11 secrets of owning a leasehold property


1. You do not actually own your leasehold property!

What you may not realise is that after paying several hundred thousands of pounds for your new leasehold property, you still do not actually own it. What you are really buying is a lease which gives you the right to live on the land where the property sits, for a set period of time. When the lease expires, in theory the Freeholder can regain ownership of the property.


2. Lease extensions can be expensive

Did you know that once your lease falls below 80 years, it gets a lot more expensive to extend. It could also make it difficult to sell, as mortgage companies are very reluctant to lend on a property nearing reversion.


3. Your management rights

If you are unhappy with the way your Freeholder is managing the block, providing your development qualifies, you can create a right to manage company which will provide you with control of the management. This does not necessarily mean you need to manage the block yourself though; you are free to appoint a managing agent. Through this route, the Freeholder still owns the Freehold. Alternatively, you can go one step further and go through the ‘enfranchisement’ process. This process involves approaching the Freeholder with an offer to purchase the freehold ownership of the block.


4. You may not be fully insured

Whilst most leases contain a provision for the Freeholder being responsible for arranging buildings insurance, you should ensure you hold adequate contents insurance. One common issue is the dispute over who covers the carpets & floor coverings; the buildings insurer or the contents insurer? There is the argument of whether they are classed as a fixed item or removable and this is often decided by the way they are fitted. Be sure to check with the insurers to confirm you are adequately covered!


5. The unpaid responsibilities of a Director

Being a Director of a management company comes with many responsibilities and being an unpaid position it sometimes seems like a thankless task. You must ensure that as a Director, you hold adequate Directors & Officers liability insurance to protect you from possible negligence claims.


6. The risks when appointing a managing agent

Be careful when appointing a managing agent. There is currently no regulation of managing agents meaning anyone can start a block management company without any qualifications or experience. So make sure you do your research when deciding on an agent! And always remember to read their terms & conditions for unfair clauses before signing up.


7. Your financial liability for major works

Any works which total £250 inc VAT or more per leaseholder are seen as ‘major works’ and must go through the consultation procedure. If this has not been followed and the works are completed, did you know that you are only liable to pay £250 contribution towards the total cost of the works.


8. Incorrectly served Ground rent, service charge & administration charges

By law, the correct notices must accompany service charge, ground rent and administration invoices. These notices outline your rights. Without these, the charges are technically not due.


9. Avoiding a court case

Did you know that there are other routes to resolve issues rather than court. Why not try mediation! Mediation is a much less expensive option which provides all parties to discuss their issues with an unbiased mediator who will help in coming to a resolution.


10. Ask permission first!

Before making any alterations to your property, make sure you consult your lease first. Whilst decoration and cosmetic works are generally ok, installing a stud wall, new windows or even removing the fire place may not be. If you do not seek alteration consent you may be asked to return the property to its previous state before the works. If you decide to sell, the Freeholder may refuse the sale until the rectification works have been completed. Avoid unnecessary stress and costs by asking first! The Freeholder cannot unfairly refuse permission.


11. Don’t risk forfeiting your lease!

Did you know that failing to comply with the obligations of your lease could result in your property being forfeited and returned to the Freeholder? Forfeiture is different to repossession in that you lose the entire property rather than just the % that you owe financially. Forfeiture can be for financial reasons or for a breach of the lease.

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About This Blog

inBlock have years of experience in the fields of block management for lettings and commercial property. In our blog we seek to share the latest hints, tips and news from the world of property maintenance and management. Ask a question or feel free to share our blogs with your colleagues.