Clear, relevant schedules are the key to purchaser-friendly leases
(By our Business Development Manager, Fiona DuCasse)
Housebuilders: Is your current managing agent supporting your sales objectives with advice in this key area?
You’ve come all this way with the planning, securing, building and marketing of your latest property development. Let’s not create a lease that is an obstacle to buying.
It is still a reality that purchasers can be surprised to realize they will be expected to contribute towards service charges, especially when purchasing a house. Isn’t it the council’s job, they ask?
In addition, if the service charges are coming in high, what happens when the purchaser comments on them? Those charges need skill in explaining the value for money that must be present in the document.
I’ve seen inexperienced property developers tie themselves up in knots over drawing up a lease. A common mistake is to lump estate costs together. That’s a bad idea and below I’ll give you some examples of why this approach does not work. For these reasons, the leases might be a barrier to buying. Perhaps not the barrier but certainly a factor and if you're not presenting nice, clear leases, someone else is. Ideally, as the incumbent property manager, I would give advice before the leases were drawn up. The fundamentals of leases and schedules are simple. The more accurate, relevant and fair the leases are the easier it is for purchasers to understand what they are buying and the easier the site is to manage.
Below are three principles I try to follow when guiding property developers through this key element of securing long-term, effective property management for their site.
1. A fair anticipation of costs
Accurate costing and budgeting for the future management of an estate requires experience and attention to the details. Whether the charges are calculated on a site basis or equal split, it is a false economy in many ways to underplay potential costs. The advantage of clarity is that purchasers understand what it is they are getting for their money.
2. Make clear what people derive benefit from
Drainage and pumping stations only used by certain properties? Ground floor flat paying for lift maintenance? Access ways used by different residents? It is at this stage that developers may realise their estate has more complications than they thought. These common examples I’ve mentioned aren’t terribly difficult to clarify but they do need to be set out at the lease stage.
3. Break down services into relevant schedules
The above two issues require that relevant schedules be drawn up in a flexible way, that is an accurate representation of how your new community ought to operate when it comes to ongoing costs.
A housebuilder needs a managing agent that is experience, flexible and creative. The advice I give to a new instruction drawing up leases is to address all issues in a transparent way at the beginning of the sales process, and make sure the sales team fully understand what the leases say. Removing obstacles to buying with ongoing openness when it comes to the lease improves purchaser confidence – and covers the housebuilder for several years down the line.
(08 March 2021 )
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