The relationship between leaseholders and the freeholders who own their buildings can become a bit fraught, and by far the most frequent cause of disputes is service charges.
Few leaseholders would object to the principle of paying to maintain and insure their buildings, but a lack of control over the spending can be unnerving. Since the freeholder isn’t contributing, there’s little incentive to limit expenditure, and in fact the reverse can be true. Companies often buy freeholds so they can manage the property through sister agencies, and the heftier the charges, the more lucrative the management percentage.
The good news is that leaseholder rights are well-established, and if you feel your service charges are getting out of hand then there are several options.
- Diplomacy should come first, so start by talking to your managing agent. Often the problem is a simple lack of communication, and charges can seem much more reasonable when they’re properly explained. Plus, if the agent doesn’t know you’re unhappy, they can’t be expected to try and resolve the situation.
- The Leasehold Advisory Service (LEASE) is a government-sponsored body offering free legal advice to leaseholders. Their website is full of well-written information, and you can also contact them by phone or email. Whatever your next step, they should be your first port of call.
- The First Tier Tribunal, formerly known as the Leasehold Valuation Tribunal, can determine whether your service charges really are fair. It’s a hassle to go through the process, but it can be worth it. Just remember that their job is to assess legality, not morality. They can be fond of sensible compromise, and they might not always come down entirely on your side.
- Right to manage is a possibility if more than half the tenants in a building are in favour. So long as the property meets certain conditions (which most will), residents can set up their own ‘right to manage company’ and (usually) appoint their own managing agent. It’ll cost you money and time, and it’s important to be realistic about your expectations. You’ll still have to maintain the buildings properly, but you’ll have more control over your managing agent. It’s a good option for limiting the influence of freeholder/manager partnerships.
- Collective enfranchisement involves leaseholders forcing the landlord to sell them the freehold. Obviously you have to have the funds, and there are various eligibility requirements (in particular, leases without many years left on the clock can be a stumbling block). You’ll need a lawyer to help, but if all goes well you’ll end up with a shared freehold. As with right to manage, it’s worth considering your relations with your neighbours. If you take over responsibility for the building together, you might be seeing a lot more of each other.