Top tips for lease-holding landlords

Chafes Solicitors, one of our recognised suppliers, has provided some top tips for leasholders…
Chafes Solicitors, one of our recognised suppliers, offers some top tips for leasholders…

Chafes Solicitors, one of our recognised suppliers, offers some top tips for leasholders…

If you let flats, you’ll be familiar with service charges; as a leaseholder you are required to pay the freeholder a fee to cover costs including maintenance, repairs, insurance, management and other services.

Such costs can add up but luckily legislation protects the leaseholder from excessive service charges. With this in mind, here are some facts that all leaseholders should know:

  • If work to the apartment block or surrounding land is needed and it is to cost more than £100 for Qualifying Long-Term Agreement (QLTA) leaseholders, or £250 for non-QLTA leaseholders, in any one year, the freeholder is required to consult with the leaseholders before going ahead.
  • When consulting with leaseholders, the freeholder must:

–          Give notice to all leaseholders and tenants’ associations, detailing why the work is necessary

–          Invite responses to the notice and keep a copy of the responses

–          Obtain a series of estimates for the work (leaseholders and tenants’ associations are able to nominate alternative contractors)

–          Issue a statement detailing the estimated costs from at least two of the contractors and provide detail of where the estimates can be inspected

–          Invite responses to the estimates within 30 days and keep a copy of the responses

–          Issue a summary of any responses received and respond to them

–          Justify why the successful contractor has been chosen

  • If the freeholder doesn’t consult with the leaseholders, the leaseholders’ responsibility for cost is limited. In fact, the maximum that the freeholder can recover will be £100 per leaseholder under a QLTA and £250 for leaseholders not under a QLTA.
  • When the freeholder issues a service charge demand, they must do so within 18 months of the work being carried out.  If the demand is issued after this period, the leaseholder isn’t required to pay.
  • If the leaseholder is unhappy with the service provided by the freeholder, they can challenge the service charge costs via a Leasehold Valuation Tribunal (LVT). Challenges can be made on grounds including:

–       Whether the service charge costs were reasonably incurred

–       Whether the services or works are of a good standard

–       Whether the estimated service charge, payable before costs are incurred, is reasonable

  • When challenging whether service charge costs have been reasonably incurred, factors including the financial impact on leaseholders and whether the work should be phased to spread the cost can be considered. However, the leaseholder cannot insist that service charges are phased to spread the cost of major works.
  • Leaseholders aren’t able to avoid service charges on the grounds of hardship. So if particular repair is required urgently and is carried out at a reasonable cost and to a good standard, the leaseholder must pay in accordance with the terms of the lease.

If you’re a leasholder and would like advice or guidance on any of the tips covered, visit our Chafes recognised suppliers page.

4 thoughts on “Top tips for lease-holding landlords

  1. Is there a limit to the amount that a Mangement Company can charge leaseholders for their addition services? For example for Surveyors to investigate problems and/or “oversee” works? Many Management companies have their own Surveyors to carry out this work. I have seen situations where building repairs have been increased by £1000’s by these costs. On one occassion after years of small repairs, each following a surveyors report, a roof was replaced. 1/3rd of the cost of these works was for fees from the Management company. I own several houses that have had roof repairs and/or replacement over the years. I called 3 roofing companies who came out and gave me a quotation free of charge. Do Mangement companies need to use their Surveyors to establish that there is a hole in a roof where the rain comes in? If so how much should they charge?

    My second question is this. Under the terms of most leases the Freeholder can nominate the Insurance company that covers the buildings but the Leasholders must pay the premiums. Insurance campanies must now disclose any commission that is paid from a premium and to whom it is paid. I have made several requests for this information but it has not been forthcoming – have Leaseholders the right to this information? I was also refused information regarding the number of claims and the amounts because this information was covered under “Data Protection”. I asked for the figures only and no information about the flat numbers or work involved – this surely cannot be covered by Data Protection since I am paying Insurance Premiums?

  2. Hi Mary,

    The management company must be ‘fair and reasonable’ when charging for services. If the leaseholder should wish to question what is ‘fair and reasonable’, they may apply to the Leasehold Valuation Tribunal (LVT) for a determination. The Leasehold Advisory Service http://www.lease-advice.org/ is able to advise leaseholders about making ‘fair and reasonable’ challenges.

    With regards to your second question, it is best practice for the insurance company to share details of any commission but not compulsory. To challenge the insurance company, we suggest you speak to the Leasehold Advisory Service for guidance on 020 7383 9800

    You may also be interested in Channel 4’s Dispatches programme; they cover both of your questions in this programme http://www.channel4.com/programmes/dispatches/4od#3399948

  3. I am the freeholder of a house conversion of four flats, one of which I own. I have always had a good relationship with my leaseholders and have kept their annual service charge to £100 each thus far. However, I am spending a lot more time on insurance and other issues. What is a reasonable amount to charge annually?

  4. Service Charges in converted blocks are the costs incurred by the Freeholder in maintaining the building (e.g. communal cleaning, lighting, heating, buildings insurance, general maintenance and a sinking fund for major repairs). You are allowed to charge the leaseholders the costs you have incurred. Many freeholders appoint a Managing Agent to run the building on their behalf and you can also include the cost of the Managing Agent within the Service Charge.

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