When a flat is sold and there are arrears on service charges and/or ground rents what happens? Also if after preparing the year end accounts there is a surplus to redistribute back to the leaseholders, is it the leaseholders at that point that get the refund or the ones that actually paid towards the service charges on account during the year?

The mechanism to help stop sales complete when there are service charge/ground rent arrears is a restriction registered at HM LAnd Registry. This restriction usually requires the Managing Agent to issue a certificate of compliance so that UNLESS a certificate of compliance is produced the land registry will not register the transfer. Re: who gets the balancing charge (surplus or deficit) It is the leaseholder who is the owner at that time a balancing charge is made that gets the benefit (or the bill). Any buyer with a good Solicitor should be protected against this as under the Law Society protocol the buyers and sellers solicitors should ask the status of the service charge accounts, enquire about possible deficits and hold a retention on the purchase price until the deficit/surplus is known to protect the buyer etc....

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