Typically, when a flat is purchased by a first-time owner, the excitement and intricacies of such a move can result in the fine print within a lease agreement being overlooked. Similarly, this can also apply to leaseholders who have owned a flat for many years. On the surface, the terms are straight forward regarding ownership, but can be less clear-cut when it comes to the maintenance responsibility of the leaseholder. This would be covered under the section of a lease known as ‘the demised premises’ and will outline the parts of the specific property and the building structure that are included. Reference is usually made to a ‘marked plan’ to highlight the areas described. This is a very crucial part of a lease document for a leaseholder to understand when it comes to repairing and maintaining their property during the term of their ownership.

 

Key points to look out for are:

Windows/Doors:

The front door and frame of a flat is considered part of the demise of the property and will be the responsibility of the leaseholder to repair, maintain, and replace during the term of their ownership. For windows, responsibility will be split between the glass which is usually down to the leaseholder, and the frames and fittings which the landlord is responsible for. However, this set up can vary from lease to lease and close attention needs to be paid to the wording here, so leaseholders are aware.

Services for Water/Electricity/Gas:

Included within the demise will be the free right of passage and running of electricity, gas, water, and soil to and from the ‘demise premises’ via all water tanks, sewers, drains, gutter, pipes, wires, cable ducts and conduits in or under any part of the property for the above that exclusively serve the specific property. An example of this would be the electricity or gas supply to a flat , the leaseholder would be responsible for the maintenance or repair from the flat up to the meter, while the landlord would be responsible for the maintenance or repair for the pipes/wiring from the meter to the supply source/grid.

Storage/Garages/Parking:

The demise will also outline if a specific property comes with the exclusive use of an allocated parking space, garage or storage space. This should be highlighted within the ‘marked plan’ in the lease to support. While a parking or storage space may be available within a building for a leaseholder to access, if this is not included in the lease for a flat, then the leaseholder can have no claim to ownership or exclusive use for the above.

Ceilings/Voids:

The demise of a flat will include the floors and any joists and beams on which such floors are supported and laid up to the ceiling but, excluding any joists and beams to which the ceiling is attached. If a top floor flat, the void space between the ceiling and the roof will be remain within the ownership of the landlord.

 

Service Charges Explained

A common area of misunderstanding for leaseholders both old and new are the costs which make up their contributions towards the maintenance of, and services provided for their building. The service charge is not a fixed amount that stays the same year in year out, but rather can vary depending on the services required for the building and reviewing the level of expenditure that has taken place over a set period. For a new building where, there has been no previous years of expenditure level of buildings of similar size and grounds.

Service charges are apportioned according to the terms of an individual lease and this is the first place a leaseholder should check to confirm their contributions to the costs of running the building are correct. Contributions can be apportioned according to the square footage of a flat, the number of bedrooms in a flat, or location, e.g. a ground floor flat may not contribute towards a building’s lift as they make no use of it. This would be clearly outlined in the lease for a flat and is the basis on which a landlord calculates, and issues demands for the service charge to a leaseholder.

Each individual building operates on a financial year calendar that can vary depending on the set up, this could be 1st January to 31st December, 1st April to 31st March, or 1st July to 30th June. Also, the frequency of service charge demands issued will be highlighted within a lease document and this is usually quarterly or half-yearly. The financial year will dictate the service charge cycle for a building in terms of when an annual budget is set and published to leaseholders, the dates for when service charge demands will be issued during the financial year, and when the year-end accounts are audited and published to leaseholders.

 

Please see below a step by step guide to the service charge cycle:

• An ‘estimated budget’ for the forthcoming year is set and this is based as closely as possible on the ‘actual expenditure’ incurred over the previous year. This is in order to ensure that adequate provision is made for the services and maintenance required for a building and that costs are managed properly. Estimated budget published and service charge demands issued according to the frequency outlined in lease.
• At the end of the financial year, expenditure is reviewed and audited in order to produce the year-end accounts. This will result in either a ‘surplus’ or a ‘deficit’ for the year end accounts. A surplus is if expenditure came in under the estimated budget and a deficit is if expenditure came in over the estimated service charge budget.
• An additional demand will have to be issued to leaseholders in the form of a ‘balancing charge demand’ in order to recover the ‘deficit’ amount. If there is a surplus, the lease will dictate whether this should be credited back to leaseholders in the form of a ‘balancing charge credit’ or can be retained within the Service Charge by the landlord for future expenditure.
• The landlord needs to publish the year-end accounts within 18 months of costs being incurred in order to be able to recover any resulting deficit from leaseholders.