Living in a leasehold flat: what can you do about high service charges?

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In these tough times most people need to budget for household expenses; whether it’s insurance, repairs or improvements. But if you own a leasehold flat, it’s not that easy. If you’re living in a leasehold flat, what can  you do about high service charges?

Leasehold flats: the basics

If you live in a leasehold flat you normally have to pay an annual service charge, which pays for things like communal hallways and gardens, lifts and the buildings insurance. It can be a couple of hundred pounds or several thousand a year. You’ll also normally have to pay for the cost of repairs and maintenance (repainting the exterior, replacing windows etc).

What can you do about high service charges?

There are four basic options that may be open to you if you’ve been given a service charge bill for upkeep or a one-off bill for repairs.

You can:

  • Challenge the bill in a first-tier property tribunal. A residential ‘first tier’ tribunal is a designed to be a low cost alternative to going to the courts. You have to pay an application and hearing fee (these add up to several hundred pounds) if you take a case to tribunal. Sometimes just the threat of challenging a bill in a tribunal can make a landlord think again.

SAVVY TIP: You don’t need to use solicitors or legal experts but you would normally have to get an opinion from professional, such as a surveyor who specialises in leasehold issues.

  • Get an audit of the managing agents. You can ask an accountant to audit the managing agent’s accounts or you can get a specialist surveyor to tell you whether the repairs that the managing agent wants to carry out is necessary.

SAVVY TIP: There’s information on the basics of service charges on the Gov.uk website. The professional body for managing agents (the Association of Managing Agents), ARMA, has lots of information for leaseholders on its website.

  • Apply for the ‘right to manage’. This means that you take over the management of the block of flats, either by managing it yourself if it’s a small block or by appointing a managing agent of your own choice. It’s a big step and it comes with a number of responsibilities; for example, you have to set up a ‘right to manage’ company and there are a number of health and safety rules you have to comply with.

SAVVY TIP: Although the landlord can’t stop you from taking over the management of the block, the law says that they should become a member of the right to manage company. There’s more information about taking over the management of your leasehold block elsewhere in this section. Sharon Crossland of Leasehold Life says: “Just because you have bought the freehold or secured the Right to Manage, the real work is just starting. You’ll have to resist the temptation to sit back and let the managing agent get on with it.”

  • Buy out the landlord. This isn’t so much a short term fix as a long term solution. Instead of taking over control of the block, you buy out the landlord’s interest by buying the freehold (the correct term is ‘leasehold enfranchisement’). The property still continues to be leasehold, but, as you become the landlord as well as the leaseholder, you can draw up a new lease. You can’t do this if you live in an ex local authority flat.

SAVVY TIP: The price you’ll have to pay for the freehold will depend on several factors including the amount of time you have left on the lease and the value of the properties. If you and the landlord can’t agree a price you can apply to the leasehold valuation tribunal for a valuation. If the landlord wants to sell the freehold, the leaseholders have to be offered first refusal.

Replacing your managing agent

Managing agents don’t have to be licensed so anyone can set themselves up as one. While there are some good managing agents out there, there are plenty of mediocre ones and some who are out and out rogues.

Before you look for a new managing agent, you should work out why you want to replace them. Do you want to:

1. Reduce your service charges?

2. Improve the way your block is managed?

3. Have control over how your money is spent?

4. Issue a warning to an incompetent landlord or manager?

Challenging service charges

The Leasehold Advisory Service (LEASE), which is a free to use advice service on leasehold issues, says it saw an increase in complaints about service charges of almost 50% in the last two years.

If you’re unhappy with your service charge you should:

  1. Ask the landlord/managing agent for a breakdown of the bill. You should be given information about what you’re being asked to pay for, but if it’s not clear, contact the landlord or managing agent.
  2. Get in touch with LEASE. LEASE has a lot of information about challenging service charges on its website (it’s quite text heavy but the information is useful). It can also give you advice over the phone.
  3. Consider getting professional help. If you want to challenge your service charge or repair bill it may be worth getting a specialist leasehold surveyor or lawyer involved. The LEASE website has a directory of solicitors and surveyors with leasehold experience.

Useful links:

Leasehold Life. A useful website run by someone who’s lived in a leasehold flat and experienced bad management from agents.

News on the block; lots of information and articles aimed at helping leaseholders (and professionals working in this area).

Related articles:

Buying a leasehold flat – how to avoid making a costly mistake

How easy is it to get a mortgage if you’re self employed?

VIDEO: How an offset mortgage can save you money

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