Deed of Covenant, costs?!

NathanE

My solicitor has just informed me that I need to pay £300 to sign a "Deed of Covenant" for the "landlord".

Now, after researching this it appears that if a leasehold property was granted "right to manage" by the freeholder, and therefore has a separate management company, then it should be the management company that oversees the signing of any Deed of Covenant?

Is this correct?

The person I am buying the flat from is a director of the "management company", so I would expect that there would be no charge.

G_M

Just because he is the Director does not mean he does not have to follow the Management Company's policies - so if the Mgmt Co normally charges, he cannot brush the charge under the carpet!

NathanE

That may be true. But still, I need to make sure whether it should be LL or the MC that should be charging for this. Because one might be cheaper than the other!

propertyman

Right to manage means one thing in law but is sometimes confused with other situations.

If the "right to manage " is the statutory one under "CLRA 2002" then the deed of covenant is entered into between the RTM company and you. Ask the director of the RTMCo , they can check the articles of association which will determine this, or if the company is named "your block of flats " RTM company Limited, then this applies. http://www.lease-advice.org/publications/documents/document.asp?item=21

if however this is a situation where

a: the freeholder has appointed a residents owned management company to take on the tasks of managing agent then the deed is between you and the freeholder and is set out in the lease

b; if the lease is a tripartite one( Freeholder you and a management company ( owned by residents) )then it depends on the lease wording.

The cost of the deed is an administration cost and must be fair and reasonable. Irrespective of who it is between there are numerous LVT decisions that set the cost at between £150 and £200, and if the deed is one that is already drafted and an appendix or schedule in the lease, then £75 to £100. VAT may need to be added.

Of course your solicitor should be able to explain this to you , and ought to have done this already.

Pick up the phone and ask " why do I need to go to MSE to find this out when I am paying you?"

propertyman

NathanE wrote: »

That may be true. But still, I need to make sure whether it should be LL or the MC that should be charging for this. Because one might be cheaper than the other!

No, because only one or other can enter into the deed.

It is not a choice...

propertyman

I agree with Timmyt, mostly( the solicitor needn't charge, just give you your options as T sets out) .

But don't give up and jump for the easy "share the cost" answer.

First have a look at the lease, deeds are often put in the the lease or at the end;

if so then all it needs to be done is print it out and sign it. If the signatory is the RTM Director and you, then what real cost is there, a little paper ink envelopes and stamps....

NathanE

Unfortunately the seller has already paid an equivalent £300 just to get some documents from the freeholder. So it appears we are even already...

Just going to have to accept it I think!

NathanE

I've checked the lease and yes it contains all the things like "no pets", "no noise" etc etc in a giant list of 18 clauses.

So you think I can just print this section off and write "I agree to these rules." and sign it? Surely the freeholder won't accept that as I'll be depriving them of their easy £300!

propertyman

NathanE wrote: »

So you think I can just print this section off and write "I agree to these rules." and sign it? Surely the freeholder won't accept that as I'll be depriving them of their easy £300!

No, the deed is a separate document saying, in legal terminology, that you agree to abide by the rules that you have found.

What I was saying is that often leases contain such a document as an appedivx recsding thneed for cuistom drafting.

Sadly not in this case; so your only option is to challenge the fee after ward if you feel inclined to do so.

However it is not waste of time few buyers do read their lease and are unaware of matters, often to their later cost. Well done