Dispute with a freeholder? What to do before selling your home
If you are in a dispute with your freeholder when you put your home on the market, it could jeopardise your sale. Our checklist sets out what you need to do to prevent this.
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Complexities of Leasehold
Selling any leasehold property is always more time-consuming than selling a freehold house.
One of the reasons for this is buyers (and their mortgage lenders) require a great deal more information about the property and especially about the management of the building.
A common cause of hold-ups is when it is discovered that there is some ongoing dispute between the leaseholder and the freeholder of the building, or the agents who manage the building.
So what steps should you take when you want to sell your home and have such a dispute?
Perhaps you have queried the amount of the service charges or even refused to pay them. Or perhaps the freeholder says it is planning expensive works to the building and you are expected to pay a share of the cost – or conversely the freeholder is refusing to essential maintenance work to the building and your flat is being damaged.
You may not have a dispute directly with the freeholder but perhaps you have had cause to complain to them about something one of the other flat-owners (or their tenants) are doing or not doing.
Excessive noise is a frequent cause for complaint.
Perhaps water is leaking into your flat from the upstairs flat and the occupiers of that flat won't fix the leak. Or perhaps it is you that have received a complaint about something you are doing or not doing, and you are denying that you are responsible.
Disputes = Delays
If you are in the middle of an unresolved dispute, there is a risk that your sale will be delayed when the buyer finds out about it. You could even lose your buyer.perhaps you will even lose the buyer. So what proactive steps can you take prevent this from happening?
Proactive steps before you put your market on the property
The following are options to consider before the property goes on the market:
Speak to a solicitor
The first step should be to contact a solicitor who is familiar with leasehold property transactions and how best to proceed.
Tip: Instruct a no sale no fee solicitor well in advance of finding a buyer.
Most work on a no sale no fee basis so it won't cost you any more money.
Contacting a solicitor before putting any property on the market is the key take away here. It can save time and delays when a buyer has been found. This is even more important if you are trying to sell a flat or a leasehold house and know that there is a dispute with the freeholder.
Don't bury your head or think that the dispute won't be discovered
Don't take the view that it is easier to keep quiet about any disputes, or tell the buyer there are no problems.
On a sale of leasehold property, especially flats and apartments, sellers are expected to complete information forms that will be sent to the buyer.
In addition to the general information form there is a further Information Form specifically for leasehold properties. This asks you the seller to state whether they have received any complaints from the freeholder or the managing agents or from any neighbours, or whether you have made any such complaints.
If the buyer does not receive this information their conveyancing solicitor will want to know why.
Providing incorrect or misleading information could lead to a subsequent claim for misrepresentation. But the buyer will not only rely on the information that you give – solicitors also expect to obtain a wide variety of information from the freeholder themselves.
Even if you say there are no disputes, the freeholder or managing agent will give details of any disputes or complaints.
Will the dispute affect the new owner?
Buyers are most likely to be concerned about disputes that could continue to affect them after completion. So if possible you should take steps yourself to resolve any dispute before trying to sell the property.
For example, you must consider clearing any services charge and/or ground rent arrears (and any interest charged) if you have previously refused to pay because you consider the charges unreasonable.
Don't withhold service charge payments.
While leaseholders do have various rights to challenge unreasonable service charges they are not entitled to withhold payment when properly demanded. If the freeholder claims that there are outstanding arrears at the date of sale they will expect them to be paid when they are notified of the sale.
The buyer's conveyancing solicitors will ask the freeholders for three-years service charge accounts, plus estimate of current expenses, so any buyer will be able to decide for themselves whether the service charges are acceptable. But if there are any arrears then they will expect these to be settled – and if not a deduction will be made from the purchase price.
Resolve any disputes over alterations
Disputes sometimes arise when a freeholder claims that a flat-owner has made alterations to the property which are not permitted by the lease and have not been otherwise agreed.
If a buyer discovers there are unauthorised alterations then they will expect the situation to be satisfactorily remedied before completion.
If this is your situation then you have the choice of either removing the alteration (which may be reasonable if it is something minor) or aAlternatively asking the freeholder for formal consent – which will probably involve paying various costs and will take some time to complete. Your solicitor can advise you further about this.
There will be some disputes that may have more serious consequences for a sale, especially if matters have progressed to litigation. This could be when the freeholder has started legal action against you for recovery of service charge arrears or in respect of an alleged breach of covenant in the lease.
Again it would be preferable to try and resolve the issue out of court and as quickly as possible.
Perhaps you (and some of the other leaseholders) have brought an action against the freeholder, asking a court to declare that service charges are unreasonable or that the freeholder has failed to carry out necessary repairs.
When such litigation is still current then you must obtain advice from your solicitor about any proposed sale before considering putting the property on the market.
If the litigation has been concluded then you should be prepared to provide your conveyancing solicitor with full details as they will undoubtedly be required by the buyer.
No matter what the nature of the dispute, the conveyancing process is designed to 'smoke out' the details. The best course of action is to 'square -up' to the issue and get it resolved proactively if you can.
Instructing a solicitor before going on the market means you get access to critical advice on how to resolve the issues at the earliest stage. In effect, the solicitor's advice is free as 'no sale no fee' means you only pay a fixed fee if you sell your property.
The sooner you instruct, the sooner you start getting the solicitor's input.