Landlords still hold the power

In the first of a series on leasehold rights, Karen Wolfson looks at the predicament of a flat-owner who fails to read the small print

People often invest many thousands of pounds in a flat before realising that they are also buying into an archaic system which still gives the landlord or freeholder powers over their property.

Despite flat-owners having the majority financial stake in their property, they are still classed as tenants or leaseholders, severely limiting their rights to manage their homes. Changes to leasehold law over the past decade have attempted to redress the balance between landlord and tenant, with modest improvements to the legal position. But the present system still contains flaws.

The Government is considering a radical overhaul of the current leasehold laws, which would include introducing a new form of tenure called "commonhold". This would allow flat-owners to own their homes individually, and to own the whole house or block of flats collectively.

At present, freeholders invest in a property and, in turn, they sell flats in the block to individuals on a leasehold basis. Leaseholders can buy the freehold of the block collectively; this is a fairly new development allowing them to manage the building as a group. However, each flat is still individually granted a lease by the group of people who manage the freehold.

Commonhold would take this one stage further. It would give each flat or unit in the block a type of individual freehold. In effect, the building would be sliced up into commonholds. Meanwhile, a commonhold association made up of the flat-owners would own the block.

The Government is expected to introduce legislation that applies commonhold tenure to new tenancies, and where existing leaseholders wish to transfer from their current status. In such cases the support of the majority of leaseholders in the block would be needed to effect the transfer. Commonhold tenure could eventually take the place of leasehold altogether.

However, until new reforms are introduced, the current difficulties will persist.

The key problems faced by leaseholders in England and Wales are how to establish whether a service charge is reasonable or not, how to extend a lease without having to pay huge sums of money, and the whole rigmarole of buying a freehold. Not surprisingly, leaseholders are often reluctant to take action because of the sheer expense, amount of time and frustration involved in disputing issues with freeholders.

Service charges are a case in point. The law states that service charges should be limited to a reasonable amount. But Tim Curran, director of Leasehold Enfranchisement, a firm of chartered surveyors, points out that the tricky part of this equation is defining what "reasonable" means.

If you think your landlord is trying to charge for items he is not entitled to recover, or trying to charge too much, the first step is to read your lease thoroughly. Identify the services you have agreed to pay and study the service charge schedules, looking for items that are not mentioned in your lease, or are not recoverable for other reasons.

There are a host of services for which you could be wrongly charged; some of the most common include those not mentioned in the lease, works or services that have not been provided, and sub-standard items such as a faulty central heating system, or a lift that often breaks down.

Charges for works where the landlord has not followed the proper consultation procedure are another common problem, as well as works which cost too much, due to previous neglect by the landlord, such as carrying out repairs caused by failure to deal with a leaking roof.

Tony Essien, senior adviser at the Leasehold Enfranchisement Advisory Service (LEAS), says that many lessees fail to comb through the lease before buying a property, because of the forbidding language in which it it is written. They often believe that their solicitor will raise any problems with them, but solicitors normally go through only a brief summary of the lease's provisions, not having the time to go into great depth.

Essien urges prospective flat-owners to look at their lease carefully, ask the solicitor detailed questions about what they will have to pay for, and make sure they understand what they are binding themselves to. He claims: "Most people know more about their car than the flat which they are about to invest huge sums of money in. Their lease is often not considered a material issue until a problem arises."

He highlights one case involving a man who bought a basement flat in a building with a lift. The lift goes to all the flats except the basement flat, which has its own entrance, but the landlord has demanded that all the flats pay part of the cost of the lift service. The owner of the basement flat is contractually bound to his lease, so if it says he should pay for the lift service then he has to pay, and if it says otherwise then he is spared this cost.

The owner of the basement flat did not read his lease thoroughly before buying his flat, and found he had no option but to contribute to a service that did not relate to him. Had he been aware of this state of affairs on the purchase of his property, he could have attempted to vary his lease.

Whatever your predicament, make sure you seek advice before withholding part or all of the service charge which you consider unreasonable, as otherwise the landlord could decide to forfeit your lease. Forfeiture is the legal process whereby a landlord or freeholder can take back a lease that has been granted, if the tenant or leaseholder has broken any of its terms.

At present, service charge disputes can be contested only in a county court, which is a costly and complex affair. However, the Government is shortly expected to introduce regulations which will give the Leasehold Valuation Tribunal the power to deal with service charge disputes, providing leaseholders with a less expensive and simpler route to action than in the past.

The Leasehold Valuation Tribunal is a committee made up of a lawyer, a valuer and a lay person, who deal with a wide range of issues relating to leaseholders. For information about the tribunal's areas of jurisdiction, and making an application, you can contact your local council's housing centre or the LEAS.

Apart from service charges, many flat-owners are concerned that leases granted in the Seventies and Eighties are coming to the point where they are less than 80 years long, which can reduce the value of a property and deter potential buyers. This will be explored in more detail in the next articlen

Useful contacts: Leasehold Enfranchisement Advisory Service (LEAS) (0171- 493 3116); Leasehold Enfranchisement Ltd (0171-821 8820; Leasehold Enfranchisement Association, 0171-937-0866); Royal Institute of Chartered Surveyors (0171- 222 7000); Citizens Advice Bureaux (for details, see the phone book).

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

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