FAQs
Your property is part of a building or development with shared areas for which you have promised to pay a service charge (leasehold property) and a variable rent charge (freehold property).
Your Lease or Transfer document, registered at the Land Registry, sets out the services and the amount of your contribution either by percentage relevant to the size and tenure of your property, or equal share.
Service charges payable by Leaseholders can include:-
- Insurance for the building of which the property forms part, and liability insurance for the grounds that are shared by all the occupiers including 5 – 7 year insurance reinstatement valuation of the building
- Mechanical parts insurance and maintenance contracts, ie gates, lifts, water features and pumps
- Directors and officers’ insurance to protect the Directors of the Management Company
- Maintenance and cleaning of common parts (grounds, stairways, bin stores, access roads and paths, gardens, bike sheds etc)
- Window cleaning
- Electricity and water used in common parts
- Security and lighting
- Internal (including floor coverings) and external decoration of the building
- Annual health and safety / fire inspections, asbestos register, accident records
- Annual service charge accounts and company secretarial work
- The Managing Agents charges for the above
Rent charges payable by Freeholders can include:-
- Mechanical parts insurance and maintenance contracts, ie gates, water features and pumps
- Directors and officers’ insurance to protect the Directors of the Management Company
- Maintenance and inspections of common parts (grounds, access roads and paths)
- Annual service charge accounts and company secretarial work
- The Managing Agents charges for the above
Right to Manage v Recognised Tenants Association – the available options if there is not a registered Management Company in place
Before you go any further, give some thought to how you want the building to be managed in future:
Right to Manage (RTM)
The Commonhold and Leasehold Reform Act 2002 enables leaseholders to require the transfer of the landlord’s management functions to a special company set up by them – the right to manage (RTM) company. The provision applies to leaseholders of flats only (not houses) and does not require the landlord’s consent. It gives the leaseholder the chance to replace a poor manager although mismanagement does not have to be proven. The transfer can be made irrespective of the quality of the current management service.
- What improvements will RTM enable you to make?
- Have you identified what is wrong at the moment and prioritised what you want to change?
- Are the expectations aligned and realistic?
- Will you be adding value to individual leaseholder investments or just creating a lot of work for a few hardy volunteers?
- Will the current enthusiasm still be there when there are drains to clear, noisy neighbours to reason with and service charge budgets to account for?
- There are many boring, repetitive jobs that you will be legally required to do – or to arrange to have done.
- You will need to give notice to anyone engaged on a long-term contract (over 12 months) be they the current managing agent, the gardener or the door entry system provider. This will apply whether you intend to dispense with their services or re-engage them under the auspices of the new RTM company.
RTM does not necessarily mean self-management; it can be no more than a transfer of responsibility and decision-making.
Recognised Tenants’ Association (RTA)
A tenants’ or residents’ association is a group of owners of leasehold property on the same development who hold similar leases from the same landlord which include provisions for the payment of variable service charges. Collectively an association represents the views of its members. To be effective, formal recognition is required, either directly from the landlord in writing, or by applying to the First Tier Tribunal if the landlord is not willing or ignores the association’s request for recognition.
A certificate of recognition gives the association the legal right to:
- Request information about service charge costs from the landlord, including accounts and receipts
- Be consulted on the appointment of a managing agent
- Be notified by the landlord of proposed major works and receive copies of estimates
- Nominate contractors to carry out the works, which the landlord must consider
- Appoint a surveyor for the purposes of a management audit
There are certain conditions and criteria which must be satisfied in order for an FTT to grant a certificate of recognition. Generally, members must be paying a variable service charge to the landlord to qualify as a recognised member, and membership should not be less than 60% of those qualifying for the scheme. However, a recent Upper Tribunal decision also took into account the percentage of overall variable service charges paid by the Associations members.
When you sell your property the buyer and the buyer’s lender, via the solicitors, will require evidence of the following:-
- Evidence of current service charges paid and the monthly/annual charge. The solicitors will apportion the annual charge between the seller and buyer. The annual charge is usually calculated on anticipated expenditure, and the solicitor will agree a retention to ensure the outgoing seller pays for any additional service charges due after the end of year accounts are produced. The retention is held on account by the solicitor and may be used if the new buyer receives a demand for additional charges incurred prior to ownership. Information is provided about monies held for service charges for future maintenance
- Anticipated future works – also known as major works are important for a buyer as they will need to understand what maintenance costs they are going to be liable for. This could include a Planned Preventative Maintenance report
- The last 3 years of accounts of the management company shows how company has been trading. It is important for a buyer to know that the freehold and communal areas are properly managed with sufficient cash reserves to cover future costs
- It is important that the building is insured. A lender will require evidence and a copy of the policy schedule and wording should be provided
- Any leaseholder disputes are listed along with any current action being taken in relation to enfranchisement (someone buying the freehold), extension of the lease, right to manage or right to enfranchise company
- Costs the buyer will have to pay the freeholder after completion, for example:-
- Notice of Assignment: this will provide the date of purchase, the buyer’s name and address (if not residing at the property) to ensure the Managing Agent keeps their records up to date and service charge demands and future correspondence is sent to the current owner
- Notice of Charge: if there is a Mortgage on the property the Managing Agent and Freeholder need to know
- Deed of Covenant: The Lease or Transfer document includes a covenant “promise” by the original buyer to pay future service charges and ground rent, and abide by rules set out in the Lease
The solicitor will also require evidence of current ground rent paid and any ground rent due and the monthly/annual charge. This information is used to prove your ground rent has been paid and to apportion any amounts to you or that you owe on completion. If the ground rent is demanded by us and collected on behalf of the freeholder via management company we will provide the information. If we do not then a separate request will have to be made directly to the Freeholder or their managing agent.
Ground rent relates to the rent of the ground your leasehold sits on, whereas service charges are costs the management company (appointed under the terms of the Lease) incurs to maintain the freehold and the communal areas.
The service charge demand should not include ground rent which will be invoiced separately, either by the freeholder or the management company if they are required under the terms of the Lease to do so.
Duties of a Director of a residents’ management company (“RMC”) or
Residents’ association (“RA”)
In accepting the appointment as a director under the Companies Act 2006 be conscious of the role, your responsibilities and the commitment to the company. Do not accept the position as a title or if it is convenient for someone else – remember that should problems arise you may be personally liable.
To become a Director you need to:
⦁ Be over the age of 18 years and not previously been disqualified ass company Director or have a criminal record and on going bankruptcy proceedings
⦁ Understand how to read the Company Accounts (whilst they are similar to a trading company, they are set out as Service Charge Accounts)
Your role is to:
⦁ Take guidance from East Block Estate Management as Company Secretary
⦁ Liaise with fellow Directors (there are limitations set out in the Memorandum and Articles of Association)
⦁ Use your skills, experience and judgment to help the RMC or RA be successful
⦁ Be aware of and follow the Memorandum and Articles of Association of the RMC or RA
⦁ Follow the Lease of the development
⦁ Comply with Health and Safety Law to ensure you do not make yourself, your fellow Directors or East Block Estate Management
⦁ Ensure that the accounts are a true view of the income and expenditure of the RMC or RA
⦁ Make decisions for the benefit of the RMC, RA, leaseholders and investors, all of whom usually need / want different things
⦁ Attend Directors meetings (early morning or late afternoon, usually 2 – 3 per year, and an Annual General Meeting (evening)
⦁ Form a relationship with East Block Estate Management and work closely with us and your fellow Directors to achieve the above
Complaints Procedure
We are committed to providing a high-quality legal service to all our clients. When something goes wrong, we need you to tell us about it. This will help us to improve our standards.
If you have a complaint please contact us with the details:
Tell us why you are unhappy, setting out the act or omission you believe has occurred.
Tell us what you would like us to do to resolve your complaint.
Follow up any conversations with us in writing, making a note of the date and time and who you spoke to.
Keep copies of all correspondence with us.
Upon receipt of your complaint:-
We will send you a letter acknowledging receipt of your complaint within three days of receiving it, enclosing a copy of this procedure.
We will then investigate your complaint. This will normally involve passing your complaint to one of the owners of the company who will review your matter file and speak to the member of staff who acted for you.
We will then write to you with the outcome of the investigation into your complaint. We will do this within 14 days of sending you the acknowledgement letter.
If you are still not satisfied, you should contact us again and we will arrange for Liza Jary to review the decision.
We will write to you within 14 days of receiving your request for a review, confirming our final position on your complaint and explaining our reasons.
If you are still not satisfied, you can then contact the Property Ombudsman Telephone