A leaseholder’s right to have control of or input into how their property is managed is a right that many are either unaware of or are unable to exercise.

The landlord (freeholder) under the terms of the lease is in all but a few instances responsible for managing a property and will usually appoint a managing agent to undertake this function on their behalf.  In a large number of cases, the freehold of the building is vested in a company which the leaseholder’s own a share of and therefore have a say in the management of their property.  Such companies rely on a few leaseholders to step forward as directors to run the company and appoint managing agents.  Leaseholders/shareholders will meet annually at an AGM to appoint those directors and agree to the appointment of managing agent, accountants etc.

For many this is not the case and they find the freehold of their property is owned by a third party with little interest in the property save for the collection of the ground rent and placing the insurance from which a commission is usually earnt.  Freeholds are bought as investments and there are many investment funds, which are now buying up freeholds, particularly from developers on completion of the disposal of the flats in the new development.

Those leaseholders that feel that their property is not being managed how they would like having rights, which are simple to effect.  The right to manage is a no fault right to acquire the management of your property from your freeholder.  It requires a majority of the leaseholders in any property to form and join an RTM Company which can be bought off the internet for less than £100 and then serve statutory notice of their wish to take over the management against the freeholder who has no grounds to object except if there is an error in the administration process.

It is therefore important to take professional advice from a solicitor or a managing agent who specialises in this field and has the necessary knowledge and experience.

Once the right has been acquired, it is then the job of the members of the RTM company to find themselves a new managing agent and take control of the management of their property with the professional assistance of a suitably qualified management company.  There is another grey area with an ever – increasing number of unqualified firms offering a management service.  Look for an agent who is a member of either the RICS or ARMA and who complies with The Code of Management Practice, which is adopted in law and the widely accepted reference guide for good practice in the industry. 

It is easy to complain about your landlord or your agent but remember you have no power to do something about it if you choose.  For advice and information please do not hesitate to contact myself or any of the professional organisations listed below.

Peter Dack FRICS

Director

In my first article in the second addition of Property Focus,  I stated that the service charge is the payment made by a leaseholder to the freeholder of their managing agent to maintain, repair and insure the building as well as to provide other services to be provided under the terms of the lease such as lift maintenance, central heating, cleaning and gardening.  In article I touched on leaseholders “right to manage” removing the freeholder’s control of the maintenance of the building under the terms of the lease.

The “reasonableness” of the service charge is arguably the most contentious issue with respect to living in a leasehold property and why so many leaseholders wish to have control either by owning a share in the freehold or acquiring the right to manage. Under the Leasehold & Commonhold Reform Act 2002 leaseholders have a right to withhold payment of their service charge if they dispute the service charge, the charges have to be reasonable and the lessees fully consulted in accordance with the regulations set out in the Act.

One clear calendar month before the commencement of the financial year a leaseholder should receive a draft budget of service charges for the forthcoming year and given the right to comment on the proposed budget.  Any comments received must be considered and before implementing the budget any representations received, considered and have regard to.

Failure to do so could invalidate the right to recover the service charge, further the request for payment must be in a prescribed format with notes accompanying advising leaseholders of their rights.  Failure to advise a leaseholder of their rights will invalidate any request for payment. 

The service charge should be transparent with individual items of proposed expenditure clearly items of proposed expenditure clearly quantified.  A standard budget will include items such as fire risk assessments, health and safety inspections, emergency lighting and fire alarm testing.  The list is ever increasing with new regulations being introduced and additional services provided to some properties.

It would not be unreasonable for lessees to question any item of expenditure within a budget and to seek competitive estimate to ensure value for money.  I will touch on the large ticket items in subsequent issues but needless to say insurance and managing agent’s fees are usually the two largest items of expenditure for which leaseholders need to be satisfied they are receiving value for money.

Ultimately, a leaseholder can withhold payment of their service charge and leave it for the freeholder/RTM to take them to the Leasehold Valuation Tribunal where the question as to the reasonableness of the service charges will be considered and determined by an independent review panel.  Hopefully this can be avoided if managing agents and their client respect leaseholder’s rights by providing clear transparent information and most importantly a service to justify the service charge.

If you have any questions with respect to service charge issues or any other matter in respect of leasehold management please do not hesitate to contact me and I will endeavour to provide impartial professional advice.

Peter Dack FRICS

Director