BUYING a leasehold property can be a complicated process, and you may not always realise what you’re signing up for.
Over the past few years, it’s come to light that thousands of leasehold homeowners are trapped paying high service charges that they can’t control.
Leasehold flats often come with high service charges to maintain the grounds[/caption]
A leasehold property is where you can buy the right to live in it for a set period of time, but you don’t own the land it’s on.
This is compared to a “freehold” property, where you own both the home and the land.
Leasehold tenure tends to be more common for flats, although some new-build housing developments are leasehold too.
Because there are often multiple homes within one building or development, there is usually a joint responsibility for the upkeep of the building or site.
Oversight of this maintenance is often delegated to a management company, which charges service fees to the residents.
The problem is that these fees have largely been unregulated, so management companies have been able to charge whatever they like without explaining exactly what the money is being spent on.
Some homeowners have found that their charges have increased so significantly in a short period of time that they can’t sell their homes, as potential buyers aren’t willing to take the high fees on.
Here, we explain how homeowners can tackle high service charges and regain control of their maintenance costs, saving thousands of pounds a year.
Try resolving it directly first
Sometimes, you may be able to resolve issues with service charges easily by speaking to your management company.
Kevin Mountford, co-founder of financial firm Raisin, recommends getting a breakdown of what you’re currently paying for to help figure out if you’re being ripped off.
“Many leaseholders face inflated service charges that can feel like an unavoidable financial burden, but there are ways to challenge and reduce these costs,” he said.
“Start by requesting a full breakdown of charges from your managing agent or freeholder—transparency is key.
“Compare costs with similar properties to identify overcharges, and if something seems excessive, don’t hesitate to negotiate.”
Right to Manage
If you don’t get anywhere by approaching your management company or freeholder, you may be able to take over managing the charges yourself.
The Right to Manage is a legal process where leasehold residents to effectively take over the managing their building together.
It’s only available to leaseholders of flats, so doesn’t apply to leasehold houses.
The government is pushing through reforms that will allow more people who own leasehold homes to access Right to Manage.
Anyone in a mixed-use development where 25% or more of the space is used for commercial reasons can’t currently use Right to Manage, but this minimum is being increased to 50% to allow more people to access it.
The government is also removing the requirement for leaseholders to cover freeholders’ legal frees during Right to Manage claims, which it expects will save homeowners around £3,000.
To start the process of Right to manage, a group of residents in a leasehold development must set up their own Right to Manage company, with its own Articles of Association (a type of legal document) explaining
It costs £50 to set up a company and takes around 24 hours to register.
You then need to serve notice to the freeholder of the development – the person who owns the land – letting them know you are taking over the right to manage. They then have one month to dispute this.
Mr Mountford said: “In some cases, collective action such as forming a Right to Manage company can give leaseholders direct control over service costs, often reducing them by 20-30%.
“This could save you hundreds, if not thousands of pounds a year.”
Escalate your case to court or an Ombudsman
For private leasehold residents, you can then complain to a First Tier Tribunal about leasehold charges if you can’t use Right to Manage or need to take further action.
Mr Mountford added: “Leaseholders have the legal right to challenge unfair charges via a tribunal, which can lead to significant savings.”
If you live in social housing, you can try escalating your case via the Housing Ombudsman instead.
This can look at complaints relating to communication, (including being ignored), and the transparency and fairness of the service charges.
How to check if your home is leasehold
WHEN you buy a property, you should be advised about its tenure.
Make sure to ask the estate agent when you view the home as they should know or be able to find out.
However, if you’ve already bought a property and aren’t sure if it’s leasehold, it should say in the legal documents you got when you bought it.
If you can’t find these, you can look your property up on the Land Registry, where all homes are recorded.
Look yours up on: gov.uk/search-property-information-land-registry
