When buying a leasehold property there is an additional obligation to consider as well as all the usual investigations and reviews (property checks, title and deeds checks, AML and ID verification, to name but a few). It is usual for the terms of a lease to include an obligation to serve notice of the purchase on the landlord and/or their managing agent – but how important is this task?
Is it purely an administration duty that can be sidelined for a quiet day, or potentially forgotten about? Does it really matter if notice is served or not, especially when there are so many other important reviews and obligations that need to take place in order to purchase a property?
In short, there are very real consequences of not serving notice and complying with this obligation is crucial.
- Legal obligation: The lease will likely contain a legal requirement detailing that the landlord needs to be informed of any change of ownership and within a certain timeframe. If this is not complied with penalties can be issued by the landlord. If action is still not taken, legal proceedings can ultimately be brought by or on behalf of the landlord. If proceedings are issued it is likely that third-party solicitors will be instructed and the legal costs involved will be substantial and may well exceed thousands of pounds.
- Communication: The landlord or managing agent may need to contact the new leaseholder(s) in relation to issues relating to the building where the property is situated, such as repair works or maintenance issues. If the landlord is unable to establish contact with the new leaseholder(s) this will inconvenience all parties and may negatively impact the acting solicitors/conveyancers due to failure to comply with their obligations to serve notice.
- Updating ownership records: The landlord/managing agent will need current details for the new leaseholder(s) to ensure ground rent and/or service charge requests can be issued correctly. If these requests are not received by the new leaseholder(s), late payment penalties may be issued to them, or in extreme cases recovery proceedings for any outstanding debts. The new leasehold(s) may seek renumeration from their original solicitor/conveyancer if this occurs.
It is ultimately the buyer’s legal representative’s responsibility to ensure notice of transfer is served on the landlord or managing agent correctly, within the proper timescales, and in accordance with the specific requirements of the lease.
This is essential to ensure compliance with the lease obligations and a smooth transition for the new leaseholder(s). As noted above, if this process does not take place it can lead to legal repercussions, claims and/or delays for the new leaseholder(s) in receiving potentially important communication regarding their property.
In addition to serving notice of transfer, the buyer’s legal representative is also under a responsibility to inform the landlord if a lender has a financial interest in the property. Therefore, if the property is being purchased subject to a mortgage, a notice of charge must also be served on the landlord/managing agent to ensure that the lender’s rights are protected, and all legal obligations are fulfilled.
