If you are selling a leasehold property, you may be asked by your buyer via their solicitors as to whether you are willing to have your solicitor hold an amount of money in their client account on completion for a period of time.
Management companies produce an estimate of how much the service charges at a property will be for each accounting year. Sometimes the estimate will be generous and you may end up being credited with a sum of money as you have overpaid throughout that year because the management company did not need to spend as much as they thought they would have to on communal maintenance etc.
In some circumstances there can end up being a service charge deficit and the management company will not come to know about this until they have produced the accounts for the last accounting year. It can sometimes take up to a year or two for management companies to produce the year end accounts so it is possible that you may be involved in a transaction when the last year’s accounts have not yet been produced, or the previous year’s.
In view of this, it is common for a buyer’s solicitor to ask a seller’s solicitor to retain a sum out of the proceeds of sale and hold onto it until the accounts have been produced as if there is a deficit, it would not be fair for the buyer to pay it if it relates to a period of when they did not own the property. If it is found that there was a surplus in the accounts, then with the buyer’s solicitor’s permission, a seller’s solicitor can release the funds back to the seller.
Such requests aren’t unreasonable, as long as the sums requested are proportionate.
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Ayesha Leslie, Partner
Ola Leslie Solicitors