These Critical Documents Provide Important Information About a Property and How It Is Managed
When a leasehold property is being sold, solicitors working for the buyer will usually engage in a number of property searches and property investigations to identify any major problems that could impact the sale.
An LPE1 is the foundation for this search. The LPE1 form, short for Leasehold Property Enquiry, is used to obtain information about the property and becomes part of the leasehold Management Pack.
Since leasehold properties are owned by a freeholder, the LPE1 is used to confirm specific details about the property, including ground rent, service charges, building management, and who is responsible for what. Most importantly, the LPE1 establishes if there are any problems that exist that may be incurred with the property in the near future.
You may hear LPE1 in tandem with LPE2. An LPE2 is a document that summarizes the information in a completed LPE1 form and Management Pack.
What Sections Are in an LPE1?
An LPE1 is divided into the following 8 sections:
- Contact details: Contact for the landlord, managing agent, and tenant, with identification of the person responsible for collecting money for rent and charges, and the person responsible for management of the building.
- Transfer and registration: Information related to the Deed of Covenant, License to Assign, and content for alterations.
- Ground rent: The rent amount and payment terms.
- Service charge: The service charge and payment terms, the reserve funds payments, and any anticipated excess payments due, along with any proposed major work planned for the property over the next two years.
- Building insurance: Details about their insurance policy, including what is covered and claims in the last three years.
- Dispute and enfranchisement: Detail about any current or ongoing disputes, proceedings, or lease breaches.
- General: The number of properties in the manager area and if the leases have similar terms.
- Required documents: A list of all the documents that should be included with the form when returned to the buyer’s solicitor.
Who Puts Together and Pays for the LPE1?
Putting together an LPE1 can be a time-consuming process — expect it to take a week or more before you receive yours. Typically, it is the freeholder, the management company, or a tenant’s association who will complete the form, and freeholders and management companies will often charge up to £400 — and rarely less than £200 — to assemble one. While it is not mandatory to use an LPE1, their standard, consistent format streamlines and speeds the process of leasehold property purchases.
Who Needs an LPE1?
While LPE1s are not mandatory, they are a common fixture in land deals, and both buyers and sellers rely on them.
Sellers: Sellers will often be required to provide an LPE1 during the sales process as they need to disclose pieces of information about the property so the buyers can carry out their due diligence. Since the buyer is often heavily reliant on LPE1s, obtaining the form from the agent directly helps avoid any potential issues that could arise from misrepresentation.
Buyers: Informed buyers should demand an LPE1 so they have an opportunity to find out all of the relevant information about the property under consideration. Particularly important are payments that may be due, when they are due, and other requirements.
What Is a Property Management Pack?
Along with an LPE1, a Management Pack is almost always required when you buy or sell a leasehold property. A Management Pack typically includes the completed LPE1 form, insurance policies, health and safety policies, service charge estimates and accounts, a fire risk assessment, an asbestos survey, and any number of additional applicable documents, including: Forfeiture documents, deeds of variation, deed of covenant, Certificate of Compliance, Licence to Assign, permission to alter the property, and any notices served on the lease. Note that if the property is newly constructed, many of those documents won’t be available as they are based on the historic management of the building.
What Happens When an LPE1 Form is Wrong?
Most parties fill out LPE1 forms based on their best understanding of current and past information, but there are times when, either through accident or on purpose, the information on the form misleads the buyer. Familiar problems include undisclosed disputes with neighbors, inaccurate flooding reports, incorrect information about an existing tenant, inaccurate information about mold, and inaccurate information about planned city activities that could affect the property. If the buyer suspects that the information given on the LPE1 form was incorrect, they should speak with their conveyancer, who may be able to investigate the matter and suggest a course of action.
Any person completing an LPE1 should ensure the information provided in it is as accurate as possible. Buyers should demand one in order to make a decision about purchasing the property, and they should keep the management pack on hand well after the sale in case any of the statements on it prove to be incorrect.
Do you have questions about LPE1 forms??