LEASES OF EX-LOCAL AUTHORITY FLATS

These leases will be slightly different from others, in that you may not be able to enfranchise or act as your own managing agents. It may also not be possible to extend the lease of an ex-council flat, particularly in a high-rise block. There will also be clauses relating to how you can sell, at least if you have bought directly from the council as a former tenant at a discount.

Again, make sure you understand all the terms of the lease, as leaseowners in these blocks can often be stung for swingeing charges they did not imagine they would have to meet. If you are in any doubt about any of the clauses in a local authority lease, you can call the relevant Home Ownership Unit for clarification.

Local councils also provide a yearly rundown of service charges, with a list of what each service costs. Not all private freeholders do this, although accounts are sent to each leaseholder yearly. This is a legal requirement.

EX-LOCAL AUTHORITY BLOCK SERVICE CHARGES

Here is a typical explanation of service charges and how they are allocated, from the Home Ownership Unit of the London Borough of Hammersmith and Fulham.

What am I being charged for?

Those who have bought leases of ex-local authority apartments are charged for: administration, ground rent, insurance, electricity used in the shared areas of the block, security entry systems, lifts and any other equipment that uses electricity.

In addition, annual service charges cover day-to-day repairs and maintenance of the shared areas, caretaking, concierge services, horticulture, water meters, lift servicing and, in tower blocks, booster pumps for ensuring each flat receives fresh water.

These charges are levied every single year and all leaseholders have to pay their share, with five per cent interest over base rate charged for late payments.

Where major works are indicated, these are billed separately once the final account has been settled with the contractor. Beware: these accounts can take years to arrive.

There is a time limit for billing on major works, but local authorities get round this by sending a reminder telling you they have not forgotten about this bill.

PAYMENT PLANS

If you have been charged more than £500 for major works, you may qualify for a loan repayable over a period of years. Most local authorities have a home loans manager who can be contacted at the council offices.

Most private blocks do not provide such clear, informative booklets on the whys and wherefores of charges as ex-local authority blocks. The reason for this is that most council blocks contain a mixture of leaseholders who have bought leases, and tenants paying weekly or monthly rent, so it is essential to clarify what leaseholders, but not tenants, must pay. Tenants are not liable for services charges, whereas in a private block everybody is equally liable.

ARE LEASES LEGALLY BINDING?

The answer is ‘yes’, although in some cases, there may be unfair contracts or unfair terms within them. Also, what is technically legally binding is one thing and what is worth fighting over may well be something else again. Everybody should think very carefully about when and whether it is worth invoking the law, as it is a long, drawn out process where the results may not be what you wished to achieve.

The Leasehold Valuation Tribunal (LVT) publishes a regular bulletin summarising its latest cases, and the reasons for the decisions. In every case, where terms of the lease are disputed, the LVT has ruled that ‘the lease is all that matters’.

If a charge is not payable under the lease, it is not payable at all. Similarly, if a charge is payable under the lease it must be paid. And that is the end of the matter. The lease is totally binding on both sides and if ever there is a disagreement, the terms of the lease will be considered absolute and mandatory; as unalterable as the laws of the Medes and Persians.

Who draws up the lease?

It is drawn up by solicitors who copy other leases which is why they are all much the same.

WHAT IF YOU INFRINGE THE LEASE?

Sometimes, this may be done unwittingly but persistent flouting of the clauses of the lease will result in the landlord seeking a court order to repossess the flat. You, the leaseholder, can of course challenge the ruling in an LVT but beware: there is a temptation to imagine the tenant always wins when taking a case to the LVT.

This is by no means always the case. If your behaviour is deemed unreasonable, your lease may be forfeited and you will lose everything.

The ultimate penalty for infringement of the lease is forfeiture, which means that your lease comes to an end and you are thrown out onto the street. In reality, this hardly ever happens.

MAJOR WORKS

All blocks of flats will need major works eventually, and before buying, you need to discover whether these are indicated in the near future. If they have already been agreed, the price of your flat will be reduced by the amount payable by the seller. Never, ever buy a flat with service charges owing. Usually when you buy a flat, there will be service charges paid to beyond the time when you take possession. These will be calculated on a daily basis by your solicitor so that when you obtain possession, you both start with a clean slate.

In some countries, you, the buyer, can find yourself responsible for charges and debts unpaid by the previous owner. In the UK, there are many checks and balances to ensure this does not happen, but whenever you are buying a property with service or other charges unpaid, you need to ensure that you will not become responsible for these. This is something a solicitor should always check.

SERVICE CHARGES

This is one of the most contentious areas of leasehold property, mainly because nobody wants to pay out money and will often try to find any excuse not to pay.

It is usual for the lease to set out what the service charges are and what they cover. Such charges normally cover cleaning of common parts, lift maintenance, rubbish collection, insurance (buildings insurance is a legal requirement) and the cost of the managing agents, if there are any.

There are normally two elements to these charges: service and maintenance. ‘Service’ typically covers insurance, caretaking, gardening, rubbish collection. ‘Maintenance’ covers exterior decoration, repointing, replacing pavements or painting the front door or common parts, for example.

You will be billed by the landlord or managing agents for service charges, usually in advance. Most leaseholders pay by standing order, as this is the easiest and quickest method.

These charges may or may not include provision for a sinking or reserve fund, to build up monies for future works. If service charges do not include a sinking fund, they are known as ‘interim’ charges. One-off levies may in such cases be raised for major works.

The landlord is under an obligation to provide the services set out as charged for in the lease.

REASONABLE CHARGES

Leaseholders are fond of accusing outside landlords or freeholders of profiteering from them. In fact, it is very difficult indeed to profiteer from leaseholders in the modern world. Renske Mann, who became the freeholder of a small block of eight flats in West London, explains:

Many residents don’t realise they are paying for services and assume you are ripping them off because they are paying money when it appears they are getting nothing for it. But as with most freeholders, we were a limited company whereby all works had to be supported by bills and you have to be able to produce accounts for all expenditure.

Because you have to produce written proof of all works and expenditure, there is no easy way of making anything out of the building.

What are ‘reasonable’ charges?

It is said in countless documents that landlords can only collect those charges which are ‘reasonable’. The term ‘reasonable’ does not relate to the amount, only to the fact that the charges can be challenged. Owners can challenge these charges at the LVT, and often do, although they do not always win by any means. It costs a lot more than many people imagine to run a large block of flats.