Faq’s

Yes you can. In the past only the freeholder could change the management company, but now leaseholders can do this as well. Legislation was introduced in 2002 that gives leaseholders the ability to change their management company. It only takes a few months to complete the whole process, and will provide a number of benefits to the property and its leaseholders. This can be done though a process called Right To Manage. Leaseholders do not need to prove that their property is being badly managed either. As long as the correct steps are taken and the simple qualifying criteria is met leaseholders on any property can change their management company.

Right to Manage was introduced in 2002, (The commonhold and leasehold reform act 2002). It gives leaseholders of a property the legal right to take the responsibility of managing the property away from the freeholder or landlord and gives it to the leaseholders. This includes all aspects of management including the buildings insurance. At least 50% of leaseholders need to be in agreement and at least 75% of the property must be residential. If your property meets this criteria and the correct legal steps are followed then an application for right to manage will be successful. The leaseholders then decide how and who manages the property and what the service charge amount will be.

Your lease is an important legal document. It details the contract you agreed and entered into with the freeholder when you purchased you a leasehold property. It will document the responsibilities of the freeholder and the leaseholder in regard to the property. It will detail what the amount the ground rent is, how long the lease is for and what can and cannot take place at the property. It should also detail how often any decoration should take place and responsibilities around repairs and maintenance.

A lease agreement between a freeholder and the leaseholders will usually state that the freeholder is responsible for the upkeep, repair and maintenance of the building, and can pass on the costs incurred to the leaseholders. In practice a freeholder normally passes their property management responsibilities onto a property management company, who then charge the leaseholders for the property management. This charge is called a service charge. It is demanded by the property management company at regular intervals, normally annually or 6 monthly, to cover the costs of managing the upkeep of the property on behalf of the freeholder.

What the service charge must cover will be detailed in the lease agreement. However, most leases, especially those written many years ago, can be quite vague and can be left to the management company to decide what the service charge covers. The minimum it should cover is the cost of buildings insurance. Any over costs are then determined by the type of property and what work to required to keep in maintained. For example communal electricity, communal cleaning and gardening, external re-decoration, management fees. Unless right to manage has been achieved the leaseholders have no control over what the service charge covers and what the amount is.

Yes, you can challenge your service charge amount. If you are not happy with your service charge your first step should be to let your management company know this and ask them to provide an explanation of the charges. If you are still not happy with the service charge and believe the amount is unfair and excessive you can present this to the leasehold valuation tribunal. They will look at the the situation independently, take into account your point of view and that of the management company and decide what the service charge should be.

A sinking fund should be in place and built up year on year to cover unexpected costs and major works. A well managed property will allow a significant portion of the service charge to be used to build up the sinking fund year on year. This reduces the risk of there being an additional charge in any one year. However, there may be occasions where major works is required on a property where an additional demand for payment on top of the annual service charge is made. If the total cost of any major works is £250 or more per leaseholder then, by law, each leaseholder will be given the opportunity to get any tradesman they wish to tender for the works and their quote must be considered.

A sinking fund is a very important part of managing a property, and often overlooked by management companies. When deciding on how much the annual service charge should be it is important to factor in putting money aside each year for any unexpected costs and to build up a reserve for major works such as external redecoration. A sinking fund may take a number of years before it reaches a healthy level but it is essential if a property is to be managed properly. It is important to always have funds available for unexpected costs and it ensures leaseholders are not sent additional bills during the year is unexpected costs arise or major works are required.

When you by an apartment or flat it is usually sold as leasehold. The land that the property is built on is usually owned by someone else and they are the freeholder. They own the freehold. At purchase the buyer of a flat is agreeing to the terms in the lease and one of these terms will be an annual payment to the freeholder as rent for the land the property is built on. This is known as ground rent. The amount will be stated in the lease, along with frequency of payment and any increases over time.