Fed up of being ripped off and trapped by your freeholder? Take control of your property

Fed up of being ripped off and trapped by your freeholder? Take control of your property

All too often I hear of leaseholders frustrated by the actions - or inaction - of their freeholder of their flat, or their managing agent. This is often compounded by large or often increasing service charge demands.

“The Agent cannot be trusted: they have already overcharged us by £27k...”

“The Agent’s fees are half of our service charge”

“They wanted £80,000 for the external redecoration when we got a quote for £6,000”

“The cleaners never actually turn up and when they do, they do not do a good job”

Most people in this situation feel they have no other option other than to just sit back and take it. Occasionally people will fight charges using the Property Tribunal service, but they often get worn down by the sheer weight of bureaucracy, or they simply do not understand how to bring a good case together, or they just worry about the financial implications if they lose.

My advice is.... don’t just sit there and take it, and don’t fight it either. Instead, take control of your property if you can. This enables you to focus on the future, to a time where you and your fellow leaseholders set the level of service charge, do the work you want, employ the managing agent you want, and most important, make the communal property more an extension of your home.

A recent survey by Urban Owners Limited showed that on average leaseholders saved up to 30% on their service charge bills by taking control.

Average savings per flat per year

Cost Annual Average saving (%)
Insurance 32%
Management Fess 32%
Repairs & Maintenance 26%
Cleaning 24%
Grounds Maintenance 38%
Miscellaneous* 27%

*Legal services, bank & accountancy charges, utilities, security and lifts

There are three ways to take control.

First, if your lease has a management company separate to the freeholder, you will find often you are a member of this company and can become a Director. Once a Director you then take control – with your fellow Directors – of the day-to-day decisions on how your property is run. Often freeholders will not publicise this, or the current Directors are linked in some way to the freeholder/ management company and not making decisions in all the leaseholders’ interests. If this situation exists, this is the best mechanism to start taking control.

Second, if you live in flats and greater than 75% of your property is used for residential use, Right To Manage or Collective Enfranchisement can be available to you. These are legislated processes where if you can bring 50% or more leaseholders together, you can formally give notice to the freeholder, and you as leaseholders effectively take control of the building. With Right To Manage, a company is created of which you are members and it takes over all management responsibility, but the ownership of the leases and communal property remains with the current freeholder. With Collective Enfranchisement, a company is created of which you are members and it forces the purchase of the leases and communal property from the existing freeholder and hence you take over management as you then effectively own the freehold.

Right To Manage is cheaper to achieve than Collective Enfranchisement, but you will have to keep on paying ground rents and paying for lease extensions, whereas with Collective Enfranchisement you can effectively vote to stop paying ground rents and extend your leases for nothing. Right To Manage will likely start at £100-£150 per participant and tops out at about £500 per participant, whereas Collective Enfranchisement will likely start at £3,000 to £5,000 and can be much higher depending the length of the leases in the property.

Thirdly, if none of the above applies, it is less easy to take control. But there is one option left where the freeholder and agent can be proven to not be managing your property appropriately. With this option, you as leaseholders apply to the Property Tribunal for Appointment of a Managing Agent. You have to present evidence of the failings of the current situation and nominate a managing agent you like, and, if the tribunal agrees with you, they will appoint the agent over and above the freeholder’s agent to manage the property on your behalf. The agent however works for the tribunal more than yourselves, so it may lead to a better situation, but not necessarily one you are totally in control of.

Fed up of being ripped off and trapped by your freeholder? Take control of your property Managing Director
Urban Owners Limited
Date: 9 September, 2016
Author: Steve Wylie
Urban Owners Adler Insurance Group Bishop & Sewell LLP Solicitors 4Site Consulting