As a freeholder, you own a plot of land and any property that sits on it. This property may be divided into flats which are occupied by leaseholders, has a car park/ driveway and a garden – all of which require regular maintenance. So what are your freeholder responsibilities?
Having mortgage-paying leaseholders live in your property can make the lines of responsibility for this maintenance less distinct. Who should be mowing the lawn? Who should be painting the flats? Who should be fixing broken lights? As there are so many legal obligations, it’s good to know exactly where that line divides.
If you are a new freeholder and unsure of your freeholder responsibilities, then a good place to start is a thorough review of both the Landlord & Tenant Act 1985 and the Landlord & Tenant Act 1987. It starts with a simple disclosure or your name and address to all rent-paying leaseholders.
You’re typically responsible for the following:
- Repairs and maintenance to the structure of the building (including the roof and guttering) and any communal areas
- The cleaning of the outer building
- Upkeep and maintenance of the communal areas
- Applying ground rent / service charges and providing management accounts to show how the money has been spent
This means you must engage and pay contractors to fix, clean and maintain the building and communal areas regularly.
Another important obligation is for the arranging and renewal of buildings insurance. As they don’t own the property itself, most leaseholders will only own contents insurance.
The lease may state that as the freeholder, you must obtain comprehensive buildings cover. This is in everyone’s best interests, of course, as any damage which occurs can be rectified far less painfully. If the responsibility to insure does sit with the freeholder and you fail to fulfil this obligation, you run the risk of having to personally pay for any damage to be rectified should it occur.
Ensure that the policy you take out is specifically landlord’s building insurance and not simply residential. Your insurer should be able to help you choose cover which is most appropriate.
Service Charges and Management Reports
While you are responsible for setting, collecting and spending the service charges, the amount levied must be ‘reasonable’ or your leaseholders could challenge you at a tribunal. Calculations for the service charge must be set out in the lease. It should state that leaseholders pay an equal share of the costs towards maintenance and repairs, plus payment terms.
Additionally, you must send leaseholders a management report which clearly shows where the money has been spent. Costs for various services will fluctuate, but in the event that the total comes in under budget, it’s good to reimburse the leaseholders.
What’s in the Lease?
If in doubt, the lease should state who is responsible for what. Though leases vary, on average the leaseholder is accountable for the maintenance and upkeep of their individual unit. This covers paintwork and redecoration, carpets, floorboards, plasterwork, appliances, plumbing and wiring. Some leases may even specify that a flat must be repainted within a certain period of time, i.e. every five years.
Similarly, the lease might say that any major structural changes to the internal workings of a flat must be first reported to the freeholder, as a courtesy, really. This is usually the case if renovating the kitchen or bathroom. Hence you may receive calls from leaseholders checking whether their plans will be permitted.
Devolve it to a Property Management Firm
As you can see, a great many responsibilities sit with the freeholder and keeping up with it all can be a tough task – especially if you don’t live within easy reach of the property. No wonder so many freeholders pass these responsibilities on to a third party managing agent. The agent acts as a middle man, collecting and disbursing the ground rent and service charges, scheduling contractors, liaising with leaseholders, providing management accounts and generally running the building.
The downside is that service charges for your leaseholders will undoubtedly increase. Hence you must consult them about any proposed changes. They may wish to form a tenants’ association and take on the running of the building themselves under their ‘right to manage’.
Others – especially those that have inherited a freehold – might decide it’s all too much hassle and sell the freehold full stop.
Owning a freehold is a great investment – you have a property and can earn a little rent money. However, it’s also fraught with legal responsibilities and you must make sure that you’re fully aware. If you’re unsure, it’s worth consulting a solicitor or posting to a dedicated forum, such as LandlordZone.
If you’re thinking about selling it, then why not speak with one of our experts, who can give you all the facts and estimate on the value and answer any other questions you might have?
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Steven is an experienced entrepreneur with a successful career and track record spanning over 25 years. From property investments to high-end business partnerships, he has a wealth of commercial experience.
Q I am a leaseholder on a flat for which, under the terms of my lease, the freeholder arranges the annual buildings insurance. Since 2008 I have rented out the property and now live abroad, which the freeholder agreed to prior to my organising. However, he has failed to send through any demand for payment of either buildings insurance or ground rent for last year (2009/10) and failed to send a policy schedule for the previous year (2008/09) (which I paid in full), either to myself or the second leaseholder in the block, and has not responded to any letters or queries from us.
We engaged a solicitor at considerable cost who was only successful in gaining a letter from him confirming a policy was in place. What rights do I have to make sure my property is comprehensively insured each year, and that I receive timely insurance and ground rent demands?
To complicate matters, I wish to rent the flat out indefinitely, but the lease says I can only do so for up to three years without a covenant from the landlord, which I doubt he will give. RD
A If the lease says your freeholder is responsible for arranging buildings insurance for the property as a whole, which is normal for a building divided into flats, then the freeholder must arrange insurance. But according to the Leasehold Advisory Service (LAS), where a lease provides for the freeholder to arrange buildings insurance it is usually paid for as part of the service charge rather than as a separate item. Also, the freeholder doesn't automatically send a copy of the insurance document to leaseholders.
However, a freeholder must respond to a written request for a summary of the policy within 21 days of it being made. The summary must show the sum for which the building is insured, the name of the insurer and the risks covered by the policy. If a freeholder fails to provide insurance information, he or she is committing an offence and could potentially be liable for a fine of up to £2,500.
But before you start to take legal action against your landlord I would first ask your tenant whether there is any post for you. Again, according to the LAS a freeholder must issue a notice for payment of ground rent, which may be sent by post to the address of the flat to which it relates. So if you didn't specifically tell your freeholder that you wanted any correspondence sent to your foreign address, he or she may still be sending post to the address of the flat you are letting.
Wherever post is going, I am afraid you can't force the freeholder to send bills when you want them, and nor can you make the freeholder give you the covenant you need to be able to let the flat beyond three years.