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Service Charges and Ground Rent Paid in Advance by Seller
kivin
Posts: 20 Forumite
Hi
We are in the process of purchasing a leasehold flat and received an updated "financial statement" a few weeks ago showing expected costs. On there was "SC and GR apportionment" which when we looked into it, found out this was an estimate of what the service charge and ground rent payments we will have to pay when we move in for this billing period. Service charge / ground rent is paid every 6 months, and the seller has already paid this current bill up until the end of October, so this is what the "SC and GR apportionment" costs are for, which we are fine with.
However, having since reviewed all the other paperwork, the following is in the lease:
"A Lessee who assigns or parts with possession of the Demised Property shall not be entitled to the return of any sums paid under this Schedule and the balance of any such sums shall enure for the benefit of the Lessee's successors in title".
The Schedule referred to above sets out the fixed ground rent costs, and how the service charges are calculated each year.
Our understanding of this is that we would therefore benefit from the seller's already paid service charge and ground rent costs (as would whoeever we sell the property to in the future). I queried this with our solicitors and received a response back that it is a standard condition of sale in the contract that the buyer reimburses the seller any ground rent and service charges they have paid in advance, and that this is an obligation. Again, we are fine with this is this is the case and correct.
I then reviewed the contract, and there is no mention at all of this. I raised another query with our solicitors and the latest reponse is that "there is no specific clause, but it is usual practice in leasehold transactions for the sellers solicitors to provide a completion statement on exchange of contracts apportioning ground rent, service charge and/or insurance which the seller has paid in advance, as the seller will only be liable for the ground rent, service charge etc up until the completion day."
Does anyone have any advice? Do we have a point? Are the solicitors fobbing us off? Or should we just stop questioning it and pay it? It is a minor amount in the ground scheme of things, but it just doesn't seem right with what we have read in the lease.
We are in the process of purchasing a leasehold flat and received an updated "financial statement" a few weeks ago showing expected costs. On there was "SC and GR apportionment" which when we looked into it, found out this was an estimate of what the service charge and ground rent payments we will have to pay when we move in for this billing period. Service charge / ground rent is paid every 6 months, and the seller has already paid this current bill up until the end of October, so this is what the "SC and GR apportionment" costs are for, which we are fine with.
However, having since reviewed all the other paperwork, the following is in the lease:
"A Lessee who assigns or parts with possession of the Demised Property shall not be entitled to the return of any sums paid under this Schedule and the balance of any such sums shall enure for the benefit of the Lessee's successors in title".
The Schedule referred to above sets out the fixed ground rent costs, and how the service charges are calculated each year.
Our understanding of this is that we would therefore benefit from the seller's already paid service charge and ground rent costs (as would whoeever we sell the property to in the future). I queried this with our solicitors and received a response back that it is a standard condition of sale in the contract that the buyer reimburses the seller any ground rent and service charges they have paid in advance, and that this is an obligation. Again, we are fine with this is this is the case and correct.
I then reviewed the contract, and there is no mention at all of this. I raised another query with our solicitors and the latest reponse is that "there is no specific clause, but it is usual practice in leasehold transactions for the sellers solicitors to provide a completion statement on exchange of contracts apportioning ground rent, service charge and/or insurance which the seller has paid in advance, as the seller will only be liable for the ground rent, service charge etc up until the completion day."
Does anyone have any advice? Do we have a point? Are the solicitors fobbing us off? Or should we just stop questioning it and pay it? It is a minor amount in the ground scheme of things, but it just doesn't seem right with what we have read in the lease.
0
Comments
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Your solicitor is correct.
Once you complete any service charges become payable by you, therefore any paid in advance by the vendor are paid back to them.
You can't expect them to pay the service charge after sale as it is no longer their responsibility.0 -
The lease wording protects the freeholder, not the lease purchaser (ie you). Otherwise, f/h cash flow would be impacted if they had to reimburse to the vendor and then chase you (purchaser) for the remaining GR/SC due.0
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Yor will benefit from the pre-paid fees the current owner has paid.
You re-imburse him pro-rata when you buy.
What's the problem?0 -
TrickyDicky101 wrote: »The lease wording protects the freeholder, not the lease purchaser (ie you). Otherwise, f/h cash flow would be impacted if they had to reimburse to the vendor and then chase you (purchaser) for the remaining GR/SC due.
Thank you, the penny has now dropped! Had our solicitor explained it in such terms we wouldn't have been left confused.
Just to clarify for other responses, we weren't expecting the seller to pay for the service charges / ground rent, but couldn't understand how this fitted in with what we had read in the lease - the quoted reponse above though helps make sense of it.
(We are FTBs....this isn't the first stupid question we've asked, and probbaly won't be the last!)0 -
(We are FTBs....this isn't the first stupid question we've asked, and probbaly won't be the last!)
The whole ftb process is confusing.
Just keep posting - no question is stupid when you don't know the answer!
I'm a retired employment solicitor. Hopefully some of my comments might be useful, but they are only my opinion and not intended as legal advice.0
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