13. Determining responsibility for building management
Determining responsibility for building management in a leasehold property is a critical aspect of property ownership that significantly impacts the living conditions and financial obligations of leaseholders. This responsibility can be allocated in several ways, depending on the terms outlined in the lease agreement.
| Freeholder retains management responsibilities | In some leasehold properties, the freeholder, who possesses the ownership of the freehold, retains direct responsibility for building management. This role includes overseeing property maintenance, arranging insurance coverage, collecting ground rent from leaseholders, and making decisions related to property management. Leaseholders pay service charges to the freeholder to cover the costs associated with these management responsibilities. |
| Management company specified in the lease | Alternatively, the lease agreement may designate a management company to assume various aspects of building management. This management company takes on responsibilities for maintenance, repairs, insurance, and other services stipulated in the lease. Leaseholders typically pay service charges directly to the management company, and the company is tasked with ensuring the property is properly maintained. |
| Exercise of the Right to Manage (RTM) | Leaseholders have the legal right to exercise the Right to Manage (RTM), a process that empowers them to take control of the building's management. To implement this right, leaseholders can establish an RTM company, which takes over the management functions from the landlord or freeholder. The RTM company assumes responsibility for tasks such as building maintenance, service charge collection, and decision-making on behalf of leaseholders. This process allows leaseholders to have a more direct role in managing the property, potentially leading to increased transparency and cost efficiency. |
| Consulting the lease agreement | The lease agreement stands as the definitive document that outlines who bears responsibility for building management. It specifies the roles and obligations of the freeholder, management company, or any other entity involved in property management. Leaseholders should conduct a comprehensive review of the lease agreement to gain a clear understanding of who is responsible for various aspects of building management and the related financial commitments. |
| Service charges and ground rent | Service charges, distinct from ground rent, are fees that leaseholders typically pay to cover the expenses related to building management services. The specific charges are based on the responsibilities laid out in the lease agreement. Ground rent, conversely, is a separate payment made to the freeholder for the use of the land upon which the property is situated. |
| Legal protections and rights of leaseholders | Leaseholders possess specific legal protections and rights in the context of building management. These rights encompass the quality of services provided, access to information, and mechanisms for dispute resolution. A comprehensive understanding of these rights is essential for leaseholders to guarantee that building management is conducted transparently and fairly. |
| Professional advice | Engaging with legal and financial professionals who specialise in leasehold properties can be invaluable for leaseholders. These professionals can offer expert guidance on comprehending the complexities of lease agreements, facilitating the Right to Manage process, and addressing any concerns or disputes linked to building management. |
Determining the responsibility for building management in a leasehold property is a multifaceted process with significant implications for leaseholders. The allocation of this responsibility can involve the freeholder, a designated management company, or the establishment of an RTM company by leaseholders themselves. It is essential for leaseholders to carefully review their lease agreement to ascertain the specifics of their property's management structure, related costs, and their associated rights and obligations. This comprehensive understanding is pivotal for effective property management and adherence to the lease's terms and conditions.