or owners of managed freeholds) deal with managing agents, some of them being very large “faceless” entities. Managing agents, appointed by a landlord or a management company depending on the terms of the lease (or transfer) charge administration fees for their services in the day-to-day running of for example a block of flats. From the bureaucracy of communal bins and changing lightbulbs in communal areas to major works like a new roof, managing agents play a vital role, especially where leaseholders find the development is too complex or large to administer themselves. 

However, for the outgoing seller and incoming buyer looking at these properties there are considerable and often unanticipated costs. A sales or management pack is typically paid for by the seller, obtaining important information that the buyer (and any lender) needs to know. For example, are any major works anticipated that an incoming buyer will have to contribute to? What about the current outgoings associated with a given flat, are those service charges staying the same? Are any new service contracts being considered? All of this information needs to be obtained and put to a buyer together with the proper advice of what this means for them. 

Conversely, the buyer will usually pay fees to update ownership and mortgage records with the managing agent – lenders like Halifax or NatWest require this. 

Sometimes the fees quoted from the managing agent can be eye-watering, particularly on remortgages, where both the information pack and record update fees are required. Sometimes managing agents also charge for conveyancers time asking additional questions. 

It is important to think when looking at the properties to which this article relates, how much is this actually going to cost me going in? How much longer might this take or how much more complicated is this getting? But also, how much will this cost me on the way out? Not just for the information needed, but there could be other fees too (for example contributions to sinking funds, contingency or transfer fees.

Our team at SE Solicitors can help you make sense of all the information coming at you and what you are committing to in advance. Our residential property team can help you navigate leasehold transactions, but also landlord and tenant advice or disputes, and much much more! Contact us here.