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A guide to LPE1 and LPE2 forms for Leasehold Property Enquiries

• October 5, 2020
• Property Market

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?

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.

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.

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.

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/

Adam has worked in the property sector for 20+ years. He specialises in the ground rent and freehold reversion space, providing services to clients from private landlords to corporate investors. Freehold Sale launched In 2013 where Adam enjoyed success building and managing freehold portfolios with partner companies.

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Charges when Selling or Buying Leasehold Property

When you buy, own or sell a Leasehold property, many of your rights and obligations will be set out in your lease. One of your obligations will be to make certain payments to the person or the organisation responsible for administering and managing your building. That person might be a landlord, a management company, or a managing agent instructed by the landlord or management company (referred to below as "the landlord"). The typed of payments or charges can be divided into three groups. They are:

Ground Rent

Your lease may provide for you to make regular payments of ground rent as well as service charges. Although the lease may initially oblige you to pay a fixed amount of ground rent, it may also contain a clause which allows the landlord to increase the rent in years to come. When buying a leasehold property you should always ask your conveyancer to explain if there are any rent review clauses in your lease and explain what this would mean to you in financial terms.

Service Charge

Service charges normally vary according to the amount that is spent by the landlord each year on the upkeep of the building as a whole, including for example, cleaning the communal areas, gardening, maintaining and renewing the structure of the building (including the roof), building insurance. Usually, the lease will oblige you to pay a fixed percentage or a "reasonable proportion" of that amount. You should ask your conveyancer how the service charge is calculated, what it covers and whether the landlord has any plans for expensive remedial works to be carried out to the building for which you will be responsible.

Administration Charges

The landlord is likely to make an administration charge if you ask for a service connected with the buying or selling of a leasehold property. The following are examples of these charges you may have to pay,

When you are selling

1. Sellers leasehold pack: When you are selling a leasehold property it will be your responsibility to pay the landlord's charge to provide a Sellers leasehold pack (usually in the form of a Form LPE1) to provide the leasehold information required by your buyer and their lender.

2. Licence to Assign: It is possible that your lease requires you to obtain a licence from the landlord to sell the property. This involves the landlord approving the buyer as a new owner of the property. You may have to pay both the landlord's and landlord's solicitors charges for consenting to the sale and providing the Licence.

3. Exit or Transfer Fee: A retirement flat lease may include an "exit" or "transfer fee" payable by you from the sale proceeds and expressed as a percentage of the property value.

When you are buying

1. Deed of Covenant: Some leases require a buyer to enter into a Deed with the landlord to confirm that you will be bound by the terms of the lease. The buyer has to pay this charge.

2. Notice of Assignment of Transfer and Charge: The landlord will require that a notice is sent to them notifying of the change of ownership and any mortgage lender. This is to ensure that the landlord has your contact details (these may be different from the address of the property you have purchased) for the purpose of sending you ground rent and service charge invoices, and details of works to be carried out to the building.

3. Certificate of Compliance: The landlord may be required to provide this to confirm to the Land Registry that the change of ownership requirements in the lease have been complied with.

4. Share or Membership Transfer Charge: If you are required to become a member of the Management Company then the landlord may make a charge to transfer the share or membership certificate into your name.

To ensure that you are aware of the above charges and procedures, when you are selling or buying leasehold property, you should ask your conveyancer to review the lease and property title at an early stage.

Hughes Paddison has an experienced residential property team who are able to advise on all aspects of leasehold conveyancing whether you are selling or buying. Please contact our residential property team, we will spend time discussing any queries you have concerning the leasehold property you are buying or selling, and provide you with a conveyancing quote.

The information contained on this page has been prepared for the purpose of this blog/article only. The content should not be regarded at any time as a substitute for taking legal advice.

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