Estate agents have just been given the go-ahead to market my ground floor flat in Melbourne.Conveyancing has not commenced but I have just received a quarterly service charge invoice – Do I pay up?

The sensible thing to do is clear the invoice as normal because all ground rent and service charges will be apportioned on completion, so you will be reimbursed by the buyer for the period running from after the completion date to the next payment date. Most managing agents will not acknowledge the buyer until the service charges have been paid and are up to date so it is important for both buyer and seller for the seller to show that they are up to date. This will smooth the conveyancing process.

Back In 2007, I bought a leasehold flat in Melbourne. Conveyancing and Santander mortgage went though with no issue. I have received a letter from someone claiming to own the freehold. It included a ground rent demand for rent dating back to 1995. The conveyancing solicitor in Melbourne who previously acted has now retired.What should I do?

The first thing you should do is contact the Land Registry to be sure that the individual purporting to own the freehold is indeed the registered owner of the freehold reversion. It is not necessary to incur the fees of a Melbourne conveyancing lawyer to do this as you can do this on the Land Registry website for less than a fiver. You should note that in any event, even if this is the rightful freeholder, under the Limitation Act 1980 the limitation period for recovery of ground rent is six years.

I am looking at a couple of apartments in Melbourne both have approximately forty five years left on the leases. Should I regard a short lease as a deal breaker?

There are no two ways about it. A leasehold apartment in Melbourne is a wasting asset as a result of the reducing lease term. The closer the lease gets to its expiry date, the more it adversely affects the value of the premises. The majority of purchasers and mortgage companies, leases with less than 75 years become less and less attractive. On a more positive note, leaseholders can extend their leases by serving a Section 42 Notice. One stipulation is that they must have owned the property for two years (unlike a Section 13 notice for purchasing the freehold, when leaseholders can participate from day one of ownership). When successful, they will have the right to an extension of 90 years to the current term and ground rent is effectively reduced to zero. Before moving forward with a purchase of property with a short lease term remaining you should talk to a solicitor specialising in lease extensions and leasehold enfranchisement. We are are happy to put you in touch with Melbourne conveyancing experts who will explain the options available to you during an initial telephone conversation free of charge. A more straightforward and quicker method of extending would be to contact your landlord directly and sound him out on the prospect of extending the lease They may agree to a smaller lump sum and an increase in the ground rent, but to shorter extension terms in return. You need to ensure that the agreed terms represent good long-term value compared with the standard benefits of the Section 42 Notice and that onerous clauses are not inserted into any redrafting of the lease.

I've recently bought a leasehold property in Melbourne. Am I liable to pay service charges relating to a period prior to my ownership?

Where the service charge has already been demanded from the previous owner and they have not paid you would not usually be personally liable for the arrears. However, your landlord may still be able to take action to forfeit the lease. It is an essential part of leasehold conveyancing for your conveyancer to be sure to have an up to date clear service charge receipt before completion of your purchase. If you have a mortgage this is likely to be a requirement of your lender.

If you purchase part way through an accounting year you may be liable for charges not yet demanded even if they relate to a period prior to your purchase. In such circumstances your conveyancer would normally arrange for the seller to set aside some money to cover their part of the period (usually called a service charge retention).

I am employed by a long established estate agent office in Melbourne where we have witnessed a number of leasehold sales jeopardised due to leases having less than 80 years remaining. I have been given contradictory information from local Melbourne conveyancing firms. Can you confirm whether the owner of a flat can start the lease extension process for the purchaser on completion of the sale?

Provided that the seller has owned the lease for at least 2 years it is possible, to serve a Section 42 notice to kick-start the lease extension process and assign the benefit of the notice to the purchaser. The benefit of this is that the buyer need not have to wait 2 years to extend their lease. Both sets of lawyers will agree to form of assignment. The assignment needs to be completed before, or at the same time as completion of the sale.

Alternatively, it may be possible to extend the lease informally by agreement with the landlord either before or after the sale. If you are informally negotiating there are no rules and so you cannot insist on the landlord agreeing to grant an extension or transferring the benefit of an agreement to the purchaser.

Melbourne Conveyancing for Leasehold Flats - Sample of Questions you should ask Prior to buying

Where a Melbourne lease has fewer than eighty years it will impact the salability of the flat. Check with your mortgage company that they are content with remaining years on the lease. A short lease means that you will probably have to extend the lease at some point and it is worth discovering what this would cost. Remember, in most cases you will need to own the premises for a couple of years before you are legally able to carry out a lease extension. How much is the maintenance charge and ground rent on the property? On the whole the outlay for major works tend not to be built into the maintenance charges, although a few managing agents in Melbourne obliged tenants to pay into a sinking fund created for the specific intention of building a fund for larger works.

Other Topics

Lease Extensions in Melbourne