When selling their flat, leaseholders are often surprised to find out that they need the freeholder’s consent to sell- this is known as a Licence to Assign.
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Why is a Licence To Assign necessary?
A minority of leases will contain a provision stating that the property may not be “assigned”, i.e. sold or otherwise transferred, without the “prior consent in writing of the Lessor”.
This means that the freeholder’s consent must be obtained by the seller, and at the seller’s expense, before the sale may proceed to completion.
A Licence To Assign is usually found in leases for large purpose-built blocks of flats, often with a high service charge. The reasoning behind it is quite sensible. It is to ensure that the incoming owner is of suitable financial status to be able to pay the service charge. For the same reason, some leases also prevent the sale of a property to a company, or particularly to an overseas company, without a personal guarantee from a UK-based director of the company.
How does a Licence To Assign work?
In order to establish that the buyer can afford the service charge, the freeholder will instruct their solicitors or managing agents to seek references from the buyer. This is usually a bank reference stating that the buyer is capable of meeting the service charge payments, and either an employer’s reference or a personal reference (or both) to confirm that the buyer is of suitable character to live in what the freeholder clearly believes is a cut above the average block of flats.
Unfortunately, this often leads to considerably higher charges relating to the sale, with the freeholder’s solicitors frequently charging £1,000 or more for what is ostensibly an exercise in paperwork. It stands to reason that any person buying a property, whether with a mortgage or as a cash buyer, can afford the service charge, even where the service charge is high. But where the lease requires the freeholder’s consent, there is little that the seller can do but comply if they want their sale to proceed as planned.
How long does it take to obtain a Licence To Assign and can the Freeholder refuse to give consent?
Freeholders are barred by legislation from unreasonably withholding or delaying consent, but this is perhaps not legislation that many sellers will wish to rely on, as to do so would involve an application to court, which would naturally delay their sale by months. Typically, obtaining the freeholder’s Licence to Assign will perhaps add three or four weeks to the overall timescale as long as the need for the Licence is spotted early on in the process by the acting solicitors.
Should you have any queries in relation to buying or selling a property, then please do not hesitate to contact Meaby&Co for a free, no-obligation quote by emailing firstname.lastname@example.org or calling is on 0207 703 5034.
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