When you purchase a residential property, it will usually be by ‘leasehold’ or ‘freehold’. Homeowners who own their properties as ‘leasehold’ do own their properties in the normal sense, but they do so however on a long lease (often 999 years) rather than own the property outright.
A long lease of this nature, created a long time ago, will often reserve only a very small nominal rent, which the freeholder will not collect. The vast majority of the time, leasehold property owners encounter very few problems and, in fact, some property owners are not even aware that they have a leasehold agreement.
New leaseholds however are often more problematic. Higher ground rents mean it is worth landlords’ while to collect them and to be more involved with the property. Leases often contain covenants restricting what leaseholders can do with their properties and, in order to get the landlord’s consent, for example for alterations, a hefty fee might be payable. The presence of certain covenants and other terms of a lease can even make a property unmortageable and unsellable.
The Law Commission has been reviewing the current laws and outlined a variety of potential reforms to the system in January 2020 but stopped short of calling for leaseholds to be scrapped.
Problems also arise when the freeholder wishes to provide services to maintain the property and/or its grounds. Regular maintenance, such as gardening, upkeep of communal grounds and decorating of communal areas, and more involved property works, including structural maintenance of the building can be organised by the freeholder. The lease will normally provide that areas such as walls, foundations, common parts and the roof are the responsibility of the freeholder but the cost of the repairs is to be shared between the properties within the building or estate.
The result is that property owners have been invoiced for planned maintenance and for services provided by the freeholders, and in the case of major structural repairs, such as replacing the roof, these costs may be tens of thousands of pounds. In some cases, the homeowners may not agree with the work that has been undertaken, or the charges for such work may be very expensive, and a better deal could have been negotiated. If the freeholder is making these decisions without consulting the leaseholders, the homeowners do not have a choice in the matter.
If residents are not willing to pay then the freeholder may undertake the works anyway and register a charge against the property to prevent it being sold without the costs being paid to them from the proceeds of sale.
We have recently seen an increase in the number of enquiries from residents of houses and flats who are unhappy with the services provided, or charges levied by the freeholders of their properties.
Fortunately there is a solution to these problems.
Owners of properties held on a long leasehold have certain rights, such as the right to be consulted ahead of any major works. In addition, in a number of cases, there may be a willingness for the freeholder to transfer the freehold to the residents at a cost, which is usually far less than the cost of the works that the residents are being charged for. If you have not been consulted about major works, you may be able to form a case against the freeholder.
In the case of a block of flats or maisonette, all the residents will need to cooperate in the acquisition of the freehold by forming a management company. Each property owner will need to be a member and following the acquisition, the management company (controlled by the property owners) will take control over the building or estate.
If you are a property leaseholder and are unhappy with the work instructed by the property freeholder, or have been invoiced for charges which you do not agree with, don’t hesitate to get in contact with us or call us on 0845 287 0939.