Changes announced to leasehold Information Packs
On 27th June 2019, the Secretary of State announced a series of changes to the leasehold sector. This followed the Government’s consultation on implementing changes to promote fairness and transparency for leaseholders and to challenge unfair practices and unreasonable fees in the leasehold sector.
Amongst the many changes announced is a mandatory cap on the fees charges for producing leasehold information to customers in the form of a leasehold property enquiry pack (LPE1).
Any managing agent, management company or landlord providing these packs will need to be aware of the upcoming changes.
What is an LPE1?
An LPE1 is a standardised questionnaire for freeholders, management companies and managing agents to provide information regarding a property to a customer. The use of this standardised form allows leasehold information to be provided to a customer in a consistent and uniform manner.
The division of responsibilities under a lease can often mean that form LPE1 is completed by multiple parties. For example, where a landlord collects ground rent but a separate management company deals with the service charge and insurance. This can prove to be time consuming and costly to the customer with each party requiring payment of a fee for providing the information.
The proposed changes:
Until now, the process and fees for producing leasehold information differed vastly between landlords and managing agents, however the proposed new legislation will make the following a statutory requirement:
- A maximum fee of £200+ VAT for producing leasehold information in the form of an LPE1.
- The leasehold information must be provided to the customer within 15 days
- A fee of no more than £50 can be charged to refresh the leasehold information once it is over 6 months old
In setting the maximum fee of £200+VAT for providing a completed LPE1, the government has confirmed that in setting this fee they will include a mechanism in the legislation to take into account changes in inflation.
Issues to Consider:
Potential problems may occur where landlords and managing agents are completing form LPE1 separately, as each party will require their own fee for providing information.
The Secretary of State’s proposal that the fee for completing form LPE1 will be capped at £250+VAT is silent on the issue of multiple parties completing LPE1 for the same property. This means that potentially, the combined fee for a landlord and managing agents separately providing information to a customer could exceed the proposed capped fee. However, the consultation does contain the expectation that landlords and managing agents will charge a fee that reasonably reflects the cost of the work actually involved in providing the information.
Once LPE1 has been received, requests for updated information, particularly relevant when a purchase spans 2 financial years, are to be provided for a fee of no more than £50.00. The cost of providing refreshed information should be reasonable and be less than the original fee for completing LPE1. Whilst not explicitly confirmed in the consultation, it would be suggested good practice for the 15 day turnaround to also be applied to requests for updated LPE1.
2. Routes of Appeal
The Secretary of State has also announced that further routes of appeal are to be provided for customers to challenge the reasonableness of fees.
Once legislation is enacted, customers will be able to challenge fees through the First‐Tier Tribunal and via a mandatory redress scheme, which will require all freeholders to become a member.
As a result, there will be more responsibility for landlords and managing agents to justify the reasonableness of their fees, especially where they are only providing a portion of the information required, such as a landlord only providing ground rent information.
3. Time constraints
The proposed changes place an obligation on landlords and managing agents to ensure that LPE1 is completed and provided to the customer within 15 days. It is important that landlords and managing agents now review their processes to ensure that this turnaround obligation is met in anticipation of the legislation.
Whilst it is not clear from the consultation what sanctions may result from a breach of this obligation, it is expected that this will be dealt with further in the upcoming legislation.
What should you do?
At present the changes announced are just proposals, but they will become law once legislation is passed. Until this legislation is passed, landlords and managing agents can continue with their current fees and processes.
News of the Secretary of State’s announcement is being circulated and discussed throughout the industry and therefore landlords and managing agents should now proceed with caution and consider the increased likelihood of challenges to their existing fees if they currently exceed the proposed cap.
Going forward it is advisable for all landlords and managing agents to now implement the following to bring their processes in line in anticipation of legislation:
- Ensure the fee for completing LPE1 does not exceed £200+ VAT. Ideally the fee should be below this capped amount and reasonably reflect the work actually involved in providing the information. Ensure that the LPE1 is returned completed within 15 days.
Ensure that a subsequent request for updated information (once the original information is over 6 months old) is provided for a fee of no more than £50.
If you would like further information, please contact Laura Gregory at SLC Solicitors (firstname.lastname@example.org)