COUNCIL / HOUSING ASSOCIATION LEASEHOLD FLATS
As a leasehold flat owner, you usually own and are responsible for the maintenance of everything within the four walls of your flat/home, including floor boards and plasterwork, but not usually the external or structural walls.
The landlord, who can be a person, a company, a local authority or a housing association, owns the structure and common parts of the building, including the roof and the land it stands on and is responsible for its maintenance, including drainage.
In the private sector, according to independent advice agency the Leasehold Advisory Service (Lease), it’s now becoming quite common for the leaseholders to own the freehold of the building through a residents’ management company, effectively becoming their own landlord. However in the social sector this is extremely rare in Wales.
WHAT IS A LEASE
A lease is a contract between the leaseholder and the landlord, giving conditional ownership for a fixed period of time usually 99-120 years. It is the key document detailing all the responsibilities and obligations of both the leaseholder and the landlord. It should also spell out what you can expect from the landlord in terms of services.
Although a standard lease was used in RTB properties every lease could be different. It is essential that you read your lease carefully to find out exactly what your rights and responsibilities are.
WHAT DOES A LEASE CONTAIN
A lease document can be very specific to your property, as such every lease could be very different. In general they are:
- a contractual agreement between parties, (you and the landlord or their managing agent who may also own the freeholder to the property). It’s a document that sets out the terms and condition’s for occupation of the premises
- provides a right to occupy a dwelling for a specific duration, with exclusive possession, at a rent (ground rent)
- Capabilities of assignment (i.e. being transferred).
SO WHAT DOES A TYPICAL LEASE CONTAIN?
The lease usually (but not exclusively) has 5 parts.
- List of the parties to the lease
- Date on which the tenancy starts
- The price to be paid
- The intention of parties to create a lease
- Brief description of property (the demise)
- Length of the tenancy (i.e. 99 years)
- Rent to be paid
- Ground rent
- Lessee’s covenants
- To pay service charges
- Use and occupation of the premises
- Alterations to the property
- Repairs to the interior
- Lessor’s covenants
- Commitment to allow peace and quiet enjoyment of the home
- Repair and decoration of exterior and common parts
- Buildings insurance
- Details of mutual enforceability of the rights and obligations under the lease
OBTAINING A COPY OF YOUR LEASE
If you can’t find a copy of your lease you can ask your landlord. Some social landlords provide copies for free, others have conditions for charging of additional copies. They are not obliged to provide you with a copy however its good practice do so at least once. You can also obtain a copy of your lease from the Land Registry Office.
A Lease is often written in complicated legal terms, particularly ones written in the 70’s or even older ones. You should seek legal advice if you are unsure or unable to understand your rights and obligations under your lease. Buying a lease means that you are responsible for some substantive costs, it is important therefore as you may not be aware of the substantial costs that may be involved.
You can obtain free Information and advice from lease-advice.org or call 020-7490-9580 or 0845-345-1993, or email queries to email@example.com if you are unsure about your obligations or need to explore property lease issues.
Your contractual rights laid out in the lease normally entitle you to expect the landlord to maintain and repair the building and manage the common parts such as grounds, staircases and hallways.
You will be required to keep the inside of your flat in good order and to behave in a neighbourly manner. You will also have to pay a share of the costs of maintaining and running the building. Your lease may also contain restrictions such as not being allowed to sub-let, without the landlord’s consent, although each lease could be different.
Leasehold is a form of tenancy. It is therefore subject to the payment of a rent – which may be nominal. This is usually termed the ‘Ground rent’ and is a specific requirement of the lease and must be paid on the due date.
Service charges are payable by the leaseholder to the landlord for all the services they provide, including maintenance and repairs, insurance of the building and, in some cases, provision of central heating, lifts, lighting and cleaning of common areas etc. Service charges usually also include the costs of management, either by the landlord or by a professional managing agent.
Service charges can vary from year to year and can go up and down with no limit other than that they are reasonable. 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.
Details of what can and cannot be charged by the landlord and the proportion of the charge to be paid by the individual leaseholder are all set out in the lease.
DAY TO DAY MAINTENANCE COSTS
All maintenance costs are met by the leaseholder’s and landlords normally make no financial contribution. Some social landlord’s have been known to waiver some charges as cost benefit however this will become increasingly rarer.
The lease normally obliges the landlord to take out insurance for the building and common parts and gives them the right to recover the cost of the premium through service charges. The policy doesn’t usually cover the possessions of individual leaseholders. Leaseholders often take out their own insurance for home contents and is separate from building insurance cover, the two are often confused.
RESERVE OR SINKING FUNDS
Many leases provide for the landlord to collect sums in advance to create a reserve or sinking fund, ensuring that enough money is available for future scheduled major works such as lift repairs or rendering, roof replacement or repairs. The lease will set out the sums involved and when regular maintenance works are due. Sometimes two major works items need to be undertaken at the same time, such as roof and rendering. Scaffolding is often needed and actually saves money to have the two items done at the same time, however this increases the costs to the leaseholder.
It’s important to ensure consultation through the S20 notice process are properly monitored and opportunities are given to involve leaseholder’s in theses decisions.
CHALLENGING SERVICE CHARGES
Leaseholders have powerful rights to challenge service charges if they feel they are unreasonable. This can be done through the Leasehold Valuation Tribunals (LVTs).
The LSVT provides a relatively informal way to resolve residential leasehold disputes. Application to LVTs can be made under many different laws and on many subjects, among other things, the reasonableness of a service charges and whether it is payable and disputes relating to insurance. Lease publishes useful leaflets, which are downloadable from its website, on LVTs.
Most social landlords carry out the management of the property themselves, but some may appoint a managing agent to manage and maintain the building on behalf of the landlord in accordance with the terms of the lease, relevant legislation and codes of practice. Although this practice is common in the private sector, we may see this develop in the social housing sector as the need to reduce management costs, improve value for money or diversify based on social landlord’s expertise develops.
In such circumstances, the agent takes instruction from the landlord, not the leaseholders, but should be constantly aware of the leaseholders’ wishes and requirements. The agent receives a fee which is usually paid by leaseholders as part of the service charges.
REGULATION COVERING MANAGING AGENTS
Social landlords are regulated by the Welsh Government and have to abide by regulatory codes. This includes specific provisions relating to the governance, finance and service delivery with the aim of putting tenants at the heart of regulation. The process is a co-regulation approach with an emphasis on shared learning and the development of good practice while adopting codes of practice that are ethical and responsible for the sector. Generally speaking social landlord’s manage lease holding properties in-house.
There is no statutory regulation of ‘managing agents’ in the private rented sector. Social landlord’s who do diversify their portfolios into social letting agencies may be members of ARMA, the Association of Residential Managing Agents, Tel: 020-7978-2607 or go to www.arma.org.uk Members agree to abide by a code of practice and that of the Royal Institution of Chartered Surveyors. Tel: 0870-333-1600 or visit www.rics.org
If there is a problem with management services, the leaseholder’s argument is not with the agent but with the landlord, who has ultimate responsibility for the full and proper management of the property. Leaseholders with such complaints are advised to discuss their situation with their landlord in the first instance and Lease before contacting their landlord.
In extreme cases, where the landlord will not meet their obligations to maintain the buildings and communal areas in accordance with the lease, it may be necessary to take action through the county court. Lease provides in-depth advice on such a course of action, however it is always useful to seek to resolve the issues prior to the courts, as court action can be costly.
RIGHT TO MANAGE
Leaseholders who have suffered long-term management difficulties from landlords or who believe they could do a better job at a lower cost themselves, there is the option to self manage or appoint their own agent.
Since September 2003, flat owners in England and Wales have been able to exercise the Right to Manage (RTM) and take over the management of their building without having to prove any fault on the part of their landlord.
RTM is part of a package of reforms stemming from the Commonhold and Leasehold Reform Act 2002, that empowers leaseholders to take control of the running of their building without having to pay large sums of money to buy the freehold. They also gain better control over insurance costs and the level at which service charges are set and other functions.
Exercising this right is a relatively simple process. A formal notice is served on the landlord by an RTM company which has been set up by a sufficient number of qualifying tenants. Qualifying tenants means leaseholders whose lease was originally granted for a term of more than 21 years.
RTM is a form of DIY management and a way of reducing management costs. However, managing a building involves running a complex business and complying with all the necessary legislation that this involves. You should always consider a professional in leasehold management and right to manage when exercising this right.
Welsh Tenants: www.welshtenants.org.uk
Association of Residential Managing Agents: http://arma.org.uk/leaseholders/the-right-to-manage
Welsh Government Regulatory framework: http://gov.wales/topics/housing-and-regeneration/services-and-support/regulation/?lang=en
Leasehold Reform Legislation by the Land Registry: last updated 24th June 2015 Practice guide 27: