This year the Leasehold Advisory service (LEASE) will deal with some 40,000 enquiries and its website will host half a million visitors or more. The majority of these enquiries relate to the service charges and the management of blocks of flats, and perhaps much of the leaseholders’ confusion could be avoided if buyers really understood what they were committing to when signing a lease.

A good start is to go the extra mile and encourage vendors to include as much information as possible in the HIP, says Tony Essien, Chief Executive at The Leasehold Advisory Service (LEASE), who leads a 15-strong team of specialist lawyers funded by Government to provide free initial legal advice to leaseholders, landlords, professional advisers, managers and others on the law affecting residential leasehold and commonhold.

PROPERTYdrum spoke to Tony Essien about what must be included and what can be included to help a sale go smoothly and avoid nasty hidden surprises between offer and completion.

WHAT MUST A HIP FOR A LEASEHOLD FLAT CONTAIN?

The law sets out a list of required documents which must be included and of optional authorised information which can be included. The authorised documents provide extra information that might be useful to a purchaser and so help in selling the flat. If flat-owners have kept all communications from the landlord or the managing agent relating to the flat, most of this information will be to hand anyway, so it makes sense to include them. Even though they may add to the apparent costs of preparing the HIP, they will, in all likelihood pay for themselves by helping the sale to go through more easily. Indeed, not having this information to hand really ought to set alarm bells ringing in prospective buyers’ heads. Why risk derailing a sale?

Documents and information that are required for all types of property, leasehold and freehold:

• an index of the contents of the HIP
• a Property Information Questionnaire
• the sale statement
• the standard property searches
• an Energy Performance Certificate

In addition, other documents and information that are required for leasehold properties are:

• a copy of the lease. If necessary, a copy can be obtained from the Land Registry
• an extended Property Information Questionnaire including mandatory questions on leasehold matters. It should be possible to answer all of these without making enquiries of the landlord or managing agent.

WHAT ELSE MAY A HIP FOR A LEASEHOLD FLAT CONTAIN?

The authorised documents for leasehold properties that can be added will often speed up a buyer’s decision and will certainly speed up subsequent conveyancing are:

• the name and address of the lessor (the landlord) and of any managing agent, which can be found on any demand for service charges and ground rent
• a copy of any special management regulations relating to the building or estate
• statements or summaries of the annual service charge accounts for the past three years
• all requests for payment of ground rent, service charges and insurance for the past 12 months
• information on the landlord’s proposals for any future works or long-term agreements or contracts

Other useful information that can be included:

• any licence relating to the flat
• details of the freehold, including any proposals to buy it
• details of the rights and obligations of the leaseholder and the landlord and whether these have been complied with
• information relating to the landlord and any agent or manager of the building that might affect the purchaser’s relationship with them
• details and membership of any body which manages the building, such as a Residents’ Management Company (RMC) or Right to Manage Company (RTM)
• information on any outstanding payments for service charges or ground rent
• information on any sinking fund or reserve fund for the building, including whether any payments are outstanding
• information about who is responsible for insuring the building, including the terms of the insurance cover and whether any payments are outstanding.

OBTAINING INFORMATION FROM THE MANAGING AGENT

Many, although not all, of the documents should be held by the managing agent. Remember that most agents will charge the flat’s vendor a fee for providing copies and that there is no statutory obligation on them to comply with requests for HIP documents, or to do so in a timely manner. Vendors looking for a quick sale should be mindful of this.

WHERE CAN I GET MORE ADVICE?

Your or your vendors can contact LEASE (The Leasehold Advisory Service), www.lease-advice.org. Estate agents are welcome to call to speak to an adviser on 020 7354 5380 Monday to Friday 9.30am to 5.00pm or email info@lease-advice.org. LEASE publishes a detailed advice guide on HIPs which is available on request or to view or download at its website. LEASE also publishes a useful guide called “Living in Leasehold Flats – a guide to how it works” and recommends that agents refer all prospective buyers to it.

The Leasehold Advisory Service (LEASE) is an Executive Non Departmental Public Body (ENDPB) funded by Government to provide free legal advice to leaseholders, landlords, professional advisers, managers and others on the law affecting residential leasehold and commonhold. It also provides a mediation service.

LEASE is funded by: Communities and Local Government (CLG) Ministry of Justice (MoJ) Welsh Assembly Government (WAG)