Leasehold Property Rights

Often the freehold is owned by a Management Company which is in turn owned and controlled by the leaseholders who each own a ‘share of freehold’. However the Management Company does not always own the freehold. It all depends on the legal ownership structure of your estate, set out in your Lease.

While leasehold property can be bought and sold, if the term remaining is less than 80 years, it is considered to be a short lease and mortgage lenders will become increasingly reluctant to advance a mortgage on the property. It may therefore become difficult to sell, and will decrease in value gradually over time. You may therefore wish to consider extending your property lease.

Flat owners have a statutory right to buy the freehold of their building, even against their freeholder’s wishes. This process is known as leasehold (or collective) enfranchisement.

There is also a statutory right for flat owners to take control of the management of their building in a process known as Right to Manage (or RTM).

Irrespective of leaseholders’ right of collective enfranchisement, should your freeholder otherwise decide to sell, they may have to offer the right of first refusal to all leaseholders before proceeding. If they do not, your freeholder could be guilty of a criminal offence and the leaseholders may have the right to force the buyer to transfer it to them.

Leases vary from one property to another, but under the terms of your lease, it is likely that you will have to:

• pay the freeholder/landlord/management company an annual ground rent (caution –read your lease carefully as some ground rents increase sharply or even double every 10 years);
• pay an annual maintenance/service charge to cover the cost of cleaning, gardening and repairs to the common parts, as well as the cost of buildings insurance;
• abide by rules and restrictions (known as covenants) relating to issues as diverse as alterations, subletting, pet ownership, running a business from home and not being noisy or otherwise anti-social. In return it is common for the freeholder, landlord/Management Company to have to maintain and insure the buildings and common parts, ensure all lessees comply with their lease terms, permit the lessees to occupy and use their flats without interruption (known as “quiet enjoyment”).

While most leases provide that the freeholder is responsible for the upkeep of the main structural parts of the building, communal areas and surrounding grounds, they are usually able pass the cost of this on to you and your fellow leaseholders. This is in addition to the ground rent.

It is not unusual to find that you must also contribute to a sinking fund as part of the service charge to cover the future cost of any larger long-term projects such as replacing the roof.

Often, a freeholder will use a managing agent or a separate management company to look after issues such as cleaning, maintenance and the collection of ground rent. However, if a majority are in favour, flat owners can exercise their right to take control of the management of their block to appoint their own agent or self manage.

Where the debt is not disputed the landlord can make an application for your mortgage lender to meet the cost, which is likely to be a breach of your mortgage conditions.

While very rare, it is sobering to note that the ultimate sanction for breaching the terms of your lease is forfeiture which results in the Lease being terminated early.