A growing number of leasehold sales are taking place each year across all UK regions, up from 220,000 in 2011 to 260,000 in 2015, with 57% in Greater London and 40% in the North West.
As a result the CA wants to see a streamlined process taking out the unnecessary delays and a cut to what it describes as ‘unwarranted’ fees charged by many lease administrators who administer the terms of the lease to the leaseholder.
In a recent survey of conveyancers some 56% of CA member firms said they believe that in 30% of transactions lease administrators charge unreasonable fees, and a further 32% said in 16% to 30% of sales they charge unreasonable fees.
On top of this, 62% of estate agents, the traditional buffer between the consumer and the process, say that 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 as there is no registration or regulation required and significant delays can be incurred attempting to find the right person or company.
There is also a recognised imbalance of bargaining power between the lease administrator and the leaseholder as 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.
When it comes to overcharging on the part of the lease administrators the CA 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.
The CA also points out that there is also often a duplication of costs with leaseholders required to pay multiple parties to complete their LPE1 (Leasehold Property Enquiry) form and 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.
It points out that 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.
To reduce the impact of these issues the CA suggests that delays in the provision of information required in the conveyancing process should be minimised and a level playing field created across managing agents, management companies and landlords.
Specifically, the CA wants to see an update to the Commonhold and Leasehold Reform Act 2002 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.
It is calling for an obligation to provide the data within 20 days of receipt of payment and for lease administrators to be required to be a member of one of the three existing property ombudsmen schemes and for the digitisation of lease administrators held by the Land Registry to create a Lease Administrator’s Register.
‘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,’ said Beth Rudolf, director of delivery at the Conveyancing Association.
‘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,’ she explained.
‘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,’ explained.
‘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 and 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,’ she pointed out.
‘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,’ Rudolf added.
‘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,’ she concluded.
