Leasehold and Freehold Transactions, Commonhold and Management Issues
Leasehold due diligence
Leasehold transactions require investigation beyond the register: the lease itself, the management pack, service charge accounts, ground rent, insurance, and any deed of variation or section 20 consultation history. Candidates must understand the landlord's covenants, the tenant's obligations, forfeiture and relief, and the statutory protections against unreasonable service charges. Management companies, right to manage and leasehold enfranchisement are frequently examined.
Freehold and commonhold
Freehold transactions carry their own risks: restrictive covenants, overage, easements and boundary disputes. Commonhold is a form of freehold ownership of a unit within a commonhold association; it is rare in practice but examinable in principle. Candidates should know the difference between a commonhold community statement and a lease.
Traps
The classic trap is the short lease: a lease with less than 80 years unexpired may be unmarketable and marriage value affects enfranchisement. Watch the distinction between a service charge and a rentcharge, and the effect of a restriction on the register requiring the management company's consent to transfer. Also note the need for a landlord's certificate of compliance and the effect of a deed of covenant.
Rule of thumb
For leasehold, read the lease for term, rent, repairing obligations, alienation and forfeiture, then the management pack for arrears and disputes.
Worked example
A lease has 70 years unexpired and the buyer needs a mortgage. Many lenders refuse under 70 years or require a deed of variation. The solicitor should advise on lease extension and the valuation implications before exchange.