Apartment Building

Why Leasehold?

Many commentators say that leasehold is a feudal system. There is some justification for this but there is a good reason for making flats leasehold. 


A home is often said to be an Englishman’s castle.  There may not be a moat or drawbridge but if the property is a freehold house you can, within reason, do what you like (even if you’re not a man and you’re not English!).  The only qualification is that you are subject to the planning laws. This is not the case with a flat.  You must have due regard for others in the same building, and in most cases you need to contribute towards the cost of maintenance and repairs for the building and any common parts, i.e. gardens, stairs, access paths and hallways.

For this reason there must be a lease to set out what can or cannot be done. The lease will set out regulations and conditions. Any serious breach of these could be dealt with by the property being forfeited.  If this happens it will be taken over by the freeholder. This cannot happen without a Court order and this only takes place in a very few cases.  Theoretically the threat of this is makes leaseholders obey the terms in the lease.

Houses

Where houses are built on an estate and there are common parts such as roads, footpaths and gardens it has been common practice to sell the houses as leasehold. This enables the freeholder to collect money from the leaseholders for the costs of maintenance and repairs,  Sometimes the freehold will be transferred to a management company and shares issued to all the leaseholders so that they have a say in the expenditure.  They will appoint a few shareholders as directors who will either form a committee to run the estate or appoint a managing agent. They will charge a fee for this which is paid for by the leaseholders along with all the other costs.   

Sometimes the developers will keep the freehold  and appoint a managing agent.  This has the disadvantage that the leaseholders have no say in the costs of maintenance and repairs.  The lease will be drafted so that the developer receives ground rent which can be anything from a peppercorn (i.e. nothing) to several hundred pounds per annum.  In some cases unscrupulous developers will insert a clause which escalates the ground rent over time to several thousand pounds.

Ground rent does not form part of service charges. The leaseholders get no benefit from the ground rent; it is just a way of making extra money from the sale of a property.  In many cases the developer will sell the freehold on to investors who have no interest in the estate; it is simply an investment, a way of making money for no effort.  Fortunately the Government is planning to outlaw this practice.

A property is described as a maisonette if it is a flat with its own front door. Depending on the nature of the building there may be no provision for service charges as the owner of each flat is responsible for maintaining their part of the property.  However it is still necessary for each flat to be governed by the terms of a lease, e.g. rights of support and protection and who is responsible for the structure, i.e. the roof and foundations. Ideally this will be shared but some leases make the upper maisonette responsible for repairs to the roof and the lower maisonette responsible for the foundations.

There may also be a joint responsibility for the drains and water supply. ​Buildings insurance can be a joint policy taken out by the freeholder and charged to each leaseholder, or each flat owner insure their own property. The latter is not a good arrangement as you cannot be sure that the other flat owner has taken out their insurance and if the building is damaged in a storm and only one flat is insured there is a serious problem - you cannot rebuild one flat if the other flat is not insured and not structurally sound. If the lease is written this way you should to take out an indemnity policy to cover you if the above scenario occurs. These are not expensive and will usually cover you for several years. 

Maisonettes