Tuesday 17 April 2018

What is a 'Reasonable' Leasehold Event Fee?

Skipton Building Society is the latest lender to change their Handbook requirements introducing a reasonableness test when it comes to leasehold event fees.

The new instruction at section 5.14.9 reads ‘....event fees must remain at a reasonable level at all times during the lease term’

This begs a couple of questions: “What is an ‘event fee’?” and, “What is ‘a reasonable level’ when it comes to an event fee?”

Ordinarily, the reference to a leasehold event fee is within the context of a retirement property leases. Nevertheless I am yet to find a single lender who, in their Part 2 Handbook instructions, narrowly limits the definition of event fees solely to retirement properties.

In the absence of such a limitation I expect lenders to assert that an event fee would cover fees referenced in a lease such as Transfer Fees, Subletting Fees*, Management Fees and Consent Fees. These are all examples of ‘events’ where a fee is applied.

If there are unreasonable fees specified in the lease, or, even if you are on notice of excessive fees outside lease (e.g. management fees), you must make a disclosure to the lender.

The Conveyancing Association in 2016 estimated that up to 75% of leasehold home movers were being charged unreasonable fees. If that is true then that should result in a significant amount of disclosures based on Handbook requirements.

When it comes to the ‘reasonableness’ test, unless it’s obviously a low event fee, I suggest that you disclose the details to the both clients (lender and borrower) and deflect the responsibility on them to make the decision whether to move forward.  

*The Upper Chamber (Lands Tribunal) back in 2012 determined that Sub-letting fees should not be more than £40. Therefore any subletting fee that is higher is unreasonable and should be referred to the lender.  Sub-letting charges of £100 – £135 are of course very common

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