Risk management
Leasehold conveyancing know the risksA leasehold conveyancing transaction has many risks and dangers, and often requires more time, expertise and attention to detail than a freehold matter.
There is a real danger of overlooking something obvious.A checklist can be invaluable.
Some of the more obvious points overlooked include:l Is the lease complete? In one case a page was omitted from the copy supplied.
The solicitor did not notice.
Unfortunately it transpired that the missing page contained a forfeiture on bankruptcy clause.l Read all the lease.
Does it make sense? Do you understand all the clauses? The dangerous clause may be hidden on page 26.l Check the unexpired term.
Does it satisfy Council of Mortgage Lenders (CML) handbook requirements? Have you told the client? Does the client understand what the unexpired term means?l Is the property description correct? Does it correspond with the plan? Has the plan been properly coloured? Has the client seen and confirmed the plan?l Pay special attention to garages and parking spaces.
Are they included in the demise, or is it a right to use in common with others? l Rights.
What rights are there? Can the client actually get to and from the property? Are there any restrictions as to exercising the rights?l Exceptions and reservations.
What such matters affect the property, and in whose favour are they?l Is ground rent fixed or subject to review? If the latter, does the review procedure work? Check, by doing a calculation, to ascertain potential future liability.
Do you need experts advice?l Service charge.
How much is it? How often is it paid and to whom? Check the accounts for at least three years Do you understand them and can you explain them to the client? Are there any sums likely to become due? Check receipts for items that can be expensive, such as lifts and external decoration.l Management company.
Does it exist? Do a company search.
Obligations to the company is it a professional company or does it consist of tenants? Be aware of the CML handbook requirements.l Forfeiture provisions.
What are they? Bankruptcy is invariably unacceptable.l Insurance provisions.
What are they? Obtain a copy policy and up-to-date schedule.
If necessary liaise direct with insurance company.
Check the policy is valid, check the sums insured.
Refer to an expert if necessary (can you really advise on reinstatement value of a block of 12 flats?) Are insurance arrangements acceptable to lender and buyer clients?l Obtain a clear ground rent receipt.l Identify covenants and regulations and tell the client.l Repairing obligations.
Check and advise the client.
Can access be obtained for emergency repairs?l Always comply with CML handbook requirements.l Always serve all notices required by the lease.This checklist is not exhaustive.
Use it as a basis to create your own.l This column was prepared by the St.
Paul risk management team
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