Leaseholders have rights!

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Whether you are a first time buyer, downsizing or wanting a city pad, understanding the leasehold system can be confusing. Mary Anne Bowring, creator of www.leaseholdersupport.co.uk unravels the jargon and explains your rights.

  • With leases getting shorter, leaseholders should be aware of their legal right to extend their lease. To qualify, you now only need to own the lease for 2 years and don’t need to live in the property.  Your statutory right is an additional 90 years to add to whatever unexpired term you currently hold with ground rent reduced to a peppercorn.
  • The Commonhold and Leasehold Reform Act 2002 provides the owners of leasehold properties with the right to manage their own property.  It is no longer necessary to prove that the freeholder is at fault or managing the block badly to claim the right to manage. By setting up a Right to Manage (RTM) Company, leaseholders can take over the running of their block.
  • If you are concerned that the block is falling into disrepair and the freeholder isn’t managing the block effectively then you can apply to the Leasehold Valuation Tribunal to request they appoint a Manager that you propose. Requesting a Court Appointed Manager is different from claiming your right to self manage as there is a need to prove that the freeholder is at fault.
  • The right to buy the freehold was given to lessees in 1993. There is no requirement to reside in the flat and you can own the flat through a company. Provided two thirds of the flats have long leases and that 51% of the “qualifying lessees” participate you can force the Freeholder to sell you his title.

Understand your rights as a leaseholder and visit www.leaseholdersupport.co.uk for clear and simple guidelines.   Click on the “special offers” button for FREE step by step guides.

Legal right to extend lease

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Since 1993 Leaseholders have been able to claim a 90-year lease extension at a reduced ground rent of £1.00/peppercorn if demanded.  Lessee’s rights have become more accessible.  For example, you now only need to own the lease for 2 years, do not need to live in the property and can own it through a company.

The prospect of extending your lease may seem like a daunting task especially if your Freeholder has disappeared. Don’t worry, as the County Court can grant a “vesting order” to get over this hurdle.

The first stage is to make sure you gather all the relevant paperwork.   The lease is likely to be required by the valuer to calculate your future ground rent commitments.  Also, check the last ground rent demand to see who your ground rent is being paid to.

To serve notice the lessee needs to state their lease details and the premium that they would like to pay for the lease extension.  To know what premium you should quote on your notice requires specialist valuation advice. Your notice could be invalid if you do not pass certain legal tests, one of which is satisfied by you having taken valuation advice.

A lease extension valuation requires more elements than a typical mortgage valuation as there are 13 input factors. A good valuation report should include calculations to show you how the premium is made up, an explanation of the methodology and comparable market transactions or case law evidence on which your valuer has relied.

Before serving Notice, many lessees commence informal discussions with the freeholder, especially if they live in the block. This can’t really put you at a disadvantage but some landlords will simply refuse to enter discussions without a formal notice as this protects their position as to costs.

If you are proceeding informally you will need to ensure that the Freeholder is quite clear that it is your Section 42 rights you are seeking.  A claim notice fixes the valuation date (date of notice) and establishes that it is a 90 year extension you are claiming.

Ringley advise that of their 300+ cases a year, premiums can still be agreed informally, and of the half negotiated after service of a claim notice, only about five percent end up at the Leasehold Valuation Tribunal.  There are 13 variables to be agreed and three components of the valuation to be established.  Some variables like ground rent are fact; others are based on property and financial market evidence or case law such as the long and short lease values.

A Supplementary Lease and Dead of Variation is the legal instrument that extends your lease. The lessee’s rights are to vary the ground rent and the term. The Freeholder cannot force you to agree to changes to other clauses. Your old lease does not get ripped up.  It is sometimes here that leaseholders who went down the informal route become unstuck when the Freeholder suggests that whilst the premium is agreed, they do not agree to the ground rent being reduced.

If you have a mortgage it is necessary to obtain your mortgagees consent and the Supplemental Lease and Deed of Variation will need to be registered at HM Land Registry to become part of your properties title. There is a nominal registration fee and stamp duty land tax form to be filled in.

Ringley gets ‘Highly Commended’ Award

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Ringley picked up the ‘Highly Commended’ award to reflect the work their valuation team do in the specialist field of Leasehold Enfranchisement. “We work mostly for

In fact Ringley were finalists in two categories – the other being Individual Valuer Of The Year. Mary-Anne Bowring, Ringley Group Managing Director says “we are deeply proud of what we have achieved in a modest 10 years. We work the harder side of the fence, mostly championing cases for leaseholders, employing tactics and good negotiation skills.

The notable case that showed how far we can go for clients was a block of 52 flats in Forest Hill Road. Ringley were not the original valuers on this case. We met Mundania Court at the point of the collective enfranchisement group giving up all hopes having spent £15,000 in fees to other advisers. The residents could afford to buy the freehold, but not the roof masts and couldn’t see any way around this issue.

Getting the leaseholders re-motivated was not hard. By the time the case came to Tribunal due to leases getting shorter, the contribution per participating flat was circa £14,000 compared to the cost of a lease extension at circa £17,500 per flat. The saving to push forward was significant.

The freeholder was a difficult, or should I say ‘a strategically clever landlord’ who was using the leverage of 4 no. telecommunications masts, roof top, to obstruct the deal in anyway possible.

We had 2 working days to prepare for the Tribunal hearing. The Tribunal was a success. We were able to prove that acquisitions and mergers in the telecoms industry had devalued the masts also the Roman Road case suggested capitalizing 50% of the rents only. The freeholder’s expectations or value they put upon the telecoms income was clearly significantly out of kilter with the market. As was the original valuers!

Leaseholders should take control of building management

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Recent Market Research by leading London Managing Agents the Ringley Group into ownership, services, management and running costs of apartment buildings, has identified that between 50-60% of all inner London apartments are sublet, rising to an estimated 70+% for the newer blocks constructed since 2005, underpinning the strength of the buy-to-let sector during the property boom. However when it comes to controlling service charges just 9.5% of tenants have any control over their own building management costs and, as a result, many are receiving excessive bills, unnecessary services or obtaining limited benefits.

“In the current economy, we expect service charge breakdowns in 2012 to come under heavier scrutiny from leaseholders and predict that recent legislation will encourage many to move towards resident-led management structures,” explained Mary-Anne Bowring, MD of the Ringley Group. “It is extraordinary that the numbers of London leaseholders that currently have control over the destiny, costs and services in their buildings are so low. Furthermore, it is disturbing that the number of wealthy institutional, overseas and famous estate freeholders that are making big profits by charging a premium for management services is so high. This scenario includes undertaking all too frequent upgrades to common facilities and ‘marking up’ costs such as buildings insurance. There are many such Tribunal cases on insurance but all too often these cases are settled out of court, as Landlords don’t want a blot on their public record.”

The Ringley Group market research found that many individual flat owners often don’t receive the value they deserve.  Many could save thousands of pounds a year simply by increasing their involvement in the management of their building – yet only 9.5% in Central London appear to be doing so.

The research document also identified that there are currently 1,252 large apartment buildings across inner London containing 30+ dwellings, 60% of which are concentrated in Zone 1 and the Docklands and constructed during the last property boom.  The balance comprises 2,123 smaller apartment buildings with up to 29 dwellings and commercial premises.

Service charges for prestigious Knightsbridge and Mayfair residences over 4,500sqft in size can be in excess of £25,000 per annum but do enjoy a high level of facilities and services.  Annual service charges for the more typical two bedroom apartments vary hugely by postcode, with areas like SW3 (Chelsea) and Canary Wharf typically commanding £2,600 to £6,000 per annum while in SW17 (Tooting) the equivalent costs are just £800 to £950 per annum – but they also often receive an inferior level of service and have fewer facilities like gyms, pools, increased security or a concierge.

The lack of control that residents in the capital have over the management of their building suggests that leaseholders are either apathetic, unaware of other cost effective alternatives, or lack the support and momentum required to initiate a change.  Worse still, it indicates that leaseholders are unaware that if they cannot afford to buy their freehold that they can still take control of the management of their building by exercising their right to manage and that since 2002 there is no need to prove that the freeholder is at fault or provides a poor service.

Ringley has long campaigned for leaseholders to take a more active role in block management and offers advice and support to forward looking or disgruntled leaseholders interested in taking the next step, whether it’s through Right to Manage or by collaborating together with other owners to purchase the freehold. Ringley has also recently packaged its advice into 5 easy to understand ‘BlockCare’ product modules.   ‘BlockCare 100’ is a free to download methodology that includes all the knowledge and tools you need plus ‘no win no fee’ help with service charge arrears. ‘BlockCare 200’ is a sophisticated online block administration system that helps residents of smaller blocks manage their buildings once they have control. Available in five different block management packages, BlockCare enables leaseholders to set their own service charges in order to save money and improve the overall management of their apartments.

The survey data was collected during 2011 by a combination of door-to-door surveys, interviews, map references and checks at the Royal Mail and Land Registry across 15 inner London postcodes from Vauxhall in the south to Hampstead in the north, Maida Vale in the west to the Docklands in the east.

Property Management

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So what’s this weeks hot property management topic. To me it seems to be the increasing number of Freshwater blocks we are talking. All of whom seem to be waking up to the realisation that they don’t need to be subserviant to Freshwater any more.

How so?, you may ask. Well since the introduction of the Commonhold and Leasehold Reform Act 2002 property management of your block is probably your absolute right. I know there’s a contradiction there so let me explain.

You need a few friends, democracy and all that. In fact you’ll need 50 percent of the block to be in it with you. Your friends, like you, need to be qualifying tenants. I know leaseholders don’t like to be called tenant, nowdays we think of tenants as people who rent flats, but in this case it means that originally the lease for your property was a long lease (more than 21 years) and that the rent you pay (ground rent) is low. Again in simple terms let’s take that for now as well below the weekly rent you could get.

So long as any commercial parts of the building do not exceed 25 percent and your building is capable of being separately managed you are probably away.

Examples of capable of being separately managed is not defined in law. Horizontal separation is important, beware of communal heating systems shared with other buildings and ask a professional if your building has unusual features.
Motivations to getting on with the Right to Manage that seem to keep repeating themselves include; repairs lessees believe are excessive or unwarranted, the Freeholder trying to raise money and start works when there is an ongoing Right to Manage Claim. Headleases suddenly getting registered to vary liabilities or obligations and muddy accounting leaving leaseholder’s unsure whether they are paying towards their communal heating or secretly the heating to the block next door as well.

It seems that Ringley’s property management packages, we call them BlockCare, give leaseholders such a contrast in transparency it is literally liberating.

Why should there be any mysteries? At least that’s what we say.

For example, with Ringley every leaseholder can see a copy of every invoice we pay on the web area we maintain for them 24/7. For Directors there’s expenditure lists, arrears lists, court action on arrears and analysis of spending against the budget too. Also we have an agreement with our bankers that a Director of the RTM Company can receive a copy of the bank statement direct from the bank to their home. Better still you set the expenditure limit for us to adhere to.

It upsets me that some Freeholder’s choose not to work with leaseholders. After all surely property management was intended to be the freeholder providing services to and for leaseholders. Surely, good property management has to be a partnership in ideals, a match in expectations and a transparency in dealings.

If you and your fellow leaseholders think Right to Manage might be for you then check out our self help packs at www.leaseholdersupport.co.uk or see one of our Solicitors at Ringley Legal LLP could help you.

What is Block Management?

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Since people began to live in cities space has always been an issue. In modern times, spatial pressures have increased exponentially, leading to increased inner city house prices, and more seriously, an increase in related problems such as homelessness.

A less sinister by-product of these spatial pressures is a rising trend in apartment living. More and more of us are buying or renting in blocks of flats, not just for their relative affordability, but also for lots of other reasons, such as security as well as the heightened sense of community.

But what is block management? Unlike traditional homes, where a householder is able to comfortably manage the day to day running of the home, in a block there are lots of issues that can only, realistically, be effectively managed by a block management company.

For instance, a block management company will be able to ensure that everybody pays their service charge (i.e. the charge levied on residents for the day to day running of the block.)

Often, in such close proximity, neighbours will raise disputes with one another and a flat management company can help both parties to reach agreement, resolve breaches of the lease etc.

In fact, whilst block management companies will charge a fee to manage your block, they can also help you to save, and you may find that they are able to offer cheap buildings insurance.