Please see below a simple breakdown guide to leasehold & freehold flat ownership. Also down the right hand side of the page are downloadable guides to assist you with information on common residential block management issues.
Leasehold ownership of a flat is simply a long tenancy, the right to occupation and use of the flat for a long period - the 'term' of the lease. This will usually be anything from 99 to 999 years and the flat can be bought and sold during that term.
The leasehold ownership of a flat usually relates to everything within the four walls of the flat, including floorboards and plaster to walls and ceiling, but does not usually include the external or structural walls.
The structure and common parts of the building and the land it stands on are usually owned by the freeholder, who is also the landlord. The freeholder is responsible for the maintenance and repair of the building. The costs for doing so are recoverable through the service charges and billed to the leaseholders.
The landlord can be a person or a company and it is also quite common for the leaseholders to own the freehold of the building, through a residents' management company, effectively becoming their own landlord.
Nicholsons manages older blocks of apartments and you may live in an apartment where you know each of the flats is freehold with Title Deeds governing ownership instead of a lease.
The Deeds will outline the ownership of the property including your contribution towards the maintenance and upkeep of the external structure and communal areas. In order to enforce the Title Deeds a Deed of Covenant is entered into between Nicholsons and the owner to ensure monies are collected towards running costs & repairs.
A lease is a contract between the leaseholder and the landlord giving conditional ownership for a fixed period of time. The lease sets out the contractual obligations of the two parties: what the leaseholder has contracted to do, and what the landlord is bound to do. The leaseholder's obligations will include payment of the ground rent (if any) and contribution to the costs of maintaining and managing the building.
The lease will probably also place certain conditions on the use and occupation of the flat. The landlord will usually be required to manage and maintain the structure, exterior and common areas of the property, to collect service charges from all the leaseholders and keep the accounts.
When a flat changes hands, the seller passes on all the rights and responsibilities of the lease to the purchaser, including any future payments of service charges that have not yet been identified.
Principally, these will be the requirements to keep the inside of the flat in good order, to pay (on time) a share of the costs of maintaining and running the building, to behave in a neighbourly manner and not to do certain things without the landlord's consent, for example, make alterations or sublet. The landlord has an obligation to ensure that the leaseholder complies with such responsibilities for the good of all the other leaseholders. These rights and responsibilities will be set out in the lease.
Service charges are payments by the leaseholder to the landlord for all the services the landlord provides. These will include maintenance and repairs, insurance of the building , lifts, lighting and cleaning of common areas etc. Usually the charges will also include the costs of management, either by the landlord or by a professional managing agent.
Service charges will vary from year to year; they can go up or down without any limit other than that they are reasonable.
Details of what can (and cannot) be charged by the landlord and the proportion of the charge to be paid by the individual leaseholder will all be set out in the lease. The landlord arranges provision of the services. The leaseholder pays for them.
Many leases provide for the landlord to collect sums in advance to create a reserve or 'sinking' fund to ensure that sufficient money is available for future scheduled major works, such as external decorations or lift replacement. Contributions to the reserve fund are not repayable when the flat is sold. If there is insufficient money in the reserve fund to deal with major works the costs will be shared between owners in the proportions set out in the individual lease.
It is the leaseholder's obligation to pay the service charges and ground rent promptly under the terms of the lease. If they are not paid and the landlord is able to satisfy an LVT that the charges are properly due and reasonable, then he can begin forfeiture proceedings by applying for a court order. The court has wide discretion where forfeiture is concerned, but if forfeiture is approved by a court, this can lead to the landlord repossessing the flat.
The landlord may also seek a county court judgment for payment, which can affect a leaseholder’s ability to obtain credit.
The managing agent takes instruction from the landlord, not the leaseholders, but should constantly be aware of the leaseholders' wishes and requirements.