A leasehold flat is usually a property in an apartment block, converted house, or above commercial units. When you buy a leasehold property, effectively you are buying the lease.
You are leasing the property from the freeholder for years, certainly decades – and even in some cases, centuries!
Once you buy the leasehold, you become the “tenant” and the freeholder becomes the “landlord”. However many modern leases also have a third party to the lease and that is the “Residents Management Company”. This can all seem confusing due to the terminology crossover with renting. However, this terminology will be used in your lease and other documentation, so it’s important to be aware of it.
The structure and common parts of your block plus the land it is built on are usually owned by the freeholder. The freeholder or a residents management company will be responsible for the maintenance and repair these areas as well as the building’s envelope. The costs of doing this are usually recovered through the service charge. A managing agent is usually appointed by the freeholder or a residents management company to manage the maintenance and repairs, and collect the service charge.
The leaseholder owns everything in the four walls of their flat, as deep as the plaster and floorboards. In some blocks and converted houses, this might also include an outdoor space such as a balcony, terrace or garden.
The service charge keeps the building well-maintained, safe and compliant. It funds insurance, repairs, maintenance, cleaning, inspections, security and much more. The apartments individual lease will tell you specifically about what’s included.
The block will run in financial years, similar to a business. Before the start of the financial year, a budget is set for the service charge. This is agreed by the managing agent with the freeholder or resident management company. This is distributed to the leaseholders, and the funds collected are kept in a separate bank account for the service charge. At the end of the financial year, the end of year accounts are prepared.
Whoever runs your building, the developer, freeholder or a resident management company, they will usually appoint a managing agent similar to Horizon. The agent is responsible for:
Collecting the service charge and managing the budget
Liaising with leaseholders and attending meetings
Arranging repairs, maintenance, insurance and inspections
Ensuring the building is safe and compliant
Ultimately they can only do their job if there is sufficient money in the service charge paid by the leaseholders
Hopefully you found this very brief guide to leasehold property useful and as ever, if you have legal advice on your obligations and covenants as a leaseholder, its always prudent to speak to a solicitor or a body such as the Leasehold Advisory Service.
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