The Conveyancing Association (CA) has issued a series of recommendations to end what it believes to be significant delays and overcharging taking place within the leasehold transaction process.
With a growing number of leasehold transactions taking place each year across all UK regions – 260,000 in 2015 up from 220,000 in 2011, according to the Land Registry – and with 57% of all transactions in Greater London and 40% in the North West being for leasehold properties, the CA wants to see a streamlined process taking out the unnecessary delays, and a cut to the ‘unwarranted’ fees charged by many lease administrators – those who administer the terms of the lease – to the leaseholder.
In a recent leasehold survey of conveyancers, 56% of CA member firms said they believe lease administrators often (in over 30% of transactions) charge unreasonable fees, and a further 32% said they believe they regularly (16-30% of transactions) charge unreasonable fees.
Furthermore, 62% of estate agents say the provision of leasehold sale information causes real issues in the house-moving process, with 34% branding it ‘an absolute nightmare’.
Common problems within the process include:
- Identifying the lease administrator –there is no registration or regulation required and significant delays can be incurred attempting to find the right person/company.
- An imbalance of bargaining power between the lease administrator and the leaseholder – there is currently no requirement for the publication of costs or any control over their extent in relation to receipt of service of notice, deed of covenant, share transfer or certificate of compliance.
- Overcharging on the part of the lease administrators. The CA says it has seen cases where costs levied are up to nine times more than what the conveyancing industry might expect them to charge for carrying out such work. On average lease administrators are charging between £250 per hour and £360 per hour for administrative work, far in excess of what conveyancers and customers might expect those charges to be.
- There is also often a duplication of costs with leaseholders required to pay multiple parties to complete their LPE1 (leasehold Property Enquiry) form.
- No redress system is currently available to existing or incoming leaseholders with no effective consumer rights and no recourse to the Ombudsman given its lack of jurisdiction over costs unless the complaint is in respect of a breach of agreement for those costs.
- There can be significant delays in the provision of the LPE1 information and dealing with other requirements post-sale necessary for the registration and protection of the leaseholder’s title. This causes significant distress to a chain of house movers and can cause sales to fall through.
The CA has therefore set out a number of aims in order to tackle these problems:
- To reduce delays in the provision of information required in the conveyancing process.
- To enable the delivery of reasonable and proportionate administrative charges, in particular with respect to administrative charges not covered by the Commonhold and leasehold Reform Act 2002.
- To create a level playing field across Managing Agents, Management Companies and Landlords.
- For relevant parties to provide information in a timely fashion to reduce the delays in the home moving process.
Specifically, the CA wants an update to the Commonhold and Leasehold Reform Act 2002 to:-
- Update paragraph 1 of Schedule 11 to include all administrative payments to lease administrators by any party to be a reasonable fee and these fees should not be duplicated were there are multiple lease administrators.
- Include an obligation to provide the data within 20 days of receipt of payment.
- To require any lease administrator providing this service to be a member of one of the three existing property ombudsmen schemes.
- To grant jurisdiction to the First Tier Tribunal to hear all cases not resolved by the Ombudsmen.
It also wants digitisation of lease administrators held by HM Land Registry to create a lease administrator’s Register.
Beth Rudolf, director of delivery at the Conveyancing Association, said: “For many people the process of purchasing a leasehold property can be fraught with delay and significant unexpected extra costs that seem arbitrary in the extreme. Talk to those who have gone through that process and you will hear an acute sense of frustration that begins with attempting to track down the leasehold Administrator, moves on to trying to get the necessary information out of them within a normal timescale, and finally ends with sometimes multiple charges to different parties, often for the same tasks, which in no way reflect the level of work required to deliver that information.
“Given this, and the fact that the number of leasehold transactions continues to grow, the CA believes now is the time for action to take place in order to develop a much fairer system, with transparent and reasonable costs, as well as an obligation to provide the data required within a 20-day timescale.
“The, quite frankly, extortionate costs being levelled by some coupled with a distinct lack of motivation to provide the necessary information means action has to be taken, especially when (by our reckoning) 75% of leaseholders are being charged excessive fees for the work involved – in 2015 this equates to 200,000 cases. If you add in the sellers who have to pay for the LPE1 this number can be upped to 400,000.
“Of course, there are some great lease administrators out there and we are working with their trade associations who are just as frustrated by the rogues. We understand they would like to see all lease administrators under the jurisdiction of the Ombudsmen, just as their members already are, to ensure there is a level playing field and to give guidance as to what reasonable fees and timescales should be.
“We will continue to work with them to provide a platform for the industry to develop solutions to right these wrongs. By changing the Commonhold and leasehold Reform Act 2002 and collating a register of all lease administrators we will go a long way towards developing a process which is far fairer and more fit for purpose for what looks likely to be a growing number of transactions within the purchase market.”