Rights and Responsibilities for Leaseholders
Even though houses can be leasehold (e.g. bought through affordable home ownership schemes) most will be flats or apartments.
Nonetheless, all leases (legal agreements used for leasehold properties) must be for a fixed period of time.
The lease states how many years the lessee can own the property. Ownership would return to the landlord when the fixed term ends.
Important: Some of the housing advice and rules for leaseholders, freeholders, and about ground rent, differ in Northern Ireland.
As a rule, a property lease will state what conditions the lessee and the landlord have agreed to, including:
- Whether permission is needed to undertake alterations.
- What fees will be paid towards property maintenance.
- Who has responsibility for making and paying for repairs and dealing with noisy neighbours (e.g. the lessee or the freeholder).
The individual or company that is leasing the property has the right to get details and information about any service charges (and insurance where applicable) as well as:
- Have the name and address of the landlord (e.g. freeholder).
- Be consulted about certain running costs and property maintenance.
- Being able to challenge certain charges when they relate to specific circumstances (see below).
Note: Failing to follow the conditions stated in a property lease can result in a court summons. The court may order you to pay for damages caused and take away the lease.
Service Charges and Expenses
Insuring the Building
Building insurance is usually part of the service charge. In most cases, the responsibility of paying to insure the building (excluding the contents) falls on the freeholder.
Even so, the leaseholder has the legal right to:
- Ask for a summary of the insurance policy.
- Make a formal challenge about any ‘unreasonable’ costs through a tribunal (read about ways to solve a residential property dispute).
Annual Ground Rent for Leaseholders
As a rule, you need to receive a formal, written demand for ground rent from your landlord. In most cases, you would not have to pay it unless you receive this written demand.
However, after receiving the demand, your landlord would be able to take legal action to recover the charges if you fail to pay.
According to landlord rental laws in the United Kingdom, they can recover unpaid ground rent going back to a period of six (6) years. Furthermore, they have the legal right to ask for the full amount to be paid in one single installment.
The property freeholder needs to get the agreement of the leaseholder before they can increase the ground rent (unless the lease says they can).
Note: Shelter England website contains more information about what action freeholders can take if leaseholders fail to pay annual ground rent.
Leasehold Property Service Charges
The general organisation of the service charge should be set out clearly in the lease agreement. It should also state what services are being charged for.
Hence, all lessees who are paying for a service charge in a leasehold property will have the right to (both):
- Request a summary that shows:
- How the landlord worked out the charge.
- What they spent it on.
- View any relevant paperwork or documents that support the summary (e.g. cash receipts).
Note: Landlords who fail to provide this information are committing a criminal offence in the United Kingdom.
Paying into Reserve or Sinking Funds
It is not uncommon for leaseholders to have to make payments into a ‘sinking’ fund. Having a reserve fund helps counter for unexpected repairs or maintenance (e.g. replacing a damaged roof).
Even though landlords must follow certain rules about managing reserve funds, the payments are generally not refundable (e.g. if the leaseholder moves out of the property).
Note: The Leasehold Advisory Service is a government funded resource for independent advice for residential leaseholders and park home residents.
Being Consulted about Charges
In general, your landlord would need to consult with you about charges they make for running or maintaining the building, if they ask you to pay:
- More than £250 for any planned work.
- More than £100 per year for work or services that will last for a period of more than twelve (12) months.
Failing to consult with you in the proper manner means there will be an upper limit on how much you would need to pay.
Furthermore, landlords must follow the Section 20 consultation process for major works when consulting with property leaseholders.
How to Dispute a Charge
After paying a charge, you should be able to apply to a housing tribunal if you believe:
- The standard of work that it relates to does not meet your satisfaction.
- It is an ‘unreasonable’ amount.
- You should not be paying for the charge as part of your leasehold agreement.
Certain circumstances would mean that you do not qualify for a tribunal, such as if:
- A court is already dealing with the dispute.
- You already agreed to pay the charge.
- The payment was for one of the fixed charges.
How to Extend, Change, or End a Lease
Extending a Lease Agreement
The leaseholder can ask their landlord (freeholder) to extend the lease at any time. As a result, it may be possible to extend a lease by:
- Fifty (50) years on a house (providing you qualify).
- Ninety (90) years on a flat (providing you qualify).
Note: You can use the lease extension calculator as a guide to the costs involved when extending the lease of a flat.
Varying the Lease
In most cases, you should be able to negotiate a solution for making certain types of changes to the lease. Thus, having a clear discussion with your landlord usually works best.
But, there may be some valid grounds to attend a housing tribunal if you are unable to find a mutually agreeable solution.
Ending a Lease Agreement
Despite being possible for a landlord to end the lease, and then evict the leaseholder, it is not common practice.
Hence, ‘forfeiture proceedings’ may be one of the circumstances and types of leases that gives them the right to evict. Even so, the landlord must send a formal written notice and get permission from the court to do so.
Note: As a general rule, giving one (1) month of advance notice is enough to end a lease. You can read more about security of tenure when the lease runs out on the Leasehold Advisory Service website.
What Happens When the Lease Expires
According to UK law, leases are types of tenancy agreements – which means the leaseholder is a tenant. As such, you would not need to vacate the property simply because the lease has run out.
In most cases, the tenancy would continue and follow the exact same terms, unless either the leaseholder or the landlord decides to terminate the agreement.
How to Buy the Freehold
The leaseholder can ask the freeholder to sell the freehold to them at any time. But, the legal steps for doing so will depend on whether the property is a flat or a house.
Your Right of First Refusal
The right of first refusal means landlords usually need to offer the first chance to buy to the leaseholders if they want to sell the freehold of a building that contains flats.
Dealing with Management Disputes
Living in a leasehold flat means you can usually change the general management of the building (e.g. if you are not happy with the way someone is managing it).
There are several ways of achieving this, such as asking a tribunal to appoint a new buildings manager or taking over the management responsibilities yourself (e.g. Right to Manage).
Appointing a New Manager
Before you try to appoint a new manager, you would need to have some proof of ‘bad management’. So, typical examples would include:
- Having to pay an ‘unreasonable’ amount for service or administration charges.
- Being unable to find a solution for the cost of building insurance.
- The landlord failing to comply with an approved code of management practice.
You would need to apply to a housing tribunal in England or to the Residential Property Tribunal if you are living in Wales.
Note: You must have sent a ‘Section 22 notice’ to the landlord before applying to the tribunal. Doing so allows them an opportunity to fix the problems.
Your Right to Manage
Property leaseholders have the statutory right to take over the management of a building by setting up a Right to Manage company in the United Kingdom. Furthermore, there would be no need to prove bad management.
Solving Leasehold Property Disputes
The lease dispute process in England recommends using a mediation service to help you and your landlord reach an agreement. But, you should be aware that there may be a fee.
The Leasehold Advisory Service (LAS) offers free advice about leasehold properties, especially on matters that involve lease extensions, service charges, or buying the freehold.
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