We thought it would be useful to provide definitions to the most common property-related words and phrases that we come across. The legislation surrounding many of these terms is complex, and our definitions are simplistic summaries, so further advice should be sought where necessary.
The Association of Residential Managing Agents (www.arma.org.uk ) is the only residential leasehold block management association in England and Wales. They offer a wealth of guidance and advice to their members, and in turn our clients and the leaseholders of the properties currently held under our management benefit from this database and expert knowledge.
When a leaseholder has not paid their Service Charge on time as stipulated by the terms of their Lease, they are said to be ‘in arrears’. If you are a leaseholder of a property currently held under our management and you are experiencing difficulties in making payment, please contact us as soon as possible.
Transfer by the original Leaseholder (the assignor) to the new Leaseholder (the assignee). Note that the original Leaseholder can still be obligated under certain circumstances unless expressly released by the Freeholder. Notices of Assignment are typically prepared by the solicitors acting for and on behalf of the assignee upon completion.
Typically prepared on an annual basis, the budget is the expected expenditure in the building over the forthcoming financial year. The budget is then portioned among leaseholders under the appropriate apportionment details in their Leases. Actual spend during the year at a property is closely monitored compared to budget. At the end of the year there is likely to be either a Surplus compared to budget (less money was spent than anticipated) or a Deficit compared to the budget (more money was spent than anticipated).
Companies House is the register of all companies in England and Wales. Company related matters are dealt with under the Companies Act 2006. The main purposes of Companies House are to incorporate and dissolve companies, examine and store information under the Companies Act 2006, and make the company information generally available to the public.
The person responsible for the administration of the company, especially in terms of legal and statutory requirements. The Company Secretary ensures that documents are filed in a timely manner, and kept fully updated, at Companies House. The Company Secretary could be a leaseholder in the property, the managing agent or a specialist firm.
When less money has been collected during the period than has been spent there is said to be a ‘deficit’. This is typically covered through cash in the bank initially and recovered from leaseholders with the subsequent period’s service charge. Details of this are typically spelt out in your lease.
Energy Performance Certificate. Since October 2008 it has been required to have an Energy Performance Certificate (commonly called an ‘EPC’) whenever your property is rented out. This is part of European legislation to tackle climate change and reduce carbon dioxide emissions. The report grades buildings from A (most energy efficient) to G (least energy efficient) and suggests possible improvements that can be made to improve your property’s energy rating.
A legal term used to describe a part of a freehold property which overhangs or is under part of another property. Typical examples include balconies overhanging other properties or rooms in older terraced houses which may overhang rooms in adjacent houses or common parts of the building.
A legal term traditionally used to describe land and everything built on it and owned in perpetuity. If there is any time element associated with the ownership, however long that might be, the ownership is not freehold.
The individual or company owning the freehold to a property.
A term used to describe buildings of exceptional interest in England and Wales. Only 2% of buildings are listed, and only about 2.5% of those are Grade I.
A term used to describe buildings of particular importance in England and Wales. Only 2% of buildings are listed, and only about 5.5% of those are Grade II*.
A term used to describe buildings of special interest in England and Wales. Only 2% of buildings are listed, and about 92% of those are Grade II.
Rent payable by the leaseholder to the freeholder for the land on which the building sits. This provides an income to the Freeholder (so is not payment for any services provided) and the level of ground rent is set out in the Lease. Often, ground rent payable escalates over time, typically increasing every 25 years or so.
A lease between a tenant and a freeholder where contractual rights and responsibilities for the building are given to one tenant. Further long leases are usually granted by the Head Lessor to leaseholders. This situation occurs quite regularly with blocks of flats.
A contract whereby a tenant pays a landlord, or leaseholder pays a freeholder, for the right to use a property. Leases can be of short or very long duration. Leases are complex documents and specialist legal advice should be sought if you are considering entering into a lease. A lease typically requires rent to be paid (otherwise the contract is usually referred to as a Licence), although this does not have to be a commercial rent, with a peppercorn rent often sufficing.
A leasehold to a property is the right to use a piece of land for a given period of time subject to certain conditions and (usually) subject to payment of a ground rent.
The individual or company owning the Lease to a property.
These are buildings listed on the Statutory List of Buildings of Special Architectural or Historic Interest. There are currently three categories of listed buildings in England and Wales ranging from Grade I with greatest significance through Grade II* to Grade II. Only 2%of the buildings in England and Wales are listed and the vast majority of these are old buildings – for example, most buildings built before 1840 are listed.
Leasehold Valuation Tribunal, a body established to resolve Leasehold-related disputes without the need to go to court to settle it. The LVT is an independent legal body whose decision is legally binding. The LVT typically deals with disputes regarding Service Charges, appointment of a Manager and Receiver for a property, building insurance, acquiring the Freehold estate or varying or extending a Lease.
Plymouth Block Management! A managing agent performs most of the daily duties of running a property under the appointment, direction and control of the nominating party, whether that is the Freeholder, RMC, RTM or developer. Often the appointment of a Managing Agent is covered under the terms of the Lease. A Managing Agent takes many of the pressures of running the building away from the Freeholder and / or Directors of the Company, allowing them to enjoy their home or investment.
Managing Agent Enquiries
This is the set of questions raised by a purchaser’s solicitor on sale of a property.
A dividing partition erected along the boundary between two properties providing common support to the building on both sides of the partition. The owner on each side of the dividing line has rights to enter the other property in order to repair or maintain their building or the wall. The legislation surrounding party walls is complex and specialist advice should be sought if necessary.
A nominal or inconsequential rent set out in a lease in order to show that a commercial transaction exists.
Residents Management Company is the type of company that residents in a property typically establish in order to run the building themselves. This may be enshrined in the lease or it may have come about as a result of legislation. The RMC is typically tasked with running the building, enforcing the covenants of the lease, often appointing a managing agent to act on their behalf in performing the day to day functions of running the building. The business is run for the benefit of the tenants or leaseholders and not for profit. Directors and the Company Secretary are often sourced from leaseholders in the property.
Right to Manage. Under the Commonhold and Leasehold Reform Act 2002, the Leaseholders of a property have the right to form their own company and take management of the building away from the Freeholder. There are certain conditions that have to be satisfied in order to achieve this. The reasons typically stated for going through the right to manage process are either to reduce service charge and / or to control the appointment of the managing agent.
A consultation process under which leaseholders must be consulted if any works in the building are anticipated which are expected to cost more than £250 (including VAT) for any one Leaseholder in the property. If consultation is not undertaken, the maximum that the landlord may legally be able to recover is £250 per Leaseholder. Qualifying long-term agreements, that is agreements of more than 12 months in duration, are also covered under the Section 20 consultation process. This is a complex area of property legislation and specialist advice should be sought if necessary.
The service charge is the charge made to leaseholders by the landlord for providing services to the property. It typically includes things like provision of on-site staff, payment of insurance, repairs and maintenance, communal utility supplies, maintenance contracts in place at the building and managing agent fees. The Service Charge timing and method of payment, and what can be included in the Service Charge, is usually set out in detail in the Lease and its associated schedules. In most modern leases, Service Charge is collected in advance of expenditure so that the landlord is not out-of-pocket in providing the services. However, we do occasionally still see leases where the Service Charge is collected in arrears – that is the landlord recovers the funds after he has incurred the expense of providing services to the building.
Service Charge Demand
The service charge demand is the document which sets out the service charge that each leaseholder has to pay in the current period. There is a proscribed format that Service Charge demands need to follow. It will typically include a cover letter explaining the budget, a copy of the Budget, an Application for Payment and notices in the proscribed format.
When more money is collected in service charge than has been spent during the period, there is said to be a ‘surplus’. This is often either retained in the bank account or returned to leaseholders with the subsequent service charge demand. Further details are likely to be set out in your Lease.
The nature of ownership of a piece of land, which determines whether an occupant is an owner or a tenant. Freehold and leasehold are examples of tenure that land can be held under.
A term used to describe a very long leasehold interest (often 999 years). In this situation, the Lease is worth the same as the freehold interest in the property, hence the term ‘virtual freehold’.
Sales and transfers
We understand that selling your property can be an incredibly stressful time; at Plymouth Block Management we have set procedures in place to ensure that, from our side, the sale of your property completes as efficiently as possible.
Once a sale has been agreed we will receive a set of questions from your Solicitors as raised by the Buyers Solicitors; these are known as Managing Agent Enquiries. Each set of Solicitors’ enquiries are unique and we answer all enquiries on an individual basis rather than providing a standard ‘sellers pack’ in order to ensure your sale proceeds as smoothly as possible.
Some examples of typical information requested from us include the following:
- Up-to-date copy of Buildings Insurance Schedule and Policy Wording.
- Last three years’ Statutory and Service Charge accounts
- Copy of Service Charge Estimate for the current financial year relating to the Building
- Tenant Statement of Account for the property
- Details of any Reserve / Sinking Fund
- Details of any planned major works (i.e. internal and external repairs and redecorations)
- To whom the Notice of Transfer and / or Charge is to be served upon following completion and details of any registration fee payable
- Whether the Buyer will be required to enter into a Deed of Covenant and if so, details of any registration fee payable
- Whether the Seller holds a Share in any Management Company / Freehold Reversion and if so, how this is to be transferred to the Buyer upon completion
- Latest Fire Risk Assessment for the Building and confirmation that the recommendations noted therein have been fully complied with
- Asbestos Survey for the Building including details of any remedial works undertaken if the Building was found to contain Asbestos Containing Materials (“ACM’s”)
There is a standard charge for providing comprehensive replies to enquiries which is currently £480.00 (including VAT); upon receipt of cleared funds from either you directly, or via your Solicitors, we endeavour to provide full replies directly to your Solicitors within 48 hours. Should there be any follow up enquiries raised by the Buyers Solicitors arising from our initial replies to enquiries, we will endeavour to answer these in full within 48 hours and at no extra charge!
Letting your property
If you are considering sub-letting your property we would strongly advise that you review the terms of your Lease to check what requirements you are obliged to follow; most Leases will contain mechanisms to regulate and control sub-letting and as with many Leases, the following terms and conditions may apply:
- Not to sub-let part only of the Flat as distinguished from its entirety.
- Not to sub-let the whole of the Flat to a Housing Association or Local Authority or any other body whose objects include the provision of housing accommodation.
- During the last seven years of the term of the Lease not to sub-let without the previous consent in writing of the Landlord.
- Within one month of any Tenancy Agreement being entered into, to provide a copy of the Tenancy Agreement to the Landlord and / or the Management Company together with any registration fee payable as specified under the Lease.
It is also important that any prospective sub-tenants enter into a Deed of Covenant promising to abide by the key covenants and regulations of the Lease or ensure that their performance of these covenants and regulations are written into any Tenancy Agreement – failure to do so could be detrimental to you and leave you liable if there is any issue regarding a breach of Lease by your sub-tenants. Every situation is different and if you are unsure what you are required to do to fulfil your obligations as Landlord under the terms of the Lease, please contact us, will be happy to advise you of your obligations to ensure that you follow the covenants of your Lease.
Paying your service charge
The frequency of payment of your service charge will be set out in your Lease. This will typically be monthly, quarterly, semi-annual or an annual payment. We are obliged to collect your service charge at the same times as indicated in the lease.
We can accept payment by a variety of means:
- Standing orders or BACS payments
- Debit card (no charge)
- Credit card (2.5% surcharge to cover credit provider’s cost)
‘Listed buildings’ account for about 2% of properties in England and Wales. These are buildings listed on the Statutory List of Buildings of Special Architectural or Historic Interest.
A summary of the three categories of listing is:
- Grade I – buildings of exceptional merit comprising around 2.5% of listed buildings
- Grade II* – buildings of particular importance comprising about 5.5% of listed buildings
- Grade II – buildings of special interest comprising about 92% of listed buildings
If you wish to make any modification to a listed building, you will need to apply to the relevant local planning authority to obtain Listed Building Consent. Control of listed buildings falls under the remit of local planning authorities and the Department for Communities and Local Government. Undertaking unauthorised work to a listed building is a criminal offence and the owner can be forced to undo any work undertaken at their own expense.