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A Guide to Living in Leasehold Flats

25th September 2023

leasehold

Understanding leaseholds is important when living in a flat. It is in your best interests as a buyer or owner of a leasehold flat to fully understand the legal status of the ownership. What exactly do you possess, and what rights and liabilities do you have?  As leaseholds can be complex you will need to understand residential leaseholds, be aware of your rights and be informed of your duties.

 

What Exactly is a Leasehold?

Leasehold apartments are usually in purpose-built buildings, converted residences, or within commercial or retail businesses. They will additionally include “maisonettes,” which are apartments with each having separate doorways. They can also be houses where the homeowner does not own the land it’s on.

 

Leasehold ownership of a flat is essentially a long tenancy, the right to occupy and use the apartment for an extended period of time – the ‘term’ of the lease. This is often for 99 or 125 years, and the flat can be purchased and sold within that time. The term is fixed at its beginning and as a result decreases in length year after year. 

 

The leasehold title to a flat normally refers to everything inside the four walls of the flat, including flooring and plastering on the walls and ceiling, but not to the exterior or structural walls. Unless it is a shared garden for the building, a garden can be added. The leaseholder’s ownership is frequently defined as the “Demised Premises” in the lease.

 

The freeholder, often known as the landlord, usually owns the structure and common elements of the building as well as the land it stands on. Normally, the freeholder is responsible for the building’s upkeep and restoration. If this is the case, the costs will be recovered through service charges and invoiced to leaseholders.

 

What is a Lease?

A lease is an agreement between the leaseholder and the landlord that grants the leaseholder conditional possession for an agreed-upon amount of time. It is a critical document, and leaseholders should make sure they have a copy and understand it.

Leaseholders who are having difficulty understanding their lease should seek assistance and insist on a report on its terms when they are directed to handle the purchase.

 

After purchasing a leasehold property, it is not possible to change the lease terms, so it is important purchasers are aware of the services that are offered and of the requirements that are imposed. 

 

The lease outlines the two parties’ contractual obligations: what the leaseholder has agreed to undertake and what the landlord is required to do. Payment of the ground rent (if any) and contribution to the costs of maintaining, insuring, and managing the building will be the leaseholder’s responsibility. 

 

If the owner of the property does not want to oversee and care for the property’s exterior, and communal spaces, as well as collect service costs from all leaseholders, insure the building, and keep the books of accounts, Seraph Property Management will cover these responsibilities for the Landlord.

What are your Legal Rights?

Most importantly, the right to “quiet enjoyment” of the apartment for the duration of the lease, which is granted by law regardless of whether it is not explicitly stated in the lease. Having the ability to live in the property without unwarranted intervention from the landlord is referred to as “quiet enjoyment.”

 

Although you are liable for repairs within your home, the freeholder has accountability for improvements to the building’s construction and communal areas. If the ground rent and maintenance fees are insufficient to cover the costs of repairs, the freeholder may charge leaseholders an additional fee. They must, however, communicate with leaseholders if the work will cost more than predicted.

 

Assume a freeholder requests funds for installing a new lift. You can have your say if you believe the existing lift is still suitable for purpose or that the planned plans are too expensive. The freeholder has 30 days to respond in writing to your feedback.

 

In addition, you may also have the option to renew your lease. When a leasehold expires, the freeholder regains possession of the land and building (which includes your property).

If a leasehold is short (less than 100 years), it can be difficult to pass on a property to heirs. This is due to the fact that, even if you have paid off your mortgage, home ownership will eventually transfer to the landlord.

 

A short-term leasehold can also make it difficult to refinance or sell your home.

You can arrange a lease extension with the freeholder in this case. It is usually advisable to deal with a solicitor to guarantee the best possible outcome and avoid any unforeseen charges. If you’re looking to buy or sell your home, contact our James Douglas team today to see how we can help you quickly move into a brand-new property without excess paperwork.

What are your Obligations?

These will mainly involve the requirements to maintain the flat in good condition, to pay (on time) a portion of the expenses of upkeep and operation of the building, conduct oneself in a neighbourly manner, and to refrain from doing certain things without permission from the landlord, such as make modifications or sublet. The landlord has an obligation to guarantee that the leaseholder fulfils such commitments for the benefit of all leaseholders. The lease will detail these rights and duties.

 

What are Service Charges?

Service charges are payments made by the leaseholder to the landlord for every service provided by the landlord. These will cover building upkeep and servicing, insurance coverage, and, in some situations, the supply of central heating, lifts and housekeeping of common spaces, among other things. The costs of management, whether by the landlord or a professional managing agent, are usually included in the charges.

 

Service prices will vary from year to year; they may fluctuate up or down without restriction.

 

The leaseholders are obligated to pay all costs. Most modern leases permit the landlord to collect projected expenses in advance, with the landlord recovering any excess or claiming the remainder at the end of the year.

 

What are Reserve Funds?

 

Many leases require the owner of the property to collect funds in advance to establish a reserve or ‘sinking’ fund to guarantee that sufficient funds are available for future big improvements, such as exterior decorations or lift replacements. The lease will specify the terms for this, including when monthly or annual maintenance work is required.

 

Contributions to the reserve fund will not be refunded if the apartment is sold. If there’s not enough money in the reserve fund to cover substantial repairs, the costs will be split among the property owners in the amounts specified in the individual leases.

 

What is a Managing Agent?

The landlord or the building’s management company may manage the property directly; alternatively, a managing agent may be selected to handle the management and upkeep of the building on the landlord’s behalf. Either way the managing agent will operate in compliance with the lease terms as well as current applicable laws and codes of practice.

 

The agent charges a fee for the day-to-day management, which is normally included in the service rates. It is acceptable and typical practice to charge a fixed price per year. 

 

Seraph Property Management prides itself on giving a more personal approach to block and estate management.  We work with the leaseholders or freeholders to get what they want out of the building and help them consider the future of their asset.  If you are interested in moving management company or putting a currently unmanaged building over to management then please contact us no matter the number of units.

 

This article was created to serve as an outline and is not intended to be a substitute for legal guidance. For additional information, you can reach our team by phone or via our online contact form.