Leasehold ownership of a flat is simply a long tenancy, the right to occupation and use of the flat for a long period – the ‘term’ of the lease. This will usually be for 99 or 125 years and the flat can be bought and sold during that term.
The ownership of the flat usually relates to everything within the four walls of the flat, 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 freeholder, who is also the landlord, who is often responsible for the maintenance and repair of the building.
A lease is a contract between the leaseholder and the landlord giving conditional ownership for a fixed period of time. It is an important document and leaseholders must ensure that they have a copy and that they understand it. 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.
Firstly, the right of peaceable occupation of the flat 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 pay (on time) a share of the costs of maintaining and running the building, to keep the inside of the flat in good order, to behave in a neighbourly manner and not to do certain things without the landlord’s consent, for example, make alterations or sublet.
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, subject to the issue of a formal and specific demand by the landlord.
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. The charges will also include the costs of management, either by the landlord or by a professional managing agent.
Many leases 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. Contributions to the reserve fund are not repayable when the flat is sold.
The lease will normally require the landlord to take out adequate insurance for the building and the common parts, and will give him the right to recover the cost of the premium. This policy will not normally cover the possessions 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 then the Landlord can +begin forfeiture proceedings by applying for a court order. If forfeiture is approved by a court, this can lead to the landlord repossessing the flat. As an alternative the landlord may also seek a county court judgment for payment.
It is possible for the landlord or the residents’ management company to carry out the management of the property direct; More usually, a professional managing agent will 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 takes instruction from the landlord, not the leaseholders, but should constantly be aware of the leaseholders’ wishes and requirements. 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 for the main services provided. Where major works, or other works that may not be anticipated, are involved, the agent will charge additional fees, based on the time taken or a percentage of the total cost of such works.
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. LEASE is funded by the Department for Communities and Local Government and the National Assembly for Wales.
ARMA is the leading trade body in England and Wales that focuses exclusively on matters relating to the block management of residential property, whether for landlords or resident management companies. Members agree to adopt and comply with the principal objectives of the Association and undertake to follow the codes of practice issued by ARMA and the Royal Institution of Chartered Surveyors.
ARHM is the leading trade body for managers and landlords of leasehold schemes purpose-built for retired people, whether for landlords or resident management companies. Its members agree to comply with its code of practice for private retirement schemes and to offer leaseholders access to an independent ombudsman scheme.