When purchasing a leasehold property, whether it be a flat or a house you need to obtain a management pack from the freeholder which will set out the freeholder's requirements following completion of the purchase. The information contained in the pack is important as it relates to the property and can influence your decision to purchase the property.
It is for a seller to provide you with a management pack. Unfortunately, management packs can be very expensive, sometimes up to £500 but a leasehold property cannot be sold without one.
Below you will find the information contained in the pack:
Services Charges
This information will be contained in the pack and should provide you with 3 years of accounts. Your solicitor/conveyancer should review this closely to see if there are any unusual expenditures. You must also ensure that there are no service charge arrears on the account, if there are, your solicitor/conveyancer should ensure these are addressed upon completion.
Ground Rent
This is usually referred to in the lease although you may find out that the ground rent is collected by the Landlord/freeholder this may differ. Again, like service charges your solicitor/conveyancer should ensure that this is not in arrears.
Deed of Covenant
The Lease will also inform you whether a deed of covenant must be entered into by the new owner then a draft copy should be provided by the management company together with their fees. By entering into a Deed of Covenant the new home owner is making a promise to the Landlord to adhere to all the provisions in the lease.
Easements and Covenants
The 2011 Law Commission Report highlighted many practical problems with easements and covenants and proposed remedying them. Perhaps, the most important is the rule in freehold land that although a negative covenant can bind purchasers to a covenanter, a positive one cannot. The proposal is for a new 'land obligation' which will bind successors whether negative or positive.
This proposed change will make it much easier to arrange for the ongoing maintenance of roads, sewage treatment plants and environmental areas. The Report recommends that these rules be simplified and most importantly, both the benefit and burden of covenants will be registered against the respective titles affected, as easements already are. It will be possible to see clearly who has the benefit as well as the burden of the covenant.
As far as easements are concerned, the Report recommended that 20 years' non-use of an easement should be sufficient to raise a presumption that the easement has been abandoned. This should result in a lesser need to worry about old or unknown easements affecting land and the expense of a policy to cover the risks involved.
There are also proposed changes with regard to the implication of easements on a sale of part. The rule existing in S62 LPA and Wheeldon v Burrows are confusing and unclear. The recommendation is that S62 should no longer lead to the creation of easements. The proposal is that easements should still be implied on a sale of part, but only in clearer, strictly defined circumstances.
Covenants
Many properties, both Freehold and Leasehold will contain positive and restrictive covenants within the legal title of the property. Covenants are legally binding restrictions, duties or conditions imposed on a property that have to be complied with through your ownership of the property. Failure to do so may lead to enforcement action and financial penalties, which are decided by the restriction holder.
Positive covenant
A positive covenant is an obligation to do something over land. Examples of this include:
- To maintain a boundary.
- Contribute towards the cost of a private access road.
- The payment of service charge fee for a leasehold premise.
The effect of positive covenants
Positive covenants are put into place by way of an agreement between the original parties to a deed and cannot run with the land when it is sold. Consequently, if you were the original party to a deed who was required to undertake a positive action over land and it was later sold, you as the original party to the deed would remain liable for any breaches of that positive covenant.
How can this be resolved?
There are two ways in which you can counteract this effect as the original party who is burdened by the positive covenant. Firstly, the most common way is for a proposed purchaser of the burdened land to enter into a deed of covenant. The deed of covenant is confirmation that the proposed purchaser will perform the positive covenant and that they will not sell the land unless a deed is obtained. Secondly, your solicitor could put into force a chain of indemnity in the transfer deed.
If on the other hand you are the party that benefits from the positive covenant, future owners of the land who have the benefit can enforce the covenant against the original owner of the burdened land.
Restrictive covenant
A restrictive covenant limits the use of the land in a specified way. Here are just a few examples of the types of restrictive covenants you might come across:
- To be prohibited from using the land for trade or business purposes.
- Not being allowed to build on the land without the consent of the party who has the benefit of the covenant.
- Restrictions on access over land.
The effect of restrictive covenants
Once the restrictive covenant is put into place by way of a deed, in contrast to positive covenants, restrictive covenants run with the land and are not simply bound to the original parties to the deed.
They are enforceable by one landowner against another, provided that the following conditions are satisfied:
- The covenant must be restrictive.
- There must be land that benefits from the covenant.
- The burden of the covenant must have been intended to run with the land i.e. it must be made clear that it is to take effect on future owners of the land. Future owners of the land must be given notice of the covenant.
