Government statistics suggest that in the year 2018 to 2019, 4,5 million leasehold properties existed across England alone, around 20% of the entire housing stock.
With ownership of leasehold property comes the competition between the priorities of landlords and tenants: landlords seek to dispense their obligations under the leases, drawing as their income service charge receipts subject to extensive statutory controls; and leaseholders seeking a well-maintained building have a wide-ranging set of often opaque requirements to comprehend in trying to understand whether or not their landlord is doing their job.
Example clash points include: is the service charge accounted for adequately; are the services provided reasonable and good value for money; is the building well maintained; is the building adequately inspected for asbestos; and are repairs being dealt with sufficiently quickly?
But what legal rights do tenants have in these respects and what should landlords consider? This article briefly surveys the horizon on this topic and points to the need for both landlords and tenants to use the full panoply of their legal rights if appropriate to hold each other to account to maintain housing standards.
The benefits and burdens of leases
Owning leasehold property is not the same as owning a freehold house. You cannot deal freely with the property and you usually have to pay sums to your landlord to live in it. In almost all leasehold property, the landlord and the leaseholder enter into a contractual relationship that brings benefits and burdens to each.
The starting point to understanding this is the lease, which contains all the terms both parties – and sometimes landlord’s managing agents too – must follow.
At the core of most leases is a simple bargain: the leaseholder pays ground rent and service charges to the landlord, and in return the landlord provides a number of services for the benefit of all leaseholders in the building, from maintenance through redecoration to insurance and day-to-day running items including, in some cases, employing a porter and other staff.
What happens when the relationship breaks down?
The relationship does not always run smoothly.
Landlords can grow frustrated with leaseholders who refuse to pay their ground rent and service charge or who pay them late.
Likewise, leaseholders can become suspicious of landlords who demand service charge contributions that seem high, or of which they cannot trace any benefit in reality, for example when charges are rendered for cleaning the building but no cleaners ever attend.
But what can either do in these circumstances?
Most frequently, landlords face non-payment issues with leaseholders. Almost equally as often, they face complaints by leaseholders about disturbance caused by other leaseholders, whether because of leaks in neighbouring properties causing water ingress or noise disturbance from machinery or musical instruments.
Most often, where non-payment is an issue, a landlord should consider claiming the sums unpaid through any dispute resolution procedure contained in the lease (for example, some leases contain arbitration clauses). If that fails, then a County Court debt claim is available.
If the issue is something other than payment, the County Court may still hold the answer in the form of a Court declaration confirming that a leaseholder is causing nuisance or some other issue coupled with an injunction that they should stop doing something (or be compelled to do something).
Failure to comply with some Court orders may require the landlord to seek to forfeit the leaseholders lease and take back the property. Forfeiture is in itself a large topic, but can involve lengthy and expensive proceedings.
Leaseholders have, over the years, acquired substantially more rights than ever before.
Many of these arise from the legislative framework put in place by successive Governments.
Such is the concern of successive governments to safeguard leaseholders’ rights that the Government funds an independent Leasehold Advisory Service for leaseholders. They include the following:
- in respect of financial issues associated with service charges:
- the right to withhold service charge payments if the landlord fails to provide information required of them by Government legislation
- a right to be consulted about a head of service charge expenditure that will exceed £250 in any service charge year, or on account of any service contract exceeding a 1-year term
- a right to view a summary of the building insurance cover in place in the building
- a right to a summary of service charge expenditure in any service charge year after that year has ended and to inspect the receipts and invoices on which the summary is based
- the right to sue the landlord in Court for breach of trust if the service charge funds paid are not used for the purpose for which the leaseholder paid them across
- the right to apply to the First Tier Tribunal (Property Chamber) (FTT) or to the Court for determination as to the reasonableness of and liability to pay service charges or to recover service charges overpaid that a landlord is refusing to refund
- the right to appoint a qualified accountant, auditor or surveyor to conduct a management audit, if a sufficient majority of the leaseholders in the building back the move, a lesser-known right for the execution of which care should be taken to appoint a knowledgeable surveyor or accountant
- in respect of issues of poor management and disrepair
- the right to sue the landlord for specific performance of an obligation – for example maintenance or repair – that the landlord has failed to carry out
- the right to apply to take over the management of the building, if various qualifying conditions are met
- the right to apply to the FTT to invite it to appoint a candidate to take over management of the building for a fixed period, to be reviewed by the FTT thereafter
- the right in certain circumstances, and where there is a leaseholders’ association that complies with the statutory requirements, to apply to the Court for the appointment of a surveyor to oversee the maintenance of the building at the leaseholders’ cost
- In cases where landlords behave especially badly, leaseholders may in certain circumstances have the right to apply to the Court for an order for compulsory purchase of the freehold title from the landlord, as a punitive measure.
All these rights are in addition to statutory rights leaseholders have to acquire legal title to the freehold on a no-fault basis by the statutory leasehold enfranchisement process for doing so.
Points for landlords to consider
Landlords of all kinds and sizes can take a number of steps to try to mitigate exposure to the numerous leaseholder remedies available to leaseholders.
Those steps include but are not limited to:
- Ensuring that statutory information is supplied with ground rent and service charge demands
- Conducting the notification and collections of service charges in accordance with the terms of the leases and giving leaseholders adequate time to pay
- Familiarising themselves with all obligations on them in the leases and carrying them out in a timely fashion
- Maintaining a dialogue with leaseholders regarding the management of the building
- Following the statutory consultation requirements in respect of major works or the appointment of contractors on long-term contracts
- Considering whether they have sufficient expertise and giving some thought to appointing an agent to manage the building on their behalf. The Association of Residential Managing Agents maintains a list of suitably-qualified candidates.
Points for leaseholders to consider
Leaseholders should always seek professional advice if they face uncertainty, as the legal issues arising from residential property are manifold.
Some initial steps they can take if they consider that there may be an issue include:
- If leaseholders are uncertain about an issue or have questions about the way a building is run they should approach their landlord as soon as possible and start a dialogue
- Liaise with other leaseholders in the building, if appropriate, to identify shared experiences and to pool knowledge
- Act promptly to exercise appropriate statutory rights for information, if necessary, to gather in as much information about any issues as possible
- In respect of maintenance and repair issues, seek specialist advice from surveyors and contractors if necessary, in order to understand the nature and source of the problem, and to clarify who is responsible for remedying it
- Maintaining a separate savings account with a bank or building society in which to save funds for future payments of ground rent and service charges to maintain financial flexibility
Still in need of assistance?
We are here to assist you.
Should you require independent legal advice about an issue you face, whether as a landlord or a leaseholder, please get in touch using the contact details below and one of our team will be pleased to assist you.
Streathers Solicitors LLP
11 August 2021
To discuss how we can help you, please call our office on 020 7034 4200 and ask to speak to a member of the Dispute Resolution team.
*The Briefing Note reflects the position as at the date of publication. The information in this Briefing Note is not intended to amount to legal advice to any person on a specific matter or case. You are advised to obtain specific, personal advice from us about your case or matter and not rely on this Briefing Note.