The Management of Leasehold flats and Freeholds is complex. If you are new to this field and the associated terminology, we suggest reading our FAQs
Estate Block Management of Leasehold flats and Freeholds is complex. We have put together the most frequently asked questions we get asked for you.
(Click a question to view the answer) If you have a question which is not answered in our FAQs, use our contact form to get in touch and we’ll reply as soon as possible to your enquiry.
What should I do if I want to discuss a communal maintenance problem?
Initially, please contact us on 01823 0270661 or by email to email@example.com
What is a Freeholder?
The person or company who owns the land on which your house or flat was built. This person could be:
- A private individual who invests in Freeholds
- A property investment company that owns a portfolio of Freeholds
- The developer who has retained the Freehold as an investment after selling all flats or houses
- A non-trading Management Company that acquired the Freehold from the developer on completion of the last flat sale, whose shares are owned by the flat owners.
- A non-trading management company that purchased the Freehold from the existing/previous Freeholder.
Because the Freehold is ‘encumbered’ by your lease and other leases (i.e. cannot be sold without the leases), its value is nominal in comparison to the value of the leases. The Freeholder is really only entitled to collect ground rents, however, the value of the Freehold increases slowly and slightly as your lease gets closer to ending.
House owners can in theory own the Freehold as there is not another property above or below their house. Flat owners cannot own the Freehold to their flat. Sometimes flat owners acquire shares in the non-trading company that owns their Freehold when they buy their flat.
In legal documents and leases, the Freeholder is sometimes referred to as the Landlord. This can be misleading as Leaseholders or owners of Leasehold flats or houses are often referred to as Landlords also.
What is a Leaseholder?
A Leaseholder is the person who owns a long lease (as opposed to a short lease or tenancy) over a house or a flat. In legal documents, Leaseholders are sometimes referred to as Lessees.
(Leaseholders are usually referred to as Tenants in contracts and are not to be confused with assured shorthold tenancies).
What is a Block Managing Agent?
A Block Managing Agent is instructed to manage the common parts and structure of an estate or block of flats. Your Block Managing Agent is Alpha Housing Services Limited.
How does Alpha Housing Services Limited charge for their services?
Our fees are paid by monthly standing order and these costs will have been accounted for in your property’s estimated annual Service Charge Budget.
Who does the Block Managing Agent take instruction from?
The Agent is instructed by the Freeholder (client) who may be a private investor, a property company or a Residents Management Company, which is a company owned by the Leaseholders. Sometimes the Freeholder is a company or business unconnected to the Leaseholders. Although we owe a duty of care to the Leaseholders, they are not our client and we do not take instructions from them.
What is the Service Charge and why is it paid?
The Freeholder/Management Company has certain responsibilities (broadly speaking to maintain, keep safe and insure a building or buildings) under the leases granted to Leaseholders. The Freehold is typically of nominal value when compared to the cumulative value of the Leaseholds. Leases enable the Freeholder to ensure that the Leaseholders cover the costs incurred in maintaining, keeping safe and insuring the building or buildings as a whole.
The leases allow the Freeholder to collect money on account, or in advance from the Leaseholders. Block Management or Estate Management can be complex and most Freeholders employ the services of a specialist Block Management Agent such as Alpha Housing Services Limited to manage the maintenance, safety and insurance of the block or estate.
The Service Charge is made up of money collected on account from Leaseholders. As such, it is important that this money is well managed and protected. The Agent must ensure that best value is obtained for the Freeholder (and so in turn the Leaseholders who ultimately foot the bill). The Agent must ensure that the Service Charge funds are protected or ‘ring-fenced’ in case the Freeholder or Agent goes bankrupt/or is wound up, for example. The Agent should hold the funds in an account known as a Client Account. It is important for all to understand that when a Leaseholder pays a Service Charge this money is not taken as income by either the Freeholder or the Block Management Agent. The Service Charge contribution sits in the Client Account until the Agent has a need to spend it in a reasonable and professional manner.
The Freeholder is normally obliged under the terms of the lease to provide all Leaseholders with independently audited accounts to prove that the money paid on account by Leaseholders has been spent wisely. If a Block Managing Agent is instructed by the Landlord, they will discharge the Freeholders obligations in this regard.
The Agent must also ensure that there are sufficient funds in the Service Charge account to maintain, keep safe and insure the building or buildings. The Agent must also ensure that there is sufficient money in the account to react to urgent or extraordinary maintenance requirements.
A good Block Managing Agent can maintain and even enhance the value of flats or houses in a block or estate by managing and utilising Service Charge funds efficiently and professionally.
How do I know what my Service Charge is spent on?
At the end of each financial year, Statements are prepared by an independent accountant showing Income and Expenditure for your property. The Statements are circulated to all Leaseholders.
What is a Reserve/Sinking Fund?
It is important for the Freeholder or their Block Managing Agent to plan ahead for major planned maintenance. This is a relatively specialist area and involves analysis of the economic life of various elements of the building.
Except perhaps on very new or smaller buildings, a portion of the Service Charge fund should be set aside with a view to building a Reserve/Sinking Fund. Without an adequate Reserve/Sinking Fund, Leaseholders may become exposed to demands for extraordinary expenditure that could become necessary.
An inadequate Sinking Fund, particularly on an older building can affect the market value or ‘sale-ability’ of leasehold flats.
What type of services will a Block Management Agent carry out on behalf of the Freeholder?
- Cleaning of the common parts
- Window cleaning
- Car park management and maintenance
- Lift maintenance
- Fire alarm maintenance
- Security and access systems
- Refuse management
- Boiler maintenance (where communal boilers exist)
- Water system maintenance
- Roof repairs
- Electrical issues
- General repairs and maintenance
- Decorating (long term maintenance)
- Carpet replacements (long term maintenance)
- Window replacements (long term maintenance)
- Appointing and managing contractual staff to undertake the above
- Drawing up Service Charge budgets to cover the cost of the above works and reviewing these on an annual basis
- Issuing Service Charge notifications and answering any questions from residents
- Managing payments received and payments made e.g. to contractors
- Following up unpaid Service Charges and appointing debt collectors and solicitors if necessary
- Providing reports on all aspects of Service Charge collection and associated payments
- Transferring a proportion of annual Service Charges into a Reserve/Sinking Fund for the building (except perhaps in the case of very new or smaller buildings)
- Preparing year end accounts and tax returns
- Organising buildings insurance including valuations
- Implementing claims when necessary and handling all associated paperwork
- Supervising major repairs covered by the buildings insurance policy
- Carrying out site inspections
- Holding on-site meetings with residents and contractors when necessary
- Liaising with solicitors on any legal issue relating to the building
- Dealing with individual residents and landlords if the terms of a lease have not been followed
- Assisting with the enforcement of the terms of a lease and if required, instructing solicitors if a lease is continually breached
- Dealing with solicitors’ enquiries regarding any sales and providing all requisite paperwork
- Providing reports including minutes of any meetings to Freeholders and Management Companies
- Undertaking risk assessments for communal areas to comply with Health and Safety legislation
- Dealing with all residents’ queries
- Handling any complaints such as noise pollution
How is my Service Charge calculated and apportioned?
Alpha Housing Services prepares an estimated budget for your property each year, based on the actual expenditure for the previous years and the forecast spend for the year ahead. This is then charged out to each individual owner based on the apportionment stated in your Lease.
Calculation of Service Charges and Budget
This requires considerable experience and expertise as no two buildings are the same and some buildings can be extremely complex. One way of categorising the various elements of a Schedule of Service Charges for the purposes of explanation is as follows:
- Planned maintenance (short, medium and long term elements)
- Reactive maintenance
- Agent’s fee
It is also often helpful to examine the previous year’s expenditure when setting a Schedule of Service Charges. In the case of new developments where there is no information to consult, the developer (or his or her Managing Agent) estimates the Service Charges based on the age, structure and location of the building. They add to this services that are to be provided. A good estimate of these costs can be obtained by comparing services offered at other properties by similar contractors. It is important to note however that in the case of new developments, Service Charges can go up in the second year and the change in cost can sometimes be substantial. This is usually as a result of equipment warranties expiring and maintenance contracts being required.
For smaller buildings, the Schedule of Service Charges may comprise of only half a dozen items and can be straightforward to compile. For larger buildings, a Schedule of Service Charges could comprise in excess of 50 items, take into account the economic life of sophisticated plant or materials and must also factor in interest rates and inflation.
Apportionment of Service Charges
Service Charges are apportioned between Leaseholders in accordance with the terms of the lease. Some examples are as follows:
- A fraction, for example 1/8th where there are 8 equally sized apartments in a block. The fractions in leases on a development should always add up to 1!
- As a percentage of the total floor area. Some developments may consist of a number of differently sized apartments. In such cases a cost per square foot or metre is calculated and then each leaseholder pays the relevant amount, based on the overall size of their apartment.
It is possible on developments that comprise of more than one block of flats, that Service Charges between separate blocks are different. This difference is usually based on services provided in addition to fractions or percentage calculations. An example would be where some blocks of flats have lifts and others do not. It is common for those who have a lift to pay a higher Service Charge than those Leaseholders who do not.
Why do I pay an Insurance Premium?
Leases usually dictate that the building be insured as a whole and the cost included in your annual Service Charges. This, therefore, ensures all parts of the property are insured. Contents of the individual flats will need to be insured by the flat owner.
When do I have to pay my Service Charge?
Payment of Service Charge is specific to the Lease to which you are party.
Terms of payment vary but standard terms tend to be annually in advance, half-yearly in advance or quarterly in advance. You should check your Lease, or check with your solicitor who acted for you in the purchase of your property, to see when your Service Charge is due for payment.
I am selling my property. Do I still have to pay my Service Charge?
Yes. Service Charges are payable in accordance with the terms of your lease, regardless of whether you are selling your property or not.
If you are concerned that you will be paying Service Charges when you will not receive the service itself due to sale of the property, you should contact your solicitor who can reclaim a proportion of the costs on your behalf from the purchaser on completion.
Can I withhold payment of my Service Charge if I am not happy with the way things are managed?
Often one of the main reasons an estate or block of flats is not being managed properly is that there are insufficient sums in the Service Charge bank account.
A good Agent must therefore ensure that this does not happen so that it can, at all times, maintain, keep safe and insure the building or buildings under its jurisdiction. The Agent must also ensure that there is sufficient money in the account to react to urgent or extraordinary maintenance requirements. As such, for everyone’s benefit, arrears cannot and will not be tolerated.
Although you may choose not to pay a builder or other service provider if you are not happy with the service they are providing, you cannot withhold Service Charge contributions. Without an adequate balance in the Service Charge account, it is impossible to keep the building safe and for this reason the Courts would almost always find against the defaulter. You must pay your Service Charge and raise the query or complaint you may have in the correct manner.
In extreme circumstances, the Freeholder can forfeit your lease for persistent non-payment of Service Charge. More normally, failure to pay Service Charge results in the offending Leaseholder having to cover the costs incurred by the Freeholder or Block Management Agent for pursuing the arrears or serving notices in pursuance of the arrears.
How do I make a complaint if I am not happy with the service my Managing Agent is providing?
We always try to do everything we can to make sure you receive the best possible service but we know that sometimes we don’t always get things right the first time. If you’re not completely happy about anything, we’d like to hear about it straight away, so we can put it right for you and improve our service.
We take complaints seriously. If you want to make a complaint, whatever it’s about, we’ll give it our full attention and we’ll make sure it’s dealt with by someone with the right knowledge and experience.
If you’re not happy with any aspect of our service or products, you can choose how you tell us about it. Whichever way you contact us, we’ll start investigating straight away.
If you own a property in a residential estate or block managed by us, you can call us on 01823 270661.
Visit our Contact Us page, to use the contact form provided. Select ‘Make a complaint’ from the ‘Type of Enquiry’ dropdown menu, fill out the form with your contact details, and complaint, and we’ll get back to you as soon as possible.
Where is my Service Charge banked?
The Service Charge is made up of money collected on account from Leaseholders and, as such, it is important that it is well managed and protected. The Agent must ensure that best value is obtained for the Freeholder (and so in turn the Leaseholders who ultimately foot the bill).
The Agent must ensure that the Service Charge funds are protected or ‘ring-fenced’ in case the Landlord or Agent goes bankrupt/or is wound up, for example. The Agent should hold the funds in an account known as a Client Account.
It is important for all to understand that when a Leaseholder pays Service Charge this money is not taken as income by either the Freeholder or the Block Management Agent. The Service Charge contribution sits in the Client Account until the Agent has a need to spend it in a reasonable and professional manner.
What type of problems should I report to the Block Management Agent?
Your Block Management Agent is not responsible for all problems you may have with your building. Before contacting us with a maintenance request, please check first whether or not you should be:
a) dealing with the problem yourself or
b) for newer buildings contacting the developer or his/her insurer or the solicitor who acted for you in the purchase if you no longer have contact details.
What is Ground Rent?
Under most leases a relatively small amount of rent is due to the Freeholder. Without the entitlement to receive this rent, the Freeholder would have little incentive to maintain their asset.
The Freeholder will often (but not always) instruct the Block Management Agent to collect this rent on their behalf.
What happens if I don’t pay my Ground Rent?
It is imperative that the Ground Rent is paid. Ultimately and only in extreme circumstances, the Freeholder can forfeit your lease for persistent non-payment of Ground Rent. More normally, failure to pay Ground Rent results in Leaseholders having to cover the costs incurred by the Freeholder or their or Block Management Agent for pursuing the arrears or serving notices in pursuance of the arrears.
Can I make alterations to my property?
Your Lease will give details of your specific obligations. It is usual that the Landlord’s consent will be required for most alterations and that any structural alteration will be prohibited. Please contact us for further information.