You’ve got a mortgage and bought a property. You probably think that rent will be a thing of the past and that you will be free to allocate your money to repairs and maintenance as and when you are able. However if you’ve bought leasehold property you will not be the owner of the building in which the property is located; and it is the freeholder who owns the building. The leaseholders are usually required to pay all costs of insuring, repairing, maintaining, cleaning and managing the building through payment of a regular service charge. The service charge is a variable sum as costs will alter from year to year. Most leases also require payment of ground rent which is usually a fixed nominal amount specified in the lease.
The lease will set out the dates for payment of service charge and ground rent. The freeholder is obliged to send demands for payment of service charge and ground rent in advance of the date by which the payments are due.
If you fail to pay by the due date the freeholder may be entitled to interest on the outstanding balance and may take court action to recover the arrears. There is no right to withhold payment because the building is in need of repair however. If the freeholder is neglecting the building there is a separate legal process that you can follow to compel the freeholder to take action or alternatively to force the freeholder to sell the freehold to a collection of leaseholders.
Service charge does not cover the cost of major works such as replacing the roof or painting the exterior of the building. For major works costing more than £250 per leaseholder the freeholder must formally consult the leaseholders. Provided the consultation process has been correctly completed you must usually pay in advance of the works starting. If you or a fellow leaseholder can not pay, the building may fall in to ruin. The freeholder can take action to recover the cost of major works and may be entitled to interest and legal costs from you. If you have concerns about the cost or nature of the major works or that the consultation process was not followed you can take separate action.
Healys offers a full service to both freeholders and leaseholders.
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