The Government has proposed a £200 fee cap for landlords producing leasehold packs.
However, private wealth law firm Boodle Hatfield believe that this is likely to leave landlords significantly out of pocket.
A consultation on leasehold reform was recently held, to which the Ministry of Housing, Communities and Local Government responded with a proposal to set a maximum amount for what a landlord can charge a leaseholder to produce a leasehold pack. They have said that it should be capped at £200 plus VAT.
Boodle Hatfield believes that the costs for producing this information are often significantly higher. In London especially, costs can easily reach more than £750 per pack.
A leasehold pack is required by landlords whenever a leasehold unit is sold. This pack contains information on the management of the freehold, ground rent and service charges, buildings insurance, and any disputes relating to the property. This is vital information that the purchaser needs to have.
Previously, landlords have been allowed to pass on the full cost of producing the pack to the leaseholder.
Some landlords own blocks of flats with a large number of individual leaseholds, which can require the production of many of these packs each year. Each would incur a loss of more than £500 under this proposed reform.
In a block of 50 flats, Boodle and Hatfield have pointed out that it would not be unheard of for there to be ten sales in a single year. Under these reforms, this would equate to the landlord incurring a loss in costs of as much as £5,000 per year.
The law firm says that the Government needs to take into account the property industry’s responses to the leasehold reform consultation, many of which argued that the proposed £200 fee cap is too low for the London market.
Simon Kerrigan, Partner in the Real Estate team at Boodle Hatfield, says: “A £200 cap on the fee for a leasehold pack will make producing them a significant money-loser, especially for landlords in London.”
“Producing the detailed information required for a leasehold pack takes two or three hours of work by a lawyer. The proposed fee cap is simply too low to pay for that.”
“Before these reforms are enacted, the Government should look again at the burden it is proposing to place on landlords. A cap closer to the realistic cost of £750 for London landlords would be much more appropriate.”