The concept of buying leasehold can be a bit confusing. It’s probably more commonly understood now than it has been in previous years due to the discussion in the news about the cladding crisis and the brief explanations in reports about what it means to buy leasehold, but the nuances of owning and living in a leasehold flat are still confusing to many.
We’re here to make a few things clearer for those considering buying a leasehold property…
- You don’t ‘own’ your flat
This is a tough pill to swallow if you’ve spent hours of your life organising a huge mortgage and scraping together a large deposit to buy your home but, essentially, you have bought the right to own your flat for the length of your lease only.
You have purchased a lease which allows you to own the flat for the length of that lease and in line with that lease. Once the lease expires, ownership reverts back to the freeholder of the building. You can extend your lease to extend your ownership or to maintain the value of your investment but it’s an expensive process. If you breach the rules of the lease, the freeholder can claim back ownership via forfeiture.
- If you want to be part of the RMC, you will not be compensated
Being a director or board member of an RMC is entered into voluntarily. No payment is received for your time, skills or effort but you do have to accept personal liability for decisions made. It’s probably good to remember this next time you’re at loggerheads with your director as they’re just a leaseholder like you, acting on behalf of the building to try to manage things in the best way possible, in their own time and at their own risk.
- Managing agents are unregulated
While agents are legally obliged to belong to one of two approved redress schemes to enable leaseholders to make raise complaints (The Property Ombudsman and the Property Redress Scheme), they are not officially regulated.
There is no compulsory or statutory form of regulations which means that anyone can set up as a managing agent regardless of qualifications or experience. Always do your due diligence before buying a leasehold property that is under the care of a managing agent or when switching managing agents.
- If your building is badly damaged, you have the right to appoint a new manager
The property doesn’t have to have been damaged in the course of poor maintenance either- the damage could be caused by the residents but, if the managing agent doesn’t handle the issue promptly and efficiently, you don’t have to just sit and watch your investment reduce in value. You can complain to the Leasehold Valuation Tribunal (more on them later) and they have the power to appoint a new manager if they agree there has been mismanagement.
- Major works require the Section 20 consultation process
Major works include:
- Works which will cost any one leaseholder more than £250
- Works that involve an agreement of more than 12 months with outside contractors that will cost any one leaseholder more than £100 per year
If either of the above is necessary, leaseholders must be consulted via the section 20 process, which allows leaseholders to have a say in who is appointed to carry out the works and to be privy to quotes and timeline estimations.
- You can take over management of your building with your fellow leaseholders
If more than 50% of the leaseholders in the building agree, they can approach the freeholder with an offer to purchase the freehold ownership of the property. This is called enfranchisement.
- You need permission to collect a reserve fund
A reserve fund is a pot of money that all leaseholders pay into, on top of their service charges and ground rent, to pay for emergency works or the long-term maintenance needs of the block. To set up a reserve fund, all the leaseholders must agree to it, or it must be stipulated in the lease.
- Disputes regarding leasehold property have their own dedicated part of the court system
The Leasehold Valuation Tribunal is a dedicated route through the court system that is specifically poised to deal with leasehold disputes. They can deal with most complaints including those related to service charges, RTM requests, lease extensions etc.
- It’s against the law to smoke in your block
It is prohibited, across the board, to smoke in the common parts of a building containing flats. You can be fined for breaking this rule and signage should be displayed in common areas to make leaseholders and their visitors aware.
- The most common complaint made by flat owners is…
You guessed it: Noise. Living closely with your neighbours in adjoining properties is bound to lead to some conflicts around appropriate noise levels. If issues can’t be resolved amicably between neighbours or through mediation with the RMC or managing agent, local environmental health officers or a solicitor can step in.
