Friday, 13 October 2017

'We are being ripped off by our freeholder - what are our rights?'

Leaseholders in apartment blocks have valuable protections - but they need to know how to exercise them
I own an apartment in a development in London with a 125-year lease. I, alongside the other residents in the building, feel we are being treated unfairly by the freeholder, which has also appointed itself manager of the property.

The freeholder company demands high service charges and is constantly trying to alter the building. It has built three rooftop extensions in three years. The company even attempted to build a cafĂ© in the courtyard – but this, thankfully, was rejected.

The company has also laid out plans to convert our garden storage, which holds our bikes, into a new apartment.

The quality of the services provided by the freeholder has been poor. It seems as though the freeholder is interested in raising as much money from the development as possible, rather than maintaining or improving the living conditions of its residents. 

We feel as though we don't have any rights against the freeholder. Do we?

RH, London

When you purchase an apartment in a building owned by a third party freeholder, the property is not wholly yours. You have basically bought the right to live in someone else's building for a long period time, in this case 125 years.

As the building owner, the freeholder generally has the rights one might associate with outright property ownership, such as being able to develop roof space or gardens, provided they have planning permission.

However, a freeholder cannot behave entirely unchecked and the law gives consideration to the rights of leaseholders in the building. This is especially true when it comes to service charges.

Nic Shulman, editor of News on the Block, which provides help and advice to flat owners and professionals working in the residential flat industry, said that leaseholders paying unreasonable service charges can challenge this in the First Tier Tribunal (Property Chamber), which is settles legal disputes. Successful applications provide a safeguard for leaseholders, as the unreasonable charges cannot be recovered.

In respect of lease extensions, aside from limited exceptions, the freeholder must grant the extension for a further 90 years plus any unexpired lease term. Should more than 50pc of the apartment owners want to buy the freehold then the law provides a mechanism to do so.

Mr Shulman said that a cheaper alternative, which may address this reader's concerns about the freeholder also being the property manager, would be to consider one of the legal regimes for changing the property manager.

The Right to Manage gives 50pc or more of the leaseholders' clubbing together the right to request they are in control of the management. This is a "no fault" procedure, so no wrongdoing needs to be proved. Otherwise, where fault can be established a petition can be made to the First Tier Tribunal to Appoint a Manager.

This process is usually engaged for the most serious cases of mismanagement. This is a complex area where expert legal advice is necessary.

Telegraph Money has previously reported on the problems faced by leasehold buyers, which include spiralling costs of buying the freehold from the freeholder, high ground rents and unreasonable service charges.
The Government’s plan to change leasehold rules for new-build homes could hit developers who will only be allowed to charge nominal peppercorn ground rents on all new leasehold properties such as flats.

In a white paper published earlier this year, the Government said: “Ground rents with short review periods and the potential to increase significantly throughout the lease period may not be offering a fair deal.

“We are absolutely determined to address this. We will therefore consult on a range of measures to tackle all unfair and unreasonable abuses of leasehold.”

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