Freehold, Leasehold and Property Service Charges Explained
Freehold and leasehold property estate management for apartment blocks is a specialist area and accounts for a large proportion of property in England and Wales. If affects freehold and leasehold estates of all types and sizes and is therefore important to all concerned. The effects of legislation are arguably more pronounced across London and the South East where development of new blocks of flats, redevelopment of existing properties and conversions has been prevalent in recent years.
If you are reading this you may well be a leaseholder, developer, freeholder or landlord or you may simply have an interest in property management or the running of your block of flats or estate.
It is commonplace for property management agents to be appointed by the freeholder to look after the management of the freehold property. This element of the property typically comprising the structure and fabric of the buildings, the common areas, stairwells, gardens, car parking facilities, driveways and boundary walls and boundaries or curtilage.
In turn, the property leasehold interests are the responsibility of each of the flat owners who are generally liable for looking after the internal aspects of the individual flats within the boundaries of their demise but not the shared facilities within the development.
To explain more fully, you should be aware that ownership of flats in England and Wales generally comprises of a leasehold interest which covers each of the demised premises or apartments. This is supplemented by a corresponding freehold interest which includes the ownership of the main building structure and grounds, shared facilities and common areas.
Provision of, and rights to use of the shared freehold property are clearly necessary to allow leaseholders to be able to purchase and enjoy the effective use of each of the individual flats. These rights, responsibilities and obligations are set out in a property lease which is drawn up to ensure that the freeholder and leaseholder are in agreement as to their responsibilities and rights regarding the property. The lease therefore also includes for reasonable terms covering the running and use of the estate as a whole and any restrictions or limitations which are to apply.
The lease runs for a set term and provides that rental or ground rent will be payable to the freeholder during the term of the lease. In effect the leaseholder never actually owns the flat or apartment outright with each of the individual properties being held on a long term lease, usually for a hundred years or more at the outset.
In addition to the lease itself, leaseholders also have the benefit of further protection provided by statutory legislation where the current law now requires that leases must meet certain minimum standards to be fair and reasonable in today's society. This legislation means that certain terms under older lease agreements will be unenforceable.
It is also quite common these days that some flat owners will team up with their fellow leaseholders to form their own freehold management company which in turn will purchase, own and manage the freehold interest and the property.
In these circumstances each leaseholder will own a share in the freehold management company and each can be referred to as a freeholder, as well as being a leaseholder which can be confusing. Furthermore each of the freeholders and leaseholders under this arrangement will still be bound by the terms of the lease, albeit that ground rent will no longer be a consideration.
Service charge financial contributions for maintenance of the building must however continue to be paid by each lessee as prescribed in the lease. This in turn provides funds to allow the freehold property management company to meet its obligations for insuring, maintaining and managing the freehold property.
In summary it is still necessary that the lease should continue to operate as this gives the individual flat owners certain rights to enjoy their homes, protecting them from nuisance, and other do's and don'ts for the use of their property.
Likewise the landlord or freeholder must continue with its responsibilities for the maintenance and upkeep of the building and the administration of the funds required from the leaseholders to carry out these duties.
Further reading is available on-line regarding Service Charges and Leasehold property management. You may also wish to refer to the following website for further information on estate property management services by clicking on the above link.
Good luck with your property management requirements and remember that no risk options backed by regulated professional standards are often the easiest and best long term solutions.
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