Vendor obligations in Leasehold sale - TA7 / Managing Agent Enquiries

mrtwis

Hi all,

I'm the seller of a leasehold property that I've owned for the past 3 years and am well on my way to exchange and hopefully completion.
My solicitor has recently asked me to pay them a fee (150.00) that would go towards the managing agent of my flat for them to answer a set of enquiries that the purchaser's solicitor has. Having already completed a TA7 (Leasehold Information Form) as well as provided recent statements of accounts in the Home Information Pack, I felt that there was little else (of value) that could be provided by the Managing Agent. My solicitor's reply when I questioned him about this was that providing this information was required by 'Conveyancing Legislation' (and was not part of the HIPs legislation).
Can anyone advise as to what my legal obligation is in terms of supplying additional information about the leasehold and/or managing agent? I can see that most of the questions put forth by the purchaser's solicitors seem to be similar to questions in Schedule 5 of the HIPS act but surprised this wasn't part of my HIP.
Can anyone clarify?
Is there any way I could justify telling the purchaser to pay for such info?
Thanks!

poppy10_2

mrtwis wrote: »

Can anyone advise as to what my legal obligation is in terms of supplying additional information about the leasehold and/or managing agent?

Listen to your solicitor.

If you don't trust him and think he is trying to scam you, sack him and employ another one.

But don't try second-guessing his legal advice based on what some random forum members say on here. We don't know your personal circumstances like he does.

timmyt

Your lawyer is 100% correct in needing this information. The CML - Council of Mortgage Lenders - conveniently summarises what they expect a buyer of a leasehold property to ensure they receive, and this has now set the test for neglignec if a buyers lawyer fails to obtain it.

As a result a seller will be expected to supply a pack of information (quite apart from your TA7) giving such things as:

1. 3 years service charge accounts
2. confirmation that ground rent and service charge is up to date, and what has been paid and for what period.
3. confirmation there is no anticipated large expenditure about to happen
4. a copy of the current buildings insurance
5. details of what the landlord fees are for a buyer's Notice of Transfer/charge

and so on, usually 20 questions.

The fee you are being asked for is quite average if not on the low side.

However, how long has your lawyer had conduct of the sale, as many selling lawyers waste so much time by failing to get this pack until the Buyer asks. Then everyone waits around while the selling lawyer does, as landlord/management companies are not quick.

Sounds like you lawyer is doing the right thing, but has just not warned / explained enough.

Good luck in the sale.

Richard_Webster

The buyer's solicitor wants answers from the landlord/his managing agent and not just from the seller, because even thought he seller may be able to supply some of the info once the buyer has moved in and gets a demand for money from the landlord/managing agent it is no help to say that the seller didn't tell the buyer about it.

On the other hand if the landlord clearly states e.g that the seller has no arrears of service charge and then tries to collect arrears from the buyer the buyer will have some come back.

mrtwis

Thanks all for your replies.

However like the responses from my lawyer, my legal obligation in this area is still unclear and I'm reluctant to be forking out money for what seems to be largely redundant information.

The HIPS act 2004 (Section 8 / Schedule 5) makes it fairly clear what I'm legally required to supply in this area which I have largely done (without cost). However I fail to see how I'm obliged to provide anything more, particularly when it requires payment to the managing companies (one does ground rent the other insurance).

My managing companies have two sets of fees in this area:
For a total of ~160 I can receive a 'standard' sales pack from both.
For a total of ~300 I can receive a 'full enquiries' sales pack from both.

My preference of course is not to pay anything, but failing that I'd pay for the 'standard' pack which would seemingly put me at risk that it won't satisfy the purchaser's questions.

I've seen my question (or variants of it) on various threads on this forum but all the answers seem to be 'this is how its done and you just have to pay up if you want to sell'. Surely there has to be something more? (timmyt - I appreciate your response about CML requirements however surely not everyone needs a mortgage to buy a property and therefore the vendor's obligations don't arise through this?)

The HIPS act seems to have forced the seller to take on various search costs that were previously borne by the purchaser. Is the purchaser now free to demand as much information as they want at the vender's expense or is there anything that can be pushed back?

Thanks again!

PS -I appreciate I should take my lawyer's advice and/or push him for a better answer, but his fees are pretty cutthroat already and I don't care to risk having him trying to charge for teaching me UK Property law.

timmyt

HIPs act is nothing to do with it. stop losoing time and do what your lawyer says, or the buyers will not proceed.

Richard_Webster

People buying flats often ask me how long it will take.

In answer I often explain what is likely to happen over the management enquiries.

When I get the papers I will go through them and if the seller's solicitors have not already obtained the replies to a questionnaire form the landlord and/or managing agent I will send the questionnaire to the seller's solicitors who will send it on to the landlord/managing agent. Say they get these enquiries a week after I've been through the papers.

Managing agent sits on it for a few days and then writes to seller's solicitor saying their fee is anything between £100 and £300 for answering them or provides a menu different prices for answering different points. So halfway through second week seller's solicitor rings up seller client and asks him for another £200 or whatever. Seller client like OP objects. Seller's solicitor explains the position but seller won't budge so solicitor moves onto another file.

In the middle of the third week buyer's solicitor writes asking for replies. Seller's solicitor again asks his client for the money and by the end of the third week he might have got it. Cheque sent to managing agent who have a 10 working day turn round so more delay! They can do it in 48 hours for a further £75 expedition fee that the seller will not pay!

So as TimmyT says does OP want to delay things or not?

These replies were supposed to have been included in the original proposals for the HIP but were abandoned by the government before HIPs were introduced, as they realised what extra cost it would cause, and the HIP companies didn't want the apparently nice simple process which could be done by their low paid clerks complicated by having to do something non-standard!

particularly when it requires payment to the managing companies (one does ground rent the other insurance).

My managing companies have two sets of fees in this area:
For a total of ~160 I can receive a 'standard' sales pack from both.
For a total of ~300 I can receive a 'full enquiries' sales pack from both.

When people are buying flats I do try to warn them about the charges they will incur later. There are some national builders who have a habit of selling their freeholds after a couple of years to some rather questionable companies who employ expensive managing agents and also deal separately with the ground rent and insurance so you have two sets of charges to pay. The sooner people generally realise how these national builders are dropping their buyers in it the sooner they would stop buying their new flats - then the builders might set up fairer systems for the future (e.g encouraging the residents to purchase the freehold and take a hand in managing it themselves - or even use commonhold) instead of setting it all up so some rip off company can make money in the future.

RX-78

You are absolutely right! My solicitor warned me about this right at the beginning so I knew what to expect.

I'm in a process of selling up my flat and just had to cough up £150 + vat myself. Having had an informal chat with my solicitor, she's quite angry about the way the managment company charge whatever they like. I'm not surprised - My solicitor is chrging £400 for conveyance which takes many letters, reading documents, making contacts etc etc and managing company charges £175 for work that probably takes an hour or two.

Personally, I think this kind of cost should be standardised nationally to stop unfair charges. Will never happen though. For now, I dont think its worth while fighting - you'll regret it far more if the buyer gets cold feet after not progressing for several weeks....

mrtwis

Thanks again for the replies.

I've come to accept that I have little choice in this but to bend over and take it if I want to sell up and move on.

However the whole thing continues to astound me.

My question; "Why do *I* have to pay?" seems reasonable enough. Other people on this site have also asked it.

The answer I was expecting was something along the lines of:
"You, the vendor of a leasehold, are obliged to pay as legislated in the Bug!!!y Act 1533 section x.y(z) which states:
..blah blah blah... in a leasehold sale the purchaser's solicitors are free to
demand whatever information they care to from the leaseholder's
management company(s) as they see fit, with any expenses arising from such
demands to be borne exclusively by the leaseholder... blah blah blah"

Neither my solicitor, nor anyone on this site from what I've seen, have been able to provide such an answer which leads me to believe that no such legislation exists. In absence of such legislation I then turn to the HIPS act and the "Required leasehold documents" and "Required leasehold information" sections which implicitly seem to say that since 'Managing Agent enquiries' is not included then I have a legal argument to *not* provide it.

I don't particularly have a problem with a management company charging extortionate fees for this type of information. Most of what they provide is seemingly just duplicating any correspondence that would have been provided to the leaseholder throughout the lease and therefore could be avoided if the leaseholder retains that correspondence. Similarly, if the enquiries put to it are redundant or could be answered through other means.

One of the enquiries my purchaser's solicitors have put forward is to be supplied with a copy of the managing company's Memorandum and Articles of Association. Such a request irks me for several reasons:
1) Anyone can go to the Companies House website and obtain said document whenever they want (for £1).
2) The copy of the document from Companies House is probably a better source than one requested from the company itself (ie if there's anything dodgy with the company's Memorandum they could potentially supply an edited version of it).
3) The companies house website is probably a better source for finding any dodgy activity the company's involved in anyways.
4) I've never seen said document nor consider it of any significant importance to the value of my flat.
5) I'm having to pay for it.

I think it's perfectly understandable for a purchaser (or their solicitor) to want to know certain information about a managing company(s) (MC) prior to exchange. The information can probably be categorized as follows:
1) Information required for transferring ownership of the leasehold to the purchaser.
2) Accounts between the leaseholder and the MC are fully paid up.
3) That there aren't any problems or variations from the lease in regards to the specific leasehold property.
4) That there aren't any problems or variations from the lease in regards to the block.
5) That the MC itself is healthy
The first three categories are things that quite rightly the vendor should be obliged to provide or assist with and arguably are required through the HIPs Act or the TA7. The last two however quickly fall outside of the realm of info that the vendor can assist with and are things that aren't necessarily going to be disclosed through enquiries with the MC anyways. Requiring the vendor to provide/pay for such info looks, to me, as if the purchaser's solicitors are simply being lazy and/or performing an act of covering their a$$ at the vendor's expense.

The requirement to pay for a HIP prior to selling my place was a painful enough pill to swallow given that I was paying *again* for much of the same (redundant) information I paid for 3 years ago (eg local searches etc). It was made slightly less painful by the idea that HIPs are seemingly a good thing such that it allows me to be more informed should I buy again. The requirement to pay for these MA enquiries is even more painful not only because its more than I paid for the HIP but because its only been disclosed at the 11th hour and seemingly doesn't have any validity behind it. All this on top of the 10k+ loss I'm taking on the sale...

*sigh*

timmyt

Council of Mortgage Lenders handbook requires it...nothing to do with any other legilations....and as a result, it has become standard practice for a seller to produce it. Obviously not the buyer.

Its not a bad fee either so get the flat sold on the advice of your lawyer and get ready for that exchange