Many lawyers and real estate agents will appreciate the recently published video explaining “How Property Listings Are Changing” by National Trading Standards Real Estate and Leasing Team.
Estate agents and online portals are now required to ensure property listings include ‘important information’ for buyers, such as council tax bracket and service charge information. This is only the first phase of the government agency’s project and is also part of the government’s wider program Upgrade initiative.
Attention buyer
Many are already familiar with the legal principle of “caveat emptor” which translates to “buyer beware”. This means that it is the buyer’s responsibility to take steps to ensure they are aware of any issues with a property before finalizing the purchase.
This explains why residential property attorneys do thorough research and raise inquiries before exchanging contracts for a buyer, to limit any risk to a buyer by ensuring that the seller discloses all relevant information about the property sold. Buyers are normally already aware of the need for a building survey to reveal any physical faults in the property, but what other “important information” would it be useful if potential buyers were informed of upfront and how the parties can they make the transaction smoother? and faster to reach the key stage of the exchange of contracts?
Understand the key issues of leasehold properties
A real estate agent’s listing of properties will almost always indicate whether the property is leased or freehold, and potential apartment buyers are increasingly knowledgeable about inquiring about lease term and service charge information. Most are also aware that a shorter lease term means that a premium will be payable if the buyer wishes to extend the term of the lease to protect their future marketing. There is already a noticeable trend of agents providing this information, which makes it very useful for buyers. More recently, there has also been media awareness of rising ground rents, resulting in new legislation ending ground rents for most new long-term residential properties.
There are, however, more nuanced points that potential buyers need to consider, such as whether the service charge is a fixed amount or a percentage of the total expenditure on the building and exactly what the service charge includes. Often buildings insurance is payable in addition to paying the annual service fee and may come as a surprise to some.
Prospective buyers should also familiarize themselves with any major repairs or renovations planned for the building (often referred to as Section 20 notices) and when viewing a property, should consider the decorative condition of the building and all common areas, which could indicate that redecoration works are due to which the buyer will have to contribute in the future. Transactions can sometimes stall once information regarding major work comes to light, which can lead to discussions of price deductions, which are best avoided late in the transaction.
There are also more personalized considerations depending on the future plans of the person buying the property, which can be key terms of the lease, such as whether the landlord can lease the property or make changes to the property and whether the consent of the owner is required. Some people will be more concerned about lease clauses prohibiting their beloved pet or no lease clauses preventing “Airbnb” rentals to protect their privacy. Lease terms can be fundamental for some and sharing this information with potential buyers at an early stage of a transaction will help avoid delays.
London’s most desirable freehold properties and estates
Some freehold properties are also subject to similar restrictions as the leasehold traps mentioned above. For example, many homes in London’s most prestigious estates in Kensington, Chelsea and Belgravia are more akin to leasehold properties due to the nature of the historical obligations and restrictions that bind them. There may be prohibitions on making changes to the property or the consent of a third party may be required in the interest of maintaining a uniform, high quality appearance and value of the estate. There may also be shared facilities offering a gym and swimming pool or private gardens with rent to be paid which is similar to the service charge. Other properties may require access by a private road and owners may be obligated to contribute to its repair and maintenance.
Any information regarding restrictions such as garden rules or payment obligations should be available and provided to the buyer as soon as possible.
Caveat emptor: are the tables turning?
Despite the well-established principle of caveat emptor, the recent case of SPS Groundworks and Building Ltd -v- Mahil [2022] EWHC 371 (QB) points out that a seller is not entirely exempt from disclosing any known defect to potential buyers and that there is a growing tendency to expect sellers and their representatives to disclose more information. In that case, the seller had failed to bring an overdraft obligation to the buyer’s attention and the Court of Appeal held that the onus was on the seller to disclose defects in the property and that the obligation did not had not been deleted because the buyer had not made the inquiries.
The list of “important information” included in realtor property listings might continue to include planning permission and consent to building regulations or information regarding flood risk, but ultimately the easiest way to help expedite a transaction is for a seller to engage a solicitor at the first opportunity and ideally before the property is marketed so that a full set of legal documents including all important information is gathered and ready to be sent to a potential buyer as soon as their offer for the property has been accepted by the seller.
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