When a leasehold property is being sold, conveyancing solicitors for the buyer will need to undertake a range of investigations/searches on the property. Primarily, these will ensure that there are no major problems with the property. For a leasehold property, however, there are many more details that the new owner will need to be aware of. This is where the LPE1 comes in.
In this guide to LPE1, we’ll answer the following questions:
- What is an LPE1?
- What information is included on an LPE1?
- What’s included in a management pack?
- How long does an LPE1 take?
- Who completes the LPE1 form?
- Who pays for the LPE1?
- How much does an LPE1 cost?
- Is an LPE1 mandatory?
- What are the government’s proposals for LPE1 reform?
- What is an LPE2?
What is an LPE1?
An LPE1 is a document that is used to obtain information about a leasehold property. As such, LPE stands for leasehold property enquiries, which form the basis of a leasehold ‘Management Pack’.
Leasehold home ownership is very different from owning a freehold property in that the leaseholder does not own the structure of their home nor the land that it sits on. These are owned by a freeholder, who is entitled to charge a ground rent from each leaseholder together with any costs for the management and maintenance of the building.
The LPE1 will therefore seek to confirm specific details regarding ground rent, service charges and the management of the building, such as, who is responsible for what and the budgets for the current year. In particular, the LPE1 will establish whether there are any problems that exist or costs that may be incurred with the property in the near future.
What is an LPE2?
An LPE2 is a document that provides a summary of the key information contained within a completed LPE1 form and management pack. Essentially, this includes costs in relation to ground rent, service charges, insurance premiums and reserve funds in order to make the financial commitment of a leasehold property easier to understand for prospective buyers.
Considering the range of costs associated with owning a leasehold property, it’s no wonder that leaseholders who are unaware of their obligations can easily fall into financial despair. This issue was recognised by the Competition and Markets Authority who proceeded to perform a study in order to find ways of improving the financial information given to buyers of leasehold properties. As a result, the LPE2 form was introduced and together with the LPE1 form, are thought to have alleviated the problems significantly.
What information is included on an LPE1?
The LPE1 is divided into 8 Sections as follows:
Section 1 – Contact Details
- The landlord, management company, managing agent and residents/tenant’s association’s names, addresses, telephone numbers and email addresses must be provided.
- The person responsible for collecting money for ground rent, service charges and insurances must be stated
- The person responsible for the management of the building including organising maintenance and insurances will be stated
Section 2 – Transfer & Registration
- Information relating to the Deed of Covenant, License to Assign and consent for alterations and becoming a member of the management company
Section 3 – Ground Rent
- The amount of ground rent payable and the payment terms
Section 4 – Service Charge
- The amount of service charge payable and the payment terms
- Any anticipated excess payments due
- Reserve fund payments and terms
- Any proposed major works on the property over the next two years
Section 5 – Building’s Insurance
- Insurance policy details, areas of the building covered by the policy, any claims in the last three years and payment terms
Section 6 – Disputes & Enfranchisement
- Any current or ongoing disputes, forfeiture and enfranchisement proceedings and existing breaches of the lease
Section 7 – General
- How many properties are in the managed area and whether the leases have similar terms
Section 8 – Required Documents
- A list of documents that should be included with the LPE1 form when returning to the solicitor acting on behalf of the buyer.
The completed LPE1 form together with the requested documents combines to form the Management Pack.
What’s included in a Management Pack?
- A completed LPE1 form
- Insurance policies
- Health and safety policies
- Service charge estimates and accounts
- Fire risk assessment
- Asbestos survey
- Plus, any of the following documents if applicable:
– Forfeiture documentation
– Deeds of Variation
– Deed of Covenant
– Certificate of Compliance
– Licence to Assign
– Permission to alter the property
– Notices served on the lessee
If the property being sold has been newly built, a lot of the required information will not yet be available, as it is based on the historical management of the building.
How long does an LPE1 and management pack take?
Compiling the required information for an LPE1 can be a time-consuming process. As such, it can take a number of weeks before the management pack has been received by the requesting solicitor.
Who completes the LPE1 form?
Typically, the freeholder, management company or Resident’s or Tenant’s Association will complete the LPE1. It is often not possible for the selling leaseholders to complete the LPE1 form as they may not have sufficient knowledge of or access to the required information.
How much does an LPE1 form cost?
Freeholders and management companies will charge anywhere between £200 to £400 for completing an LPE1 form and providing a management pack.
Who pays for the LPE1 to be completed?
It is most common for the seller to pay the freeholder or managing agent to obtain the information required in order for the seller to respond to enquiries raised by the buyer.
Is an LPE1 and LPE2 mandatory?
No, it is not mandatory to use an LPE1 or LPE2 form, however, they make it easier for conveyancers to advise clients because they receive information in a standardised and consistent format. Furthermore, the wider use of these forms helps to streamline and speed up the process of leasehold property purchases.
Government proposals for LPE1 reform
After the Conveyancing Association (a trade body for conveyancers) called for reform of the current LPE1 process, citing delay in the provision of information, overcharging and duplication of costs as problems and reasons for change, the government was forced to take action and investigate the claims.
Consequently, in June 2019, the Secretary of State for the Ministry of Housing, Communities & Local Government, James Brokenshire announced that there will be a change to leasehold legislation.[1] This encompassed a number of items, namely, setting ground rents to zero on new leases, selling all new homes as freehold and setting a maximum cost and time frame for LPE1 requests.
As a result, the cost of the provision of the LPE1 will be capped at no more than £200. Mr Brokenshire also confirmed that all lease administrators, such as landlords, freeholders, management companies and agents, who are requested to provide this information, must do so within 15 days and it should cost no more than £50 to refresh the information once it is over six months old.
However, the government is yet to bring forward legislation to implement the changes that they have outlined, stating that they will do this ‘as soon as Parliamentary time allows.’ So, although the government have committed to mandating the proposed changes, the timeline remains unclear for when this will come to fruition and become law.
Final thoughts
Any person completing the LPE1 form should ensure that the information they provide is accurate, as the purchaser is entitled to rely on what they receive. However, it is possible to instruct a solicitor to reply to the enquiries on your behalf if you do not feel confident or do not have the time.
As a buyer of a leasehold property, it is important to ensure that you receive a copy of the LPE1 and management pack from your solicitor. This will primarily enable you to assess the financial commitments involved and make an informed decision as to whether to proceed with the purchase. If you do go on to purchase the property, it’s advisable to keep your management pack to hand in case any of the statements made within the LPE1 form prove incorrect.
Discover more expert guidance and tips for leaseholders and freeholders on our resources page.
[1] James Brokenshire (June 2019) retrieved from https://www.parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2019-06-27/HCWS1674/
