What To Consider When Selling Your Apartment

This is a guide to the typical events in selling a leasehold property. It is good for leaseholders to have a general understanding of the process and how they can assist in the sale.

One of the most important documents you will require (and should already have) is a copy of your lease. Your managing agent does not normally have a copy of your lease. You or your solicitor can obtain a copy from the Land Registry if you do not have one yourself.

Typical steps in selling a flat

You make the decision to market the flat for sale with an estate agent.
You accept an offer (subject to contract).
You and the purchaser each instruct your own solicitors to deal with the sale/purchase.
Your solicitor obtains proof of your ownership of the flat, usually by obtaining a copy of your title from the Land Registry.
Your solicitor prepares a draft contract of sale and sends to the purchaser’s solicitor, with a copy of your title, copy of the freeholder’s title and a copy of your lease.
The buyer’s solicitor will undertake searches and make enquiries about the flat. Some of the questions about the management of the block of flats will be sent to the managing agent and/or freeholder to answer.
Once the enquiries are completed and the contract agreed, contracts can be exchanged, a deposit paid and a completion date is set.
A lease often requires the landlord to be notified in writing of the sale within 28 days of it taking place.

Keeping useful documents

If you are thinking of selling your flat it is in your interest to keep documents relating to the management of the block so that they are available to answer enquiries. If you do this it will save you time and money later on. The information you should keep is:

Annual statements of account and budgets for service charges
Recent demands for service charges and ground rent
Letters about proposed major works to your block
Share or membership certificates if your ownership of the flat also requires you to be a shareholder or member of a residents’ management company
Minutes of meetings if there is a residents’ management company
Any regulations about the management of your block additional to the lease
Memorandum & Articles of Association for your residents’ management company if there is one.

Enquiries that your managing agent can answer

Your managing agent will usually be asked to supply the answer to several enquiries about the management of the block and the lessee’s payments of service charge and ground rent. These queries will usually be raised by the buyer but should be sent to the agent by your solicitor.

An agent cannot give information direct to the buyer as this may be a breach of data protection law.

Some of the queries include:

Provide copies of insurance policies
Provide copies of last 3 years’ service charge accounts
Provide latest service charge budget
Provide copies of latest ground rent and service charge demands
Confirm that payments of service charge and ground rent are up to date
Advise if any surplus or deficit may be due after the end of the current financial year
Provide information on any major works underway and planned
Provide information on any reserve funds held
Provide details of any breaches of lease
Provide details of any consents for alterations or improvement
Provide a copy of the fire risk assessment for common parts

Conditions on sales in leases

The sale of the remaining term of a lease is called an assignment. Most leases contain assignment conditions which a seller of the lease must comply with. These conditions are used to assist with the better management of schemes. They enable an agent to keep track of who is the lessee and so be able to effectively collect ground rent and service charges. Assignment conditions often also include references to mortgages and sub-letting.

There are three main types of conditions:

Deed of Covenant

The seller often has to ensure that the buyer enters into a deed of covenant with the landlord/managing agent or management company. In this way the landlord or management company has a direct contract with the buyer and prior notification of the new lessee.

No assignment without consent

A typical lease will require that the sale or mortgage of the flat cannot take place without the prior written consent of the landlord. Even if a lessee assigns a lease without prior consent the assignment is still legally valid. However, if the landlord or agent did not wish to recognise the new lessee, it could refuse to register the assignment if the lease requires it. This is extremely rare.

Requirement to register the assignment

With this type of assignment condition the leaseholder has freedom to sell but the lease requires that the landlord (and/or the agent) must be notified of the sale usually within 28 days of the sale by the buyers solicitor.

The buyer will also pay the management company/freeholder a fee for registering the deed of covenant or granting consent and assignment of the lease.

Fees charged by managing agents

Agents will charge fees for work arising out of flat sales. It is customary for the seller to pay for these costs. These will typically be for:

Answering enquiries
Where consent is required before sale
Deeds of covenant upon sale
Registration of the assignment – the change of lessee after a sale
Registration of a mortgage after a sale
Arrears of ground rent and service charges

You will be asked to settle all outstanding debts before the sale is completed or your solicitor will be asked to give an undertaking to pay the debts on completion. Even though you are planning to sell you should pay the service charge as normal. Any apportionment of service charge or ground rent is worked out between the two solicitors on completion. Agents and landlords will not give consents, deeds of covenant or register sales if debts are not paid.

Share and membership certificates

Many blocks of flats are owned and/or managed by the lessees who live in them. Often anyone owning a flat has to also become a shareholder or a member of a company set up in which some or all lessees are shareholders or members. If this applies to you on sale you will need to return your shareholder’s certificate or assign your membership of the company. Your solicitor will deal with this.