Freeholder legal obligations to Leaseholders

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    Freeholder legal obligations to Leaseholders

    Hi,

    I have recently come to own the Freehold to a some buildings that contain a large number of flats owned by other Landlords/owner occupiers who are the Leaseholders. I'm a residential landlord used to looking after my own properties but this is new to me and it has kind of happened by accident due to the bankruptcy of a former business partner.

    I am unsure of my legal obligations in this respect and I have no idea where to seek advice. I am already being badgered by Leaseholders to produce management accounts but I do not know what these accounts need to show or where to start although I understand that legally I must do this.

    Does anyone know of a good source of information or know of anywhere that can provide advice in this respect? Your help is much appreciated.

    FF

    #2
    Your main obligations insofar as long leasehold matters are concerned may be found in the Landlord and Tenant Act 1985 and LTA 1987.

    I'd start with a thorough read of these statutes, but in summary, you have obligations in relation to:

    -how you are reimbursed by way of service charge;
    -preparing accounts in relation to service charges;
    -right of first refusal when you dispose of the freehold interest.

    Also bear in mind tenant's rights under separate legiislation as to "right to manage" and "right to enfranchise". The former allows tenants under certain conditions to force management of the freehold under their control, and the latter to force you to sell them the freehold.

    Comment


      #3
      The obligations arising under statute law identified by dominic (last above) may well be reflected in the lease agreements between the various leaseholders and the freeholder. Clearly, also there may be additional, extra-statutory obligations recorded in the leases.

      Accordingly, your starting point aside from familiarity with the Acts cited by dominic should be the lease agreements (which with luck are in a standard form, i.e. identical to all flats rather than being distinct to each flat). Normally the obligations would run to positive (i.e. requiring action on your part as freeholder) covenants to do with: -

      (i) insuring the building;

      (ii) the maintenance (including cleaning), redecoration and repair of those parts of the building aside from the interior of each individual flat;

      (iii) the maintenance etc. (similar provisions per (ii)) of any surrounding areas used by all leaseholders;

      (iv) levying a service charge (and the right to collect ground rents) and providing certified accounts showing how funds have been disbursed;

      (v) acting as holder on trust for the leaseholders of any sinking fund to defray refurbishment costs etc..

      There are likely too to be negative covenants where the freeholder undertakes to permit quiet possession by leaseholders etc..

      The leases will also typically record restrictive covenants binding upon the leaseholders, for example preventing them making structural alternations etc. and covenants associated with permitting the freeholder rights to enable it to undertake its tasks, of the like of access to flats to undertake maintenance etc..

      The right to enfranchise provisions are contained in the Leasehold, Housing and Urban Renewal Act 1993 (see Part 1 thereof) and the right to manage provisions in the Leasehold and Commonhold Reform Act 2002 (see Part 2, Chapter 1).

      Comment


        #4
        Read some of the publications at the lease advisory service. Mostly plain language interpretation of the law...
        I am not a solicitor, I am a lessee/shareholder in conflict with the management. Please seek your own legal advice before relying on my comments in this forum!

        Comment


          #5
          Originally posted by fiftyfive View Post
          I have recently come to own the Freehold to a some buildings that contain a large number of flats owned by other Landlords/owner occupiers who are the Leaseholders.
          Did you buy the freehold reversions? If so, did V serve prior Notices on lessees [s.5 of LTA 1987]?
          JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
          1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
          2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
          3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
          4. *- Contact info: click on my name (blue-highlight link).

          Comment


            #6
            Originally posted by Gazou View Post
            The obligations arising under statute law identified by dominic (last above) may well be reflected in the lease agreements between the various leaseholders and the freeholder. Clearly, also there may be additional, extra-statutory obligations recorded in the leases.

            Accordingly, your starting point aside from familiarity with the Acts cited by dominic should be the lease agreements (which with luck are in a standard form, i.e. identical to all flats rather than being distinct to each flat). Normally the obligations would run to positive (i.e. requiring action on your part as freeholder) covenants to do with: -

            (i) insuring the building;

            (ii) the maintenance (including cleaning), redecoration and repair of those parts of the building aside from the interior of each individual flat;

            (iii) the maintenance etc. (similar provisions per (ii)) of any surrounding areas used by all leaseholders;

            (iv) levying a service charge (and the right to collect ground rents) and providing certified accounts showing how funds have been disbursed;

            (v) acting as holder on trust for the leaseholders of any sinking fund to defray refurbishment costs etc..

            There are likely too to be negative covenants where the freeholder undertakes to permit quiet possession by leaseholders etc..

            The leases will also typically record restrictive covenants binding upon the leaseholders, for example preventing them making structural alternations etc. and covenants associated with permitting the freeholder rights to enable it to undertake its tasks, of the like of access to flats to undertake maintenance etc..

            The right to enfranchise provisions are contained in the Leasehold, Housing and Urban Renewal Act 1993 (see Part 1 thereof) and the right to manage provisions in the Leasehold and Commonhold Reform Act 2002 (see Part 2, Chapter 1).
            Gazou, thank you, I omitted to state the obvious.

            Comment


              #7
              Hello,

              Just wanted to thank all who have taken the time to reply to my post - it's all very useful advice. I am taking a close look through the Landlord and Tenant Acts as suggested and the leasehold advisory service has been a good source of information too. And to answer Jeffrey's question, yes, the proper notices were issued when the Freehold was purchased.

              Many thanks,

              FF

              Comment

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