Leasehold Information | Property Leasehold | Residential Lease
Leasehold property is a quite unique arrangement peculiar to England and Wales and is not widely understood by those who are not involved with properties in blocks of flats.
Many flat owners and property leaseholders are unsure of the details and may therefore benefit from the following leasehold information which also identifies the names of the various parties to the property leasehold arrangements along with general residential property leasehold information.
This page contains useful leasehold information for residential freehold and leasehold property, lettings, managing agents and related real estate management information.
Leasehold Information : Who is Who in a Block of Leasehold Flats?
Freehold and leasehold information can be confusing for those not familiar with the various terms regularly referred to in property jargon used by solicitors in legal notices and conveyancing.
Freeholder – The Freeholder owns the land on which the building(s) is built. and is ultimately the owner of the main structure and fabric of the building. The Freeholder may also be referred to as the Landlord or Lessor and is a separate entity to the property leaseholders. The Freeholder is sometimes said to have a “reversionary interest”. This just means that the freeholder has the right to take possession of the property on expiry of the lease term.
Landlord – either owns the building (as freeholder), has a long lease on it, or is a 3rd party under the lease with obligations to manage the building and provide the services under the service charge. The 3rd party is most commonly a Residents’ Management Company formed of leaseholders.
Head Lessor – the landlord may grant a lease of the whole building to a party (company or individual) who then grants ‘under leases’ to the leaseholders of individual flats. In this scenario, the Head Lessor becomes the landlord of the individual flats.
Freehold Company – a company that owns the freehold. The shares in the freehold company are commonly collectively owned by the leaseholders. Leasehold information often describes the leaseholder as ‘having a share of the freehold’.
Residents’ Management Company (RMC) – a company set up to deliver the services on behalf of the landlord under the terms of the lease. The company is a party to the lease (as landlord) and all leaseholders are usually shareholders.
Right to Manage Company (RTM Co) – Right to Manage(RTM) is a legal right for qualifying leaseholders of a property to manage their own building. The RTM is exercised through a special company set up by the leaseholders for that acquisition.
Leaseholder – the person who has bought a lease for a long period which gives them the right to occupy their flat for a fixed number of years (“the term”), usually well in excess of 21 years and often as long as 999 years when originally granted. A Leaseholder may also be called a ‘lessee’, ‘ or owner’, but confusingly, leasehold information usually refers to the leaseholder as a ‘tenant’ under the property lease or in legislation.
Residents’ Association – a group of leaseholders may form a residents’ association (RA) which can help to strengthen their position through collective representation. A RA is not a party to the lease and therefore will not be named in the lease document. A residents’ association (which is an informal representative body of leaseholder owners and sometimes tenants) is different from a RMC (which is a formal, legal entity) even though the body of its membership may be similar or identical.
Managing Agent – a company appointed by the landlord to run and manage the building and any services. Whilst duties may vary, the managing agent will usually collect service charges from leaseholders which must be undertaken strictly in accordance with the terms of the lease. The service charges will include “Management Fees”, which are the agent’s fees for this service. This is usually only a very small element of the total service charge. The Managing Agent is employed by either the Freeholder, the landlord or the RMC etc.
Property Manager – the person who actually manages the building, usually an employee of the Managing Agent.
On site staff/caretaker/porter/
Tenant – if the leaseholder sub-lets their property on a short term tenancy (usually on an assured shorthold tenancy or AST), the occupier is referred to as a tenant. Their tenancy agreement is for a minimum of 6 months but can be for several years. Some leases do not allow sub-letting and many require that the leaseholder must register their tenant with the Freeholder or Managing Agent.
Common Parts – Leasehold information refers to common parts as those areas of the building which may be used by other leaseholders such as stairwells and hallways not forming an exclusive part of any individual flat.
First Tier Tribunal (Property) – part of the formal courts and tribunals system where judgements are made about service charge disputes.
Lease – An essential element of your leasehold information forming a private contract between the leaseholder and the property landlord which sets out the rights and duties of both parties. Your lease will allow you to occupy the property for a fixed number of years: typically for 99 or 125 years when first granted.
Manager – may be a named party to the lease, a managing agent or may be the landlord managing the property directly with their own staff.
Reserve Funds/Sinking Funds – money collected towards future major works and replacements. Held in trust, on behalf of the building, to ensure money is available when the works are required.
Ground Rent – the annual charge payable to the freeholder for the continuing right to occupy the property. The amount payable will be set out in the lease. It may only be a nominal amount (“a peppercorn”) or it may be reasonably substantial.
Service Charges – Service Charges are monies collected to maintain the structure of the building and common parts and cover the cost of any services provided. These include; repairs, cleaning, lift servicing, gardening, on-site staff, utilities, managing agent’s fees, in fact any service that is provided under the lease.
Service charge year – the lease will state when the service charge year starts and ends. It will also state what accounting information the landlord should provide at the end of the service charge year.
Term – Your lease will allow you to occupy the property for a fixed number of years: typically for 99 or 125 years when rst granted. This is known as the term. The remaining right of occupancy reduces year by year from the date when it was originally granted.
Demise – That part of the building forming the flat which, under the lease, the leaseholder is responsible. The boundaries of the demise which form the flat are carefully described and often include the main front door and any services which are for the sole use of that flat. Windows may be included or excluded and sometimes the glass only is the leaseholder’s responsibility.
A copy of the ARMA Handbook for leaseholders is available by clicking leasehold.