What is an Engrossment Fee?
An engrossment fee is a fee that the seller's solicitor, or your own, charges for producing a fair copy of a legal document, such as a lease or conveyance, for signature.
In modern conveyancing, you’ll normally only come across this charge if you’re buying a new build property, particularly a leasehold, lease extensions, auctions or repossession, and back-to-back staircasing. Regarding transactions, it’s normal practice to draw up a legal document; one side's solicitors draft it first, then send it to the other side's solicitors for approval. If any further amendments are needed, the document can be passed back and forth several times.
Looking at purchasing a new build? This article will cover what an engrossment fee is, which fees apply, and when you must pay them.
Do I have to pay an engrossment fee?
When you're buying a leasehold flat, particularly a new build, the seller’s conveyancing solicitor frequently prepares two engrossment copies of the transfer or lease: one for the seller or the person granting the lease to sign, and one for you. You'll be expected to pay for this if it's part of their terms and conditions.
It's not just new builds, however, where an engrossment fee can occur:
- Lease extensions: When the sale is dependent on the lease being extended, the solicitor can charge an engrossment fee. This is because you're not just amending the lease; new documents need to be produced, which can result in an engrossment fee.
- Back-to-back staircasing: When you're purchasing your shared ownership property, and the seller is staircasing to 100% ownership, new legal documents must be created and finalized, thus triggering an engrossment fee option from the solicitor.
- Repossession or auctions: In these unique transactions, the seller typically requests that their solicitor produce the transfer documents themselves. These transactions typically include an engrossment fee.
It's important to note that in lease extensions and back-to-back staircasing, there doesn't need to be a simultaneous purchase for a solicitor to charge an engrossment fee. In a standard lease extension, a Deed of Variation is used, more commonly in the informal route. For staircasing, a Memorandum of Staircasing is typically used when the seller is at the completion stage of the process.
How much is an engrossment fee?
The fees you will pay depend on the developer you choose. That being said, the engrossment fees range from £100 to £200.
When is the engrossment fee payable?
The engrossment fees are payable upon completion of the purchase, with the buyer paying the amount outlined in the contract. This fee, although listed in the completion statement, must be paid to the solicitor before you close. As mentioned above, it's unlikely that the developer will remove this fee from the contract.
Your own solicitor may charge an engrossment fee. This, however, must be disclosed before signing the contract with them.
Do engrossment fees apply to freehold properties?
While engrossment fees are mainly applicable to leasehold properties, specifically new builds, they can occur in freehold transactions. These fees are far less frequent in freeholds, as they relate to specific situations. For example, the property is a new build.
Here are a couple of scenarios in which engrossment fees apply to freeholds:
- New Build: This is the most common occurrence for an engrossment fee. As stated above, the developers' solicitors will charge for the legal documents they produce.
- Staircasing Shared Ownership: An engrossment fee can count as an additional cost during the staircasing process. You will find out about this cost when your solicitor receives the management pack from the seller's solicitor.
How did engrossment fees come about?
It’s common practice for a legal document to be drafted by one party and then sent to the other for approval. If any further amendments are needed, the document can be passed back and forth several times.
It used to be the case that such draft documents would be written or typed on paper and, when finalised, carefully written on high-quality paper. Because of the time and expense involved in this process, solicitors would charge engrossment fees.
These fees are less common today, with many solicitors including engrossment fees in their overall fee, as opposed to a standalone fee. As stated above, they are common in leasehold transactions, particularly those involving new-build properties, but are a contractual option rather than a requirement.
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Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
