As a flat owner, you may be reliant on your freeholder or managing agent to deal with issues such as repairs, maintenance and collection of service charges. If you are being overcharged or they are failing to look after the property properly, it can be distressing.
A large number of flat owners have reported major problems with overcharging and poor flat management recently. As well as making life difficult for flat owners who are struggling to pay excessive and escalating service charges, it can make it hard to sell a property as buyers will not want to take on somewhere with out-of-control costs.
While the government plans to overhaul the leasehold system and intends to consult on how leaseholders could more easily challenge unreasonable service charges, there is no date for changes as yet.
What can leaseholders do about excessive service charges and poor flat management?
There are two potential ways in which you may be able to end problems caused by the freeholder, namely:
- Working together with the other flat owners to buy the freehold; and
- Working together with the other flat owners to take over the right to manage the property
Buying the freehold
If enough flat owners want to join in the process, you may be able to buy the freehold from the landlord. This is known as collective enfranchisement.
At least half of the flats in the building must want to buy the freehold. They need to be qualifying tenants, i.e. tenants who have a lease that was originally granted for more than 21 years.
There are some exceptions, but flat owners will usually have the right to buy the freehold. There is a strict process to follow, and you will generally need to ask a solicitor to represent you. You will also need to have the freehold interest valued by an expert leasehold enfranchisement surveyor, as the group of flat owners taking on the freehold will need to pay the landlord a premium.
The process usually starts by those involved signing a participation agreement confirming that they intend to join in with the purchase and pay their share of the costs. As well as the sum payable to the landlord, you will need to pay the legal fees, the survey costs and the landlord’s reasonable costs.
The solicitor can set up a management company to take on the freehold and deal with the flat management once it has been purchased.
Notice is served on the freeholder, and this will include a proposal in respect of the price to be paid. The figure is usually then negotiated. If a premium can be agreed upon, the solicitor will draft the documentation and arrange for completion of the purchase.
If a figure cannot be agreed upon, it will be necessary to ask the First-tier Tribunal (Property Chamber) to decide on the amount to be paid. This is a specialist property court that deals with leasehold matters.
Once the purchase of the freehold has been completed, you and your fellow flat owners will be responsible for dealing with the management of the block, to include arranging buildings insurance, carrying out repairs and maintenance and setting and collecting service charges.
Another major benefit of buying the freehold is that you will be able to extend your leases without the need to pay a premium to the landlord.
Taking over the right to manage – Poor flat management
Another option is to take over the right to manage from the landlord. They would retain the freehold, but you could work with the other flat owners to set up a management company and then deal with all of the management issues.
The benefit of this is that you can set the service charge amounts and ensure that the money paid is used effectively on matters that need attending to. You will be able to prioritise the work that you feel needs doing first and shop around for the best quotes.
The block is eligible if at least two-thirds of the flats have long leases, i.e. leases that were originally granted for more than 21 years. At least half of the flats in the property must want to take over the right to manage.
Again, you will usually ask a solicitor represent you in the transaction. They will set up a right to manage company. All leaseholders must be invited to participate by being given a notice of the intention.
A notice of claim is then served on the freeholder advising them that the leaseholders intend to take up their right to manage the property. There is a set process which must be followed.
If the freeholder does not challenge the notice, and there are very limited grounds on which they can, then the right to manage can be taken up four months after the original notice of claim was served on the freeholder.
The participating leaseholders will then be responsible for all of the management issues. They must notify the freeholder of certain matters, such as major works or alterations. The freeholder also has a right to be a member of the right to manage company.
Contact us
If you would like to speak to one of our expert property lawyers about a property matter, ring us on 0333 3055 249 or email us at info@leadingpropertylawyers.co.uk.
