Frequently Asked Questions

Property Leasehold Questions | Service Charge Queries | Lease Explained

Tenant rights and residential property lease explained including property leasehold questions.

All your service charge queries answered for leasehold property by a block management expert.

Many property leasehold questions and property lease service charge queries are never satisfactorily answered. We hope you find the following will assist with your understanding of property leasehold arrangements. 

The following answers to frequently asked property leasehold questions are intended to help leaseholders and tenants make sense of the various terms used.

Your service charge queries and lease explained


What are Service Charges?

What are Reserve Funds?
What is Ground Rent?
Where does my money go?
Why is my Service Charge so high when I have a friend that pays half the amount?
The End of Year balancing charge relates to a period before I purchased the property. Do I have to pay it?
Why have my Service Charges increased?
If I am selling the property in the near future, do I have to pay the charges in full?
How can I pay my Service Charge?
What happens if the leaseholder doesn’t pay?
I want to change the address my invoices and statements are sent to?
I am the owner of this property but the invoices and statements you have sent are not in my name?
What is leasehold?
What is a lease?
What are your responsibilities?
How is the building insured?
What are my responsibilities as a Residents’ Management Company Director?
Can I sub-let my property?
Can I make alterations to my property?
Can I keep pets in my property?
Why do we need a managing agent and what do they do?
When will VFM visit my development?
What do I do if I want to complain? 
How to get started?
Current Legislation.
Getting Started.

Property leasehold can be difficult to understand for many tenants and leaseholders resulting in service charge queries and questions on how the lease system works in practice.

The following is a summary of terms for a typical property lease explained in plain English without jargon or legal wording :-

What are Service Charges?
Service charges are payments made by the leaseholder for all  property leasehold services provided to the flat owners. These services will typically include maintenance and repairs, insurance of the building and, in some cases, provision of central heating, lifts, porterage, lighting and cleaning of common areas etc. Usually the charges will also include the costs of management by the professional managing agent.

Service charges can vary from year to year; they can go up or down without any limit other than that they are reasonable and are in compliance with the property lease.

Details of what can (and cannot) be charged by the landlord and the proportion of the charge to be paid by the individual leaseholder will all be set out in the lease.

In answer to the most common service charge queries, all costs must be met by the leaseholders. Most modern leases allow for the collection of service charges in advance, repaying any surplus or collecting any shortfall at the end of the year.

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What are Reserve Funds?

Many leases provide for the collection of sums in advance to create a reserve or ‘sinking’ fund to ensure that sufficient money is available for future scheduled major works, such as external decorations, roofing or lift replacement. The property lease will often set out when regular, cyclical or maintenance works are due .

Misunderstanding the need for property leasehold reserve funds to be collected well in advance as a provision for future proposed works is the cause of one of the most frequent service charge queries and is an important part of the costs of ownership.

Contributions to the reserve fund are not repayable even when the flat is sold.

Related terms in your lease explained  by the legal profession are not always clear when the leaseholder is unfamiliar with property leasehold arrangements.

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What is Ground Rent?

Ground Rent is the rent that all Leaseholders pay to the owner of the land (the Freeholder, Landlord or Head Lessee). Terms for this payment will be set out clearly in your lease. Ground Rent is strictly payable in accordance with those terms – normally annually or half yearly.

In layman’s terms, the physical space would normally be a flat in a residential building and the lease, a legal document signed by both landlord and lessee.

The lease which is normally for 99 or 125 years outlines the obligations for both parties and will usually state the price originally paid for the flat.

The lessee will be legally obliged to pay the Ground Rent strictly in accordance with the terms of the lease.

The amount of Ground Rent due can vary in each property. For example, a 2 bedroom flat held on a 99 year lease granted in 1962 may have a Ground Rent due of only £10 per annum paid annually in arrears. However, a 2 bedroom flat held on a 99 year lease granted in 2003 is more likely to have a Ground Rent in excess of £200 per annum paid annually in advance.

On a newly built block of flats the developer will decide what annual ground rent to impose on each flat together with an asking price.

Prospective purchasers would be well advised, therefore, to take detailed legal advice on their leasehold obligations before buying a flat in a residential development.

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Where does my money go and will I receive details of the property estate management budget?

All service charge payments that VFM receive are paid into a designated, ring fenced, client bank account with monies held in trust in accordance with teh RICS Client Money Regulations. These client funds are held in a separate account from other properties we manage. At the end of the financial year for each block, independent chartered accountants are appointed to produce an income and expenditure statement outlining the total service charges received for the year and itemising the total expenditure. At the bottom of the statement it will clearly show how much money is left in the service charge fund.

The accounts are produced in accordance with the Landlord & Tenant Act and our Client Bank Accounts are regulated by the RICS Code of Conduct.

An annual budget including expenditure cost estimates is prepared and agreed for each estate prior to the start of its financial year. The Service Charge required to fund this anticipated expenditure is calculated and an application for payment issued to each leaseholder along with forecast expenditure and supporting details.

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Why is my service charge so high when I have a friend that pays half the amount?

Individual properties and lease particulars can vary considerably making comparisons of Service Charges difficult. In summary:

You cannot compare apples with oranges and there are probably good reasons for variances between charges for different estates. Here are some typical reasons:-

(i) You may have a more comprehensive set of services funded through your service charge (e.g. site manager, all windows cleaned, lifts, car parking, entry systems etc.).

(ii) Does your friend’s service charge include sinking funds as ours usually does? If not, their charge is likely to fluctuate dramatically from year to year as large expenditure falls due.

(iii) How many apartments are in your friend’s block? Small blocks tend to have a higher maintenance charge per flat and overall maintenance costs are often disproportionately expensive because the cost is shared by fewer lessees, rather than being spread across a large number. For example, a roof repair provided for only 4 flats is expensive compared to the same facility provided for 20.

(iv) Do you have extensive gardens or is your block an older building? If so, your service charge could be adversely affected.

(v) What size is your apartment? Service charge is often calculated by reference to the floor area of your apartment. If you own a two bedroom apartment and your friend owns a studio apartment then this can make a significant difference.

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The End of Year balancing charge relates to a period before I purchased the property. Do I have to pay it?

Yes. As part of the contract of sale there should have been an agreement that the previous owner of your property would still be liable for a proportion of any balancing service charge. Indeed, the solicitor that acted for the previous owner may have kept back a sum of money from the sale (retention) to cover this additional charge. We recommend that you contact your solicitor as soon as you receive our invoice in order that any recovery of monies due to you can be made.

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Why have my block management service charges increased?

It may be for any number of reasons from the introduction of new legislation to changes in the property running costs or requirements.

The cost of providing maintenance services to your property or estate is assessed annually and annual fluctuations can raise many service charge queries. The cost is initially based upon our knowledge and experience with other similar properties. In future years we will have the benefit of referring to historical expenditure figures for forecasting but even so there are some matters that are impossible to accurately predict. The costs of building repairs in one year may be minimal but may be quite substantial in the next year. Additionally, we may have to take into account outside influences such as changes in Government legislation which have recently led to substantial increases in the costs of providing management services generally.

Increased health and safety regulation has required that landlords, property management companies and their managing agents must carry out health and safety fire risk assessments and asbestos surveys.

That aside, it is often difficult to accurately predict the levels of expenditure in the first year or two of a new development. As a consequence there may be increases in the costs of providing certain services for the first few years until the development is completed.

Of course, the contractors who provide services to your property will normally increase their prices yearly to cover their inflationary costs. Insurance companies likewise will make adjustments to premiums having regard to market conditions, global climate changes, increase in personal injury claims etc. Many will also review premiums taking account of specific claims history under existing buildings insurance policies. In most cases this will lead to revised premiums year on year.

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If I am selling the property in the near future, do I have to pay the charges in full?

Yes. You should pay all of the charges due on the property prior to any sale taking place. To protect the purchaser’s interests, their solicitor must establish that there are no debts outstanding on the property. Part of the usual pre-sale enquiries that solicitors make, is to ask if there are charges due or outstanding against the property. If you have not paid in full it will, in most cases, delay completion of the sale of your property. Your own solicitor will apportion any money due back to you in the final completion statement.

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How can I pay my Service Charge?

You can pay electronically through internet banking or by cheque (by post). We also offer a standing order or direct debit facility. Service charge payments should be made in accordance with the terms of your property lease to help ensure adequate cash flow to meet ongoing payment obligations.

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What happens if the leaseholder doesn’t pay?

It is the leaseholder’s obligation to pay the service charges and ground rent promptly under the terms of the lease. If they are not paid and the landlord is able to show that the charges are reasonable, then he can begin forfeiture proceedings. If approved by a court, this can lead to the landlord repossessing the flat. However, under the Commonhold and Leasehold Reform Act 2002, the right of the landlord will be restricted.

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I want to change the address my invoices and statements are sent to?

Please write to advise us of any change of correspondence address.

For legal reasons we cannot accept such advice over the telephone. You must write to our administration department who will then make the necessary amendments.

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I am the owner of this property but the invoices and statements you have sent are not in my name?

Please contact us. The ownership of most properties is recorded at the Land Registry. There are often restrictions to prevent registration without a certificate from the freeholder. The intention being to safeguard the interests of a new purchaser from inherited arrears of service charge. If you contact us, we will advise you if your solicitor has applied for a certificate or not and if there are any matters that are preventing the issue of a certificate.

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What is a property leasehold?
Leasehold flats can be in purpose-built blocks, in converted houses or above commercial or retail premises.

Your lease explained –

Leasehold ownership of a flat is simply a long tenancy, the right to occupation and use of the flat for a long period – the ‘term’ of the lease. This will usually be for 99 or 125 years and the flat can be bought and sold during that term. The term is fixed at the beginning and so decreases in length year by year. Thus, if it were not for inflation, the value of the flat would diminish over time until the eventual expiry of the lease, when the flat reverts to the landlord (although an assured tenancy would then become a possibility).
The ownership of the flat usually relates to everything within the four walls of the flat, including floorboards and plaster to walls and ceiling, but does not usually include the external or structural walls. The structure and common parts of the building and the land it stands on are owned by the landlord, who is responsible for the maintenance and repair of the building.
The landlord can be a person or a company, including a local authority or a housing association. It is also becoming quite common for the leaseholders to own the freehold of the building, although residents’ management company, effectively becoming their own landlord. With the advent of the right to manage, the lessees will not own the freehold but will be able to manage the building as if they were the landlord.

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What is a lease?
A lease is a contract between the leaseholder and the landlord giving conditional ownership for a fixed period of time. It is an important document and leaseholders must ensure that they have a copy and that they understand it. The wording of the leases is usually in legal language and can vary from property to property. Leaseholders who cannot understand their lease should get advice.
It is difficult to change the conditions of the lease after you buy, so make sure that the services provided in the lease are those that you want or can accept.
The lease sets out the contractual obligations of the two parties: what the leaseholder has contracted to do, and what the landlord is bound to do. The leaseholder’s obligations will include payment of the ground rent (if any) and contribution to the costs of maintaining and managing the building. The lease will probably also place certain conditions on the use and occupation of the flat. The landlord will usually be required to manage and maintain the structure, exterior and common areas of the property, to collect contributions from all the leaseholders and keep the accounts.

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What are your responsibilities?
Principally, these will be the requirements to keep the inside of the flat in good order, to pay (on time) a share of the costs of maintaining and running the building, to behave in a neighbourly manner and not to do certain things without the landlord’s consent, for example, make alterations or sub-let. The landlord has an obligation to ensure that the leaseholder complies with such responsibilities for the good of all the other leaseholders. These rights and responsibilities will be set out in the lease.

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How is the building insured?
The lease will normally require the landlord to take out adequate insurance for the building and the common parts, and will give him or her the right to recover the cost of the premium through the service charges. The policy will not normally cover the possessions of individual leaseholders.

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What are my responsibilities as a Residents’ Management Company Director?
Your responsibilities as a Residents’ Management Company (RMC) Director are the same as for any Company Director. Consequently you have statutory and fiduciary duties that must not be taken on lightly. In simple terms however you will be responsible for ensuring that the development is managed properly and cost effectively. To this end you will need to work with your fellow Directors to agree a budget with the managing agent and to ensure that you members then contribute on time and in full. You will need to hold meetings in accordance with statute and ensure that you consult with your members/shareholders regularly.

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Can I sub-let my property?
Most leases allow for the sub letting of the property, subject to obtaining the prior consent of the landlord/directors of the RMC, which can not be unreasonably withheld. It is not normally permissible to sub-divide or sub-let parts of the property. Any resident wishing to sub-let their property should contact VFM. It is vital that VFM are advised as to whom resides at the property including contact details as in the vent of an emergency contact can be established.

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Can I make alterations to my property?
Most leases and transfers include restrictive covenants prohibiting alterations to either the plan or the elevations of the property without prior written consent. Such alterations will include the replacement of windows, the removal of internal walls, installing external lights and the construction of an extension. Residents wishing to make alterations should apply to VFM in writing detailing the precise works to be undertaken including the appropriate planes and specification relating to the proposed works.

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Can I keep pets in my property?
This is dependent on the terms contained within your Lease or transfer Document. Most Leases prohibit pets or require written consent of the Landlord/Directors of the RMC before a pet is allowed to reside in the property. Some older properties do not include such a restriction.

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Why do we need a managing agent and what do they do?
Not all properties have managing agents but most do. Maintaining the common areas, the fabric of the building and the grounds are important elements to ensure that the value of your property is maintained. Poorly managed sites deteriorate quickly and become less attractive to purchasers and the costs associated with good management are often less than it would cost to manage say a house with the same services, particularly where your agent has considerable purchasing power.
The Manager is responsible for ensuring that many essential things happen at your development and these are principally as follows:
(i) To make sure the building remains properly insured, at the right level and with appropriate cover. This might include engineering insurance for lifts and other plant, Directors and Officer Liability for Directors of a Residents’ Management Company and of course traditional buildings insurance that will include terrorism cover together with common area only contents cover.
(ii) To provide basic services on site including cleaning, gardening, window cleaning, lift maintenance, entry system maintenance etc. In fact just about any service that your development requires we arrange. This includes anything from spa water testing to pigeon control, it just depends on your development’s needs and the services agreed with your developer.
(iii) Health and safety is a major part of our work to protect you and the people that work on your development. Typically on a larger development we might arrange an annual Health & Safety assessment, periodic water testing, dry riser tests, fire alarm testing, lightning conductor testing, emergency lighting tests, ‘mansafe’ or cradle testing, lift testing as well as electrical and gas testing. In addition we will ensure that everyone who works on your development is properly qualified and insured.
(iv) All of the above is backed up by an inspection regime that not only provides a visual overview but will seek to maintain and indeed enhance the value of your property going forward by ensuring that contracts on site are all being undertaken in accordance with agreed standards.

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When will VFM visit my development?
Our property leasehold managing agent contract will set out the minimum number of visits per annum. For most developments this will be between 4 and 12 times during the year, plus specific visits to meet residents’ representatives. Of course reality often means that we visit much more that this, particularly in the early days of a development or where there is a specific matter to resolve.

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What do I do if I want to complain?
In the first instance it is best to speak to the Property Administrator or Manager for your property. Call or email and we will endeavour to resolve any problem as quickly as possible. If you are still not satisfied with our response then you may wish to escalate matters as a formal complaint. In accordance with statutory legislation and the requirements of both RICS and ARMA, VFM provides its customers with a formal complaints procedure .

Details can be easily accessed by clicking the following link complaints-procedure. We are, of course, also happy to receive your compliments and any comments about how we can improve the services we offer you.

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How to Get Started?
Property leasehold owners considering a change of managing agent might be discouraged by the thought of having to devote significant and very precious time and effort in securing the benefits offered by new managers.
At VFM we set out to ensure this process is made as simple and easy as possible for our prospective clients. We recognise that certain fundamental issues will require client input however by obtaining information directly from the previous agents we aim to minimise the need for unnecessary client involvement in the handover process.

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Current Property Leasehold Legislation.
There are five principal Acts of Parliament that are relevant to residential property leasehold management:
Landlord and Tenant Act 1985
Landlord and Tenant Act 1987
Leasehold Reform, Housing and Urban Development Act 1993
Housing Act 1996
Commonhold and Leasehold Reform Act 2002
The provisions of The Commonhold and Leasehold Reform Act 2002 are now being progressively brought into force stages. Among the many changes the Act brings in to effect, is the introduction of a new Right to Manage (RMT). This enables leaseholders of flats, subject to qualifying rules, to take over collectively the management duties of the building without having to prove fault on the part of the freeholder or pay any compensation. This allows leaseholders to have a greater degree of control over the level of service charges set, and the option to appoint their own managing agents and select insurers.
The new Act is being progressively implemented and disputes are to be brought before the Leasehold Valuation Tribunal. Interpretation of the legislation will no doubt become clearer as decisions are reported.

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Getting Started.
Property leasehold owners considering a change of managing agent might be discouraged by the thought of having to devote significant and very precious time and effort in securing the benefits offered by new managers.
At VFM we set out to ensure this process is made as simple and easy as possible for our prospective clients. We recognise that certain fundamental issues will require client input however by obtaining information directly from the previous agents we aim to minimise the need for unnecessary client involvement in the handover procedure.
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