You have a question? Read our FAQ or contact us
You have a question? Read our FAQ or contact us
Leasehold apartments can be located in purpose-built blocks, in
converted houses or above commercial or retail premises.
Leasehold ownership of an apartment is simply a long tenancy, the right to occupation and use of the apartment for a long period – the ‘term’ of the lease. This will usually be for 99 or 125 years and the apartment can be bought and sold during that term. The term is fixed at the beginning and so decreases in length year by year. Thus, if it were not for inflation, the value of the apartment would diminish over time until the eventual expiry of the lease, when the apartment reverts to the landlord.
The ownership of the apartment usually relates to everything within the four walls of the apartment, including floorboards and plaster to walls and ceiling, but does not usually include the external or structural walls. The structure and common parts of the building and the land it stands on are owned by the landlord, who is responsible for the maintenance and repair of the building.
The landlord can be a person or a company, including a local authority or a housing association. It is also becoming quite common for the leaseholders to own the freehold of the building, through a residents’ management company, effectively becoming their own landlord. With the introduction of the right to manage, the lessees do not own the freehold but are able to manage the building as if they were the landlord.
A lease is a contract between the leaseholder and the landlord
giving conditional ownership for a fixed period. It is an
important document and leaseholders must ensure that they have a
copy and that they understand it. The wording of leases is
usually in legal language and can vary from property to
property. Leaseholders who do not understand their lease can and
should get advice.
It is difficult to change the conditions of the lease after you buy, so make sure that the services provided in the lease are those that you want or can accept.
The lease sets out the contractual obligations of the two parties: what the leaseholder has contracted to do, and what the landlord is bound to do. The leaseholder’s obligations will include payment of the ground rent (if any) and contribution to the costs of maintaining and managing the building. The lease will probably also place certain conditions on the use and occupation of the apartment. The landlord will usually be required to manage and maintain the structure, exterior and common areas of the property, to collect contributions from all the leaseholders and keep the accounts.
Leaseholders are not necessarily entirely free to do whatever they want in or with the apartment – the lease comes with conditions, to protect the rights of everyone with an interest in the building. For example, retirement schemes will usually have restrictions on the age of those who can live there.
When an apartment changes hands, the seller assigns all the rights and responsibilities of the lease to the purchaser, including any future service charges that have not yet been identified.
Read the lease – understand your rights and responsibilities. Ask if the landlord or manager produces a plain English summary for you to read and whether there are any additional rules.
Primarily, the right of peaceable occupation of the apartment for the term of the lease, usually referred to as ‘quiet enjoyment’. In addition, the leaseholder has the right to expect the landlord to maintain and repair the building and manage the common parts – that is, the parts of the building or grounds not specifically granted to the leaseholder in the lease but to which there are rights of access, for example, the entrance hall and staircases.
Principally, these will be the requirements to keep the inside of the apartment in good order, to pay (on time) a share of the costs of maintaining and running the building, to behave in a neighbourly manner and not to do certain things without the landlord’s consent, for example, make alterations or sub-let. The landlord has an obligation to ensure that the leaseholder complies with such responsibilities for the good of all the other leaseholders. These rights and responsibilities will be set out in the lease.
Because leasehold is a tenancy, it is subject to the payment of a rent (which may be nominal) to the landlord. Ground rent is a specific requirement of the lease and must be paid on the due date. This does not apply to every lease and should be checked prior to purchase as some ground rents increase at different intervals throughout the term of the lease.
Service charges are payments by the leaseholder to the landlord
for all the services the landlord provides. These will include
maintenance and repairs, insurance of the building and, in some
cases, provision of central heating, lifts, caretaker, lighting
and cleaning of common areas etc. Usually the charges will also
include the costs of management, either by the landlord or by a
professional managing agent.
Service charges can vary from year to year; they can go up or down without any limit other than that they are reasonable. Details of what can (and cannot) be charged by the landlord and the proportion of the charge to be paid by the individual leaseholder will all be set out in the lease. The landlord and/or appointed managing agent arrange provision of the services. The leaseholder pays for them.
All costs must be met by the leaseholders; the landlord will generally make no financial contribution. Most modern leases allow for the landlord to collect service charges in advance, repaying any surplus or collecting any shortfall at the end of the year.
The landlord can only recover those costs which are reasonable. Leaseholders have powerful rights to challenge service charges they feel are unreasonable at the First Tier Tribunal Property Chamber.
When considering the purchase of a leasehold apartment, it is important to find out, for personal budgetary purposes, what the current and future service charges are likely to be. Also, check if there is a reserve fund, and what plans are there for major works that could affect the service charge in the next few years after your purchase.
Many leases (but not every lease) provide for the landlord to collect sums in advance to create a reserve or ‘sinking’ fund to ensure that sufficient money is available for future scheduled major works, such as external decorations or lift replacement. The lease will set out the sums involved and when regular, cyclical, maintenance works are due.
The lease will normally require the landlord to take out adequate insurance for the building and the common parts, and will give him or her the right to recover the cost of the premium through the service charges. This policy will not normally cover the possessions (generally known as contents insurance) of individual leaseholders.
It is the leaseholder’s obligation to pay the service charges and ground rent promptly under the terms of the lease. If they are not paid and the landlord is able to show that the charges are reasonable, then he can begin forfeiture proceedings. If approved by a court, this can lead to the landlord repossessing the apartment. However, under the Commonhold and Leasehold Reform Act 2002, the right of the landlord will be restricted.
Sometimes the landlord carries out the management of the property himself; alternatively, a managing agent may be appointed to manage and maintain the building on behalf of the landlord, in accordance with the terms of the lease, current relevant legislation and codes of practice. The agent will receive a fee, which will usually be paid by leaseholders as part of the service charges. This may be based on a specified percentage of the day-to-day service charges, but good and common practice is for it to be a fixed fee per annum. Where major works are involved, the agent may charge an additional fee, which will normally be a percentage of the total cost of such works. Please note Arrow Leasehold Management DO NOT take any additional fees/commissions for organising works/contracts on behalf of the block/estate. Only professional fees i.e. surveyors costs will be charged to leaseholders.
Probably more than you think. There is a wide range of rights
set out in the legislation and advice is readily available;
however, where a dispute arises, the first step should be to ask
the managing agent for full details and/or an explanation.
LEASE – The Leasehold Advisory Service 70-74 City Road, London, ECIY 2BJ. Tel: 020 7383 9800 or local rate on 0845 345 1993 Fax: 020 7253 2043 www.lease-advice.org LEASE provides free advice and guidance to leaseholders and landlords on all aspects of leasehold law, including problems with service charges, the right to manage, possession proceedings and rights to lease extension and freehold acquisition. The Leasehold Advisory Service is a Non Departmental Public Body (NDPB) funded by Government to provide free advice on the law affecting residential leasehold property in England and Wales.