Frequently Asked Questions

FAQ Subjects

General
Disputes
Banking
Budget
Insurance
Legal
Contractors
Freehold Purchase And Collective Enfranchisement General
Freehold Purchase And Collective Enfranchisement Qualification
Freehold Purchase And Collective Enfranchisement Process
Freehold Purchase And Collective Enfranchisement Price
Freehold Purchase And Collective Enfranchisement After Purchase
Lease Extension
Lease Extension Qualification
Lease Extension Process
Lease Extension Price
Right To Manage
Leasehold Service Charges And Reserve Funds
Leasehold Ground Rent
Leasehold Maintenance And Insurance
Leasehold Rules And Restrictions Of A Lease Covenants
Leasehold Other Residents
Leasehold After Purchase
Leaseholder Disputes, Complaints Procedure, Breach Of Lease, Response Times
Client Money, Interest, Bank Accounts, Client Accounts
Service Charge Budget, Reserve Plans, 10 Year Plans, Major Works
Insurance, Insurance Claims, Loss Adjuster
Legal, Rules, Regulations, Memorandum & Articles, Lease Covenants, Management Agreement
Contractors, Maintenance, BACS
Service Charges, Reserve Funds, Ground Rent, Direct Debits, Credit Control

General

How many years have you been in the property management business?: 10 years. Although our founder directors have previously practiced property management for many years prior.
How many staff in your company are involved with property administration?: 20+ people.
What length of notice period do you require?: 3 months to terminate an agreement & 1 month to set up a new site. This will be timed to coincide with the next available service charge collection date specified in the lease.
What does a bank reconciliation entail?: A bank reconciliation is a routine check that should be carried out on any bank account to ensure that the cheques written leave and clear the account and that cash paid in is received by the bank. Monies that have not been received (i.e. perhaps lost in the banking system) must be deducted from the cashbook ledger and the payee pursued for duplicate funds. Cheques posted to the cashbook ledger which remain uncleared should be physically stopped and/or a replacement cheque issued.
What is a certificate of compliance?: A certificate of compliance is a document required by the Land Registry to confirm that all the covenants of the lease have been complied with. This is required if a restriction against transfer is registered the title register and no conveyance can be completed on such affected properties without the necessary certificate of compliance. A certificate of compliance is usually provided by the person in charge of the ownership registers.
When can a company be dormant?: A company can be dormant when it does not trade. In a property context definition not trading is that ground rent is not received, no assets are bought or sold and that no interest is received to the company as principle. As the SMSU operates your management company through a "client account" the money is deemed to be held in trust and therefore the company has no transactions in its own right. A dormant company takes certain benefits such as being able to fund simplified accounts and can therefore be cheaper to run.
What are debentures?: A debenture is statement of a sum loaned to the company and how it will be paid back. Debentures may also impose a 'floating charge' over the assets of the company or a fixed charge. A copy of any debenture must be kept at the Registered Office. A copy must be sent to Companies House within 21 days of issue.
What is a deed of covenant?: A deed of covenant is essentially a promise. It is a promise by the buyer of a lease to abide by the covenants stated in the lease and if usually entered into as a condition of any sale in the lease post the original first sale.
What is a Licence to Assign?: A Licence to Assign is in simplist for permission to sell the property in question. Licence to assign is granted by the Freeholder to the current Leaseholder. Where a lease requires a Licence to assign before the lease can be sold it would be a breach of lease to sell the property without such consent.
What is a special resolution?: A Special resolution would be required for any change to the Company Memorandum and Articles of Association. Such motions must be passed by a 75% majority.
Where and how do you keep service charge monies? How are they administered and who receives any interest?: All client funds are held in interest-bearing client accounts administered in accordance with Royal Institution of Chartered Surveyors (RICS) Client Money Protection Scheme. All interest accrues to the leaseholders. All accounts are managed according to the RICS Code of Practice for Residential Managing Agents and are reconciled every 5-6 weeks.
What is an annual general meeting?: An annual general meeting AGM is a meeting that is required by the Companies Acts to present the accounts to the shareholders of the business, approve accounts, elect/re-elect directors, appoint and set the remuneration of the auditors. An AGM must be held within 15 months of the last AGM, unless the company has unanimously adopted the de-regulation package of the 1989 Companies Act.
When is an annual return required?: An annual return is required every year annually on the birthday of the company i.e. the anniversary of the date on which the company was incorporated.
What is an annual return?: An annual return is the name used for Form 363 that is required to be submitted to Companies House annually to register the directors, company secretary and shareholders of the company on the anniversary of the date the company was created. This is a requirement for all companies including resident management companies or right to manage companies.
What is an extraordinary general meeting (EGM): An EGM can conduct much the same business as an AGM and can be called at anytime.
What is an Elective Resolution?: An Elective Resolution would be required to change the activities of the Board. Typical resolutions include dispensing with AGMs, dispensing with the obligation to lay accounts before an AGM, Altering voting rules.
What is an Extraordinary Resolution?: An example of an Extraordinary resolution would be a resolution to wind up the Company.
What is an ownership register?: An ownership register is the legal register of who currently owns the lease at a certain point in time. A lease will always set out the original parties when it was first created, thereafter the lease is (assigned) to each subsequent purchaser. It is the registration of each "transfer" that is key to effective management.
How do I go about making alterations to my property?: Contact the SMSU Legal Services team who will advise further. Factors to be taken into account is what is permitted by the lease, are the proposed alterations structural, what possible harm could be caused if they were not carried out effectively.
What are dormant company accounts?: Dormant company accounts are simplified accounts that can be sumitted to companies house to fulfil the legal obligation to file annual accounts. In simplist form dormant company accounts for a non trading company comprise the balance sheet (statement of assets and liabilities). For a resident management company this may be the share capital only.
What is forfeiture: Forfeiture is essentially an action to terminate a lease in accordance with the Landlord and Tenant Act 1954. Since February 2005 for residential properties it is a requirement to first seek sanction that the proposed act you intend to rely on to forfeit a lease is a "breach of covenant" without first seeking this sanction any forfeiture action would be invalid.
Do we have to hold AGMs?: It is possible to de-regulate a resident management company so that AGM's are not held. Even if the 1989 Companies Act de-regulation package is adopted any leaseholder can call an Extraordinary General Meeting EGM to discuss any business that would otherwise be discussed at an AGM. The de-regulation package must be unanimously adopted.
How many clients do you have?: More than 4,500.
Does the proximity of your offices to our site affect the service we will receive?: No, contractor performance is managed by your job satisfaction forms and our annual review.
Do you offer an out of office hours service for emergencies? If so please provide details.: No, not unless you migrate to full 24/7, 365 day block management.
What means do you use to collect service charge?: Our in-house Legal Services team monitor the collection of service charges. Arrears reach the litigation stage within the quarter in which they are billed.
What if the defaulting tenant lives outside the UK?: Our legal Team may be able to secure UK jurisdiction. Good management of ownership registers would seek a service charge deposit from an overseas buyer.
What quality control procedures do you apply to your panel of contractors?: Performance is managed by checking contractors/public liability insurance, checking references, logging your satisfaction each time you instruct us to pay a contractor and managing customer service issues. We are part of an ISO9000 accredited company with many years experience in handling contractors and property repairs.
What is the reserve fund for?: Reserve funds are built towards future cyclical expenditure (such as the replacement of the lift of the re-covering of a roof and/or general block redecoration). Collecting a reserve fund helps spread costs as the due date approaches. Only if the lease allows should a reserve fund be used to fund the cost of routine services. Legislation assures that the money held in the reserve fund is held on trust. At the SMSU reserve funds are held in your own private interest bearing Client account. The interest accrues to you the lessees collectively.
What is service charge?: Service Charge is the term used for the funds collected from lessees for day to day service charge items. It is collected on the due dates specified in the lease.
How can we become exempt from a CT600 service estimate corporation tax return?: Since the Self-Assessment for tax legislation was brought in many resident management companies have suddenly been presented with corporation tax returns. Because an SMSU supported management company or right to manage company will generally be a non-profit making, not trade in its own right, and as service charge revenue will be below the taxable threshold a corporation tax return exemption can be claimed. If granted this generally lasts for a 5 year period. The SMSU's Legal Services team can lodge a request with the Inland Revenue for a waiver.
What is a register of directors/members and shareholders?: This is a simply a register of who is control of the company i.e. the directors and should reflect the records held at Companies House as any appointments or resignations have to be referred to them by completing them a 288A form.
What if the defaulting tenant lives outside the EU?: Usually jurisdiction is allowed in the country of residence of the defaulting Tenant. However, if our legal team is able to serve the Defaulting Tenant while they are in the UK we will do so. The alternative is to apply for special jurisdiction which would be time-consuming and costly. Given this, the ideal is to serve a Section 146 Notice to the tenant but this can only be done with full DirectorsÕ approval and would necessitate (post February 2005) to be a sanctioned by the Leasehold Valuation Tribunal first.
How do you deal with complaints?: We comply with the customer complaints procedures put in place by the Royal Institution of Chartered Surveyors (RICS).
Can you accommodate regular standing order payments for service charges?: We do not support Standing Order payments but do offer Direct Debit facilities. Direct debits post electronically to your ledger where as Standing Order payments are not known to us until a Bank Statement has been received and reconciled. We have to have your ledgers up to date at all times as we cannot protect you from credit control action where payments are in transit or unadvised to us.
How good are you at making contractor payments?: We now operate a weekly BACS run as well as a fortnightly cheque run. We regularly outperform our target of 21 day payment terms, the only real obstacle to this being lack of funds. However this is combated by a) our strict credit control procedures, and b) guiding you on setting budgets that are realistic.
How do you check a contractor invoice is genuine?: We operate a payment authorisation system which requires 2 valid leaseholder authorisation codes to instruct payment on each transaction. We store authorisation codes and contractors invoice dates & invoice numbers to ensure duplicate payments are not made. Contractors are requested to get their job satisfaction form signed off by someone on site which limits potential disagreements.
What financial information is provided and when?: We provide all leaseholders who give us their email address with an interim budget - variance report.
What IT facilities do you have and what information can you record and keep updated?: We use a bespoke property management accounting system which holds the ownership ledgers and individual lessees service charge accounts. We hold an electronic copy of a typical lease for your site and your insurance schedule.
Why do legal fees &court costs appear in our year end accounts?: Whilst it is true that the costs of any legal action or action in connection with the possible forfeiture proceedings are usually recoverable under the lease, the management company or freeholder has to foot the bill whilst the action is ongoing. The costs are then recovered from the lessee in default. At the SMSU, when taking court action, we immediately debit the costs to the defaulting leaseholderÕs service charge account as costs accrue. Often, in fact, this acts as yet another tool in persuading the leaseholder to pay before incurring further charges.
Are you registered under the Data Protection Act?: Yes.
Do your fees carry VAT: Yes.
How do you record telephone support time?: Every phone call is logged and timed to the leaseholders account via our support tracking system.
Can we receive any additional information about leaseholds and property issues in a more general situation?: Yes, we can supply you with a lisyt of very useful property web sites.

Disputes

What help can we receive where there is a dispute amongst leaseholders?: We offer a mediation and dipute resolution service to help overcome most problems.
Can we talk to other people who have experienced similar problems?: Yes, we allow you to participate in a discussion forum to exchange ideas with other Directors experiencing similar problems.
What help can we receive where there is a dispute amongst leaseholders?: We offer a mediation and dipute resolution service to help overcome most problems.
Can we talk to other people who have experienced similar problems?: Yes, we allow you to participate in a discussion forum to exchange ideas with other Directors experiencing similar problems.

Banking

Are our banking details secure?: Yes. You have your own bank account.
How much will such a banking facility cost me?: As long as you are in credit, your banking is all free.
Do we get interest if our Service Charge Accounts are in credit?: Yes.
How do we keep up with all our accounts?: Regular budget reports are sent out to keep you totally up-to-date on expenditure.
How do we keep up with all our accounts?: Regular budget reports are sent out to keep you totally up-to-date on expenditure.

Budget

How do I know how the spending is going?: We supply you with a monthly bank reconciliation.
Is it easy to maintain our legal ownership registers?: Yes, we do it automatically.
How do we keep up with all the things we need to budget for?: We have a service charge calculator which lets you know exactly what is in the service budget.
How do we ensure our service charge is keeping up with all the matters we need to budget for?: We offer a reserves calculator which estimates all future costs and compares it to the reserve fund.

Insurance

Q. How do I go about getting the best insurance rates?: We put you in touch with competitive insurance companies.
Insurance can be expensive. Is there an easy way to pay?: Yes, we can arrange for you to pay your insurance by installments.

Legal

What help do you offer if we are forced to take legal action?: We will put you in touch with a NO WIN NO FEE legal service.
How do we deal with solicitor's enquiries when we are buying or selling ?: At an extra cost, we can deal with the Law Society and put together a sale information pack for you.

Contractors

How do I select the right contractor for repairs and alterations?: We provide a list of quality controlled contractors.
Alterations can be a nightmare. How do I know what we are allowed to do and not do?: We can supply a whole range of information and expert advice on what you can or cannot do with alterations.

Freehold Purchase And Collective Enfranchisement General

What is enfranchisement?

Enfranchisement or Freehold Enfranchisement is also sometimes termed Freehold Purchase. All these terms refer to increasing the value of your flat by collectively with other flat owners buying the freehold of your block

I already own my flat, what is the point?

If you own the lease you do not own the flat. Leaseholds and Freeholds are different rights. When you buy a flat you buy a lease, you buy the right to reside in a part of somebodies Freehold property. It is the freeholder who owns the building, when each lease expires the flats revert to him. He can then create a new lease, redevelop etc.

What are the benefits of enfranchisement?

To make it possible to grant to residents who participate long leases, possibly with no ground rent
To allow the residents to take control of the management. Many Management Companies consult you only when major works are planned. Own the freehold and you can oversee those major works and all other expenditure on your property.
To make it more attractive when you want to sell a flat (the psychological benefit of having a flat with share of freehold)
The freeholder normally has rights to develop the property, for his own benefit. Owning the freehold gives you greater control over proposed modifications to the building
Lower Management charges. In central London, you could pay £225 plus per year per flat just for the property management service. As a Freeholder, you save this money if you manage the property yourselves, or have more control over the Property Managers who now work for you.

Do we need to form a company?

Yes. We recommend a company limited by guarantee which gets rid of the need to transfer shares every time a flat sells. Proposed legislation will stipulate the use what is a Right to Enfranchise company which has a specified structure and constitution.

How do we get ourselves organised?

Form a residents committee.
Appoint key people to drive the matter forward.
Canvass other residents.
Appoint professional representation
To work well the process should be run like a military campaign!

Do we need a binding commitment from participating tenants?

This is recommended. Get a participation agreement in place to bind the participators. Break down the commitment, for example, a preliminary commitment to contribute to the investigative costs. A decision in principle to proceed. A commitment to proceed with the formal acquisition process.

Can I get financial assistance with buying the freehold?

Buying the freehold increases your security of your flat; your mortgage company will more positively consider extending your loan to cover the freehold cost and any associated legal and valuation costs.

I am 1 of 2 flats/maisonettes, I would like to buy the Freehold is that possible?

You may both need to want to buy as 51% need to qualify for a freehold purchase application to be forced. If there are only two flats in a building, both flats must participate. If the other flat wants to participate but cannot afford to do so, you can still acquire the freehold; perhaps by a loan to the other Leaseholder. What matters is that they sign offers and are a beneficiary of the freehold when it is conveyanced. If the freeholder owns one of the flats you will never be able to compel the freeholder to sell a share. If the other flat isn't interested in participating you will not be able to compel the freeholder to sell.

My lease has 80 ½ years unexpired what can I do I am worried about marriage value?

The main reason to press on with enfranchisement sooner rather than later is that marriage value applies to all leases with less than 80 years unexpired. Get specialist advice, serve your notice to fix the valuation date whilst your lease has more than 80 years unexpired. Be absolutely sure your notice is not defective, it could cost you dearly!

Do we need another company or can we use our existing management company to buy the Freehold?

Yes, if every member of the management company participates in the freehold purchase. Else, no you will need a separate company for those participating in the freehold purchase application.

I want to add another storey to my top-storey flat. The freeholder opposes this. Will buying the freehold enable me to make modifications to my property?

Your ability to develop your leasehold property will depend on a number of permissions, (planning, building regulations and the landlord's consent).
Unless you can agree terms, the freeholder will usually be able to use the terms of your lease to prevent you from making substantial modifications to your property.
Buying the Freehold means you would have to convince your fellow flat owners rather than the Freeholder.

I live in a leasehold house. Can I buy my freehold or extend my lease?

Subject to qualification criteria, yes this can be possible.

Is there an alterative to buying the freehold which allows me to extend my lease so I don't put off potential buyers?

Yes. You may qualify and be able to claim a 90 year extension to your lease. If the lease when granted was for a term of more than 21 years, you will probably be able to claim a lease extension.
You will be required to pay for the lease extension and also the reasonable legal and valuation costs of your freeholder. Once you serve Notice claiming your right to a statutory lease extension on the freeholder, you can register this against your title and then sell your flat together with the right to claim the lease extension. If your lease has less than 5 years to run, then your freeholder can refuse to grant an extension on the grounds that he intends to demolish and redevelop the building. You cannot apply for a lease extension if you are trying to enfranchise at the same time.

I'm very unhappy about the cost and quality of the maintenance of my building. However, I don't want to buy the freehold. Is there anything I can do?

Yes, together with your fellow leaseholders, you have the legal right to compel your Freeholder to pass over the management of the building to you, without need to prove fault. Recent legislation has simplified many aspects of the process.
What you need to do is

Establish if the building is qualifies. It must contain at least two flats and at least two thirds of the flats must be let to qualifying tenants. Any commercially-used parts of the building must not exceed 25% of the total floor area. The building/flats must be self contained. Also, check that the leases were for more than 21 years when originally granted
Establish which leaseholders wish to be the original members and officers of the company
Set up a Right to Manage Company - the 2002 Act specifies in some detail how this should be set up and also prescribes the specific wording of the Articles and Memorandum which the company must hold. You cannot simply buy a typical off the shelf company.
Serve notice inviting participation on leaseholders. This form must follow a specific prescribed format.
Serve the freeholder with a Notice of Claim, and register it with the Land Registry.
Receive freeholder's Counter-Notice, either admitting that the RTM Company is entitled to acquire the rights to manage or alleging that the RTM Company is not so entitled and give reasons to support the allegation
If there are no objections then the RTM takes over the management on the date specified in the Notice of Claim (which must be at least three months after the Freeholder is required to submit their Counter-Notice)
If there are objections, the RTM company refers the matter to the LVT and takes over the management three months after the LVT's determination.

In terms of cost, you will be responsible for the freeholder's reasonable professional fees in responding to the transfer. The freeholder will not be able to recover any costs of an LVT hearing on entitlement of the RTM Company to take over the management, except where the Tribunal finds against the RTM Company.

Freehold Purchase And Collective Enfranchisement Qualification

What are the qualifying criteria?

The main criteria are that

The building must be a self contained block of flats (which includes a converted building as well as a purpose built one).
he building must have no more than 25% non residential use.
Two thirds of the flats must be let to qualifying tenants.
A qualifying tenant is one who holds the flat under a long lease, namely one which, is for a term of more than 21 years.
The qualifying tenants of flats comprising 50% of the flats in the building must participate.

Please note that it is no longer necessary for a qualifying tenant to have owned a flat for a minimum period or to have lived in it.

I rent my flat out, but I would still like to buy the freehold. Am I excluded from buying the freehold because I don't reside in the building?

No. Since 2002, the legal requirement that leaseholders seeking to buy the freehold had to be resident in the flat was abolished. Non-resident leaseholders can now participate in a collective enfranchisement.

Freehold Purchase And Collective Enfranchisement Process

We have not been able to make contact with our freeholder and no longer know where he lives. He has never collected ground rent. What do we do?

Don't worry. You can still buy your freehold. You need to apply to the County Court for a decision to have the terms under which you can buy the freehold referred to the Leasehold Valuation Tribunal for determination. The County Court has the power to dispense with the need to formally serve the freeholder with an Initial Notice.
The LVT will hear the case even if the freeholder remains absent and will determine fair terms for the purchase. Once the LVT determine terms, you can apply to the County Court for a vesting order transferring the freehold to you.

Our Freeholder is intending to sell the freehold of our block at auction. Can he do that?

Your Freeholder can sell the freehold at auction provided he has served correct notice on you of his intention to do so. This is because by Law, (Housing Act 1996) in most cases it is an offence for freeholders to dispose of freeholds without first offering it to leaseholders.
Freeholders must generally still serve a section 5a notice on the leaseholders giving them at least 2 months to respond, but instead of quoting a price they can sell the freehold at auction and offer the leaseholders the opportunity of taking the place of the highest bidder at the auction.

Do we have to bid at auction or not?

No you don't have to bid you can take the place of the highest bidder at the auction.

What type of Freeholder would buy our property at auction?

Freeholds sold at auctions may be bought by buyers paying 'hope value' of collecting ground rent, the valuable reversion (when the lease runs out), getting commission from insurance, future lease extension premiums, fees for managing or carrying out works.

We are trying to buy our freehold, before he negotiates the Freeholder is demanding a valuation fee and administration fee therefore negotiations are getting nowhere. My fellow leaseholders are becoming disillusioned. What should we do?

By law, the freeholder can require money up front towards his valuation fee, or he can refuse to discuss matters informally to force you to serve notice which then secures his costs.
Remember, usually, the value of your freehold increases as the lease decays so by delaying or putting you off the freeholder's interest may be getting more valuable. Watch out particularly if your leases will soon be below 80 years.

I have ongoing service-charge disputes with the Management Company. How might these affect my buying the freehold?

By law, any monies due to the freeholder, or their agents (typically the Management company), from any tenants in the premises need be paid before full title in the freehold can pass to the leaseholders.
Any service charge disputes need be divided into those that have been determined by the Leasehold Valuation Tribunal (LVT) and those which have not. Service charges that have been determined by the LVT need to be paid with the purchase price of the freehold. Service charges not yet determined by the LVT will give the freeholder a lien over the freehold when it is transferred to you. You will need to have these service charges determined by the LVT or otherwise settled to the agreement of both parties in order to remove the former freeholder's lien.

How long will it take?

You will probably need about 2 to 3 months to research and gauge commitment, get a valuation, report back to the other residents and generally organise yourselves.
As to the statutory procedure itself this is initiated by a notice served on the freeholder (and any intermediate landlord). From there the timescale could be one of a few months if the freeholder accepts the claim in principle.
If negotiations over the price are not going well, or if the freeholder disputes the claim, or it is not possible to agree the price and other terms without reference to the Leasehold Valuation Tribunal the timescale will be longer. Assuming the acquisition is successfully negotiated or awarded by the LVT you must allow a short period for the conveyancing of the freehold to the nominee company.
Essentially it all depends on the unity of the leaseholders and how reasonable and responsive is the freeholder. Should he be willing to settle on the terms offered by the leaseholders, or suggests a settlement within the leaseholders' range of acceptable prices, and if the leaseholders are happy to enter into the agreement and share the costs, then you could own the freehold in 2 months.
However, if the freeholder is so unresponsive, difficult to track down, unwilling to negotiate or be so unreasonable in their demands that the formal legal route has to be followed to compel the purchase, then it can take in the order of 18 months to buy the Freehold. Additionally, if there are problems organising the leaseholders, there are disputes about sharing the costs and disagreements as how to proceed, then the process can take over two years.

What are the timescales set in law?

A Generally time scales contained in current legislation are as follows

Leaseholders serve Initial Notice
The Freeholder has to serve Counter-Notice not less than two months after receipt of the Initial Notice.
Leaseholders and freeholder have a period of 2-6 months after receipt of Counter-Notice to negotiate amongst themselves.
If within this period you cannot agree terms, you must apply to the Leasehold Valuation Tribunal to determine the terms.
The central London LVT currently takes about 20 weeks to schedule hearings.
The LVT issues a determination within a target of 6 weeks after the hearing.
The determination of the LVT becomes final within 28 days of its issue unless either party seeks leave to appeal the determination at the Lands Tribunal.
After the determination of the LVT becomes final, the freeholder must provide a draft contract within 28 days.
Both parties have a period of two months from the LVT determination becoming final to enter into the contract.
Failure by the freeholder to enter into the contract on the terms specified by the LVT, entitles the leaseholders to apply to the court within two months requiring the freeholder to meet his obligations.

Freehold Purchase And Collective Enfranchisement Price

Do we need a formal valuation?

No, but the statutory valuation methology is complex.

You need to know how much you are likely to have to pay even if only for the purposes of negotiating with the freeholder.
The notice served on the freeholder must state the proposed price, if you quote an unrealistic price you could invalidate the notice.
It is highly likely that the freeholder will employ a specialist valuer and the tenants will almost certainly need one to negotiate on their behalf. Appoint a Surveyor who specialises in this type of valuation.

How much do we have to pay?

It depends on

the amount and the level of ground rents
whether there are ground rent reviews
how many years are unexpired on the lease
how many flats are participating
how many of the leases (if any) have less than 80 years unexpired
what the difference between the short lease value and extended lease value is (marriage value)
whether there are 'unsold' parts of the building that you will also have to buy off the landlord
what the right capitalisation rate (investment multiplier) is for the postcode/are you live in
other compensation to the freeholder for other interests, garages, development potential
the freeholder's "reasonable" legal and valuation costs but not his costs for proceedings at the Leasehold Valuation Tribunal.
costs of drafting a Participation Agreement
costs of serving an Initial Notice on the freeholder if he declines an informal negotiation.
payment to a management service to manage the process on your behalf.

My lease has 80 ½ years unexpired what can I do I am worried about marriage value?

How much more might it cost to buy the freehold if our leases when the leases drop below 80 years?

The simple answer is the cost of the marriage value. The difference between the short lease value and the value of the lease once you can grant yourself a share of freehold. When a lease is less than 80 years you must compensate the Freeholder on a 50:50 split for the marriage value. Marriage Value is only payable on flats of participating leaseholders.

Do we have to pay the freeholder's costs?

Yes. By law the residents' nominee company must pay the reasonable costs of the freeholder (and any intermediate landlord) of assessing whether the lessees have the right to enfranchise, dealing with the tenants notice (serving counter notice), also the landlord's valuation and conveyancing work. There is still a liability to pay the costs if the tenants withdraw from the process.

What are the other costs?

The main costs will be the professional fees, namely solicitors and surveyors/valuer as well as the landlord's costs, company formation costs. There may also be payments in respect of the conveyancing for example Stamp Duty Land Tax, Land Registry fees and incidental searches.
You should bear in mind that there are a number of variables for example whether or not is it necessary for the claim to be referred to the leasehold valuation Tribunal and whether the claim is dealt with fairly speedily by way of negotiation with the freeholder. Clearly there are economies of scale which can benefit large groups of participators. In our experience the overall cost per tenant usually works out to be reasonable when compared with the benefit obtained. Nevertheless before proceeding it is recommended that a costs benefit analysis be made once the initial investigative work has been undertaken.

Our freeholder wants to sell us the freehold. His Notice looks formal, but how can we be sure if the price stated is reasonable?

In most cases, it is a criminal offence for the freeholder to dispose of the freehold without first offering it to the leaseholders and doing so in writing.
The offer must give the leaseholders at least two months to respond. If an insufficient number of leaseholders accept the offer or if there is no response from the leaseholders, then after the two months expire the freeholder is then free for a period of 12 months to dispose of the freehold at no less than the offer price to the leaseholders.
Should the Freeholders deal fall through and he want to sell at a lower price, or after the 12-month period has expired he must start all over and serve a new Notice.
You will need specialist advice from a Valuer to find out if the price is reasonable.

Freehold Purchase And Collective Enfranchisement After Purchase

What happens with maintaining the property after I buy the freehold?

It is a mistake to assume all building management problems disappear after a Freehold purchase. They become your problems.

You will need to insure the building.
You will find that arguments intensify about what maintenance should take place (a flat-owner in the basement who doesn't use the common areas in the main building may object to the costs of cleaning the common areas or to the costs of internal redecoration).
There are also administration issues. Is there to be a common bank account? Who makes payments and keeps records?
There are maintenance issues. Who engages the decorators, cleaners, etc?
There are credit control issues. What happens if one of the leaseholders refuses to pay their share of costs? What sort of atmosphere would exist if there was a need to take your neighbour to court to force them to pay for their contribution to the maintenance?
There are lease interpretation issues. Your existing leases should contain covenants which require the property to be maintained. Co-operation and flexibility are required to meet these obligations.
You should note that some leases have been designed so that the party providing the maintenance is a party to the lease. In these cases, even when you acquire the freehold, you may need to compulsorily acquire the management under the Right to Manage procedures

OK, well if we own the Freehold what is the process for extending the leases?

If you join with other leaseholders to buy the freehold, you keep your lease but buy a share in a company whose main asset is the freehold. Then when your lease ends a company in which you own a share gets the flat at the end of your lease, the right to redevelop etc.
Normally the freehold company will vote to allow all members to increase the length of their lease - typically to 999 years - and abolish ground rent. Physically extending the lease requires a deed of variation, to 'vary' the number of years until it expires.

What will happen once the freehold has been acquired?

If you bought the Freehold because your lease was shortening, you can increase the term of the lease (typically to 999 years) after purchase. You can also abolish ground rent and any other clauses in the lease you consider problematic. You might even consider drafting a new lease, for which you need only pay the relevant legal fees.

What about service charges after the freehold has been acquired?

If your main motivation was to reduce excessive service charges levied by the existing freeholder, it will be for the shareholders in the company you used to buy the freehold to determine future service charge levels or delegate this to a managing agent you appoint.

A management company looks after the communal gardens and general external maintenance. What will happen after we acquire the freehold?

If the management company has been appointed by your freeholder, you may be able to sack them an appoint one you choose.

Lease Extension

Why should I extend my Lease?: The value of the Lease decreases as the unexpired term decreases. This may seem negligible when the lease has more than 100 years to run then this decrease may be negligible but there will come a stage when it will become significant.
If your lease has less than 80 years to run, part of the price you will have to pay to the Landlord includes marriage value. This could be considerable, so it is important to protect the value of your lease sooner rather than later.
I am having trouble selling my flat, buyers think the lease is too short, what should I do?: You may encounter difficulties if you want to sell your flat if the unexpired term is less than is regarded as mortgagable by most lenders. Different lenders have different criteria but they are generally looking for an unexpired term of at least 60 years. There are special considerations applying to flats in certain prime Central London areas.
My lease has 80 ½ years unexpired what can I do I am worried about marriage value?: The main reason to press on with extending your lease sooner rather than later is that marriage value applies to all leases with less than 80 years unexpired. Get specialist advice, serve your notice to fix the valuation date whilst your lease has more than 80 years unexpired. Be absolutely sure your notice is not defective, it could cost you dearly!
Why can't I just leave things as they are?: The shorter a lease becomes, the more expensive it becomes to rectify the problem later. Costs have been known to double within a few years, particularly where lease lengths have slipped below the critical 80-year level. By extending the lease or acquiring the freehold and making subsequent lease or management changes, the saleability and value of the property will be enhanced.
I already own my flat, what is the point?: If you own the lease you do not own the flat. Leaseholds and Freeholds are different rights. When you buy a flat you buy a lease, you buy the right to reside in a part of somebodies Freehold property. It is the freeholder who owns the building, when each lease expires the flats revert to him. He can then create a new lease, redevelop etc.
Are there other ways to make my flat more attractive?: Yes, you could buy your freehold collectively with the other flat owners in your building, thisis called collective enfranchisement. See our FAQ's on Collective Enfranchisement.
Can I get financial assistance with buying extending my lease?: Probably, extending the lease will probably increase the value of your flat. Your mortgage company will more positively consider extending your loan to cover the freehold cost and any associated legal and valuation costs.
I want to add another storey to my top-storey flat. What do I need to be aware of?: Your ability to develop your leasehold property will depend on a number of permissions. (Planning, building regulations & Landlord's consent). Unless you can agree terms, the freeholder will usually be able to use the terms of your lease to prevent you from making substantial modifications to your property.
If negotiations with the Freeholder are not progressing, buying the Freehold may be an option but you would then be negotiating with all your fellow flat owners rather than the Freeholder.

Lease Extension Qualification

What are the qualifying criteria?

The main ones are as follows but there are a number of exceptions and special situations

The flat must be held under a long lease i.e. one which was granted for a term of more than 21 years
The flat must have been owned by you for more than 2 years
There is no residency qualification, only one of ownership

Lease Extension Process

How long a lease extension will I get?: 90 years in addition to the unexpired term of your lease.
Will I still have to pay ground rent?: The ground rent should be reduced to a peppercorn meaning that no ground rent should be payable for the whole of the term (e.g. the 90 years plus the present unexpired term)
What happens if the Landlord disputes my entitlement to claim or we cannot agree on the price?: In most instances claims to enfranchise are resolved by negotiation between the valuers for each party. In those minority of cases where there is a dispute as to entitlement or the price cannot be agreed then the matter can be referred to the Leasehold Valuation Tribunal. This can be a lengthy and expensive process.
Although, as mentioned above, you are required to pay the reasonable costs of the landlord you are not liable for the costs of the landlord in respect of any proceedings before the LVT, except where the LVT determines that an application should be dismissed or one party has acted unreasonably in the proceedings.
I have not been able to make contact with the freeholder and no longer know where he lives. He has never collected ground rent. What do I do?: Don't worry. You can still extend your lease. You need to apply to the County Court for a decision to have the terms under which you can extend your lease referred to the Leasehold Valuation Tribunal for determination. The County Court has the power to dispense with the need to formally serve the freeholder with your Claim Notice.
The LVT will hear the case even if the freeholder remains absent and will determine fair terms for the purchase. Once the LVT determine terms, you can apply to the County Court for a vesting order transferring the lease extension to you.

Lease Extension Price

How much will I have to pay?

The valuation formulae are complex but are primarily based on ground rents and yields and the length of the unexpired term. As specified above it is very important to be aware if your lease has less than 80 years left at the date you serve your Notice on the landlord you must also pay a marriage value which can considerably increase the price.

Do I need a valuer?

It would be extremely unwise not to have a formal valuation or a valuer specialising in this field. Even for negotiations you need to have an idea of how much you are likely to pay and it is necessary to specify a price in the Initial Notice. If the price is unrealistic this could lead to your Notice being declared invalid.

What other costs must I pay?

You will also have your professional costs which will be those of your solicitors and surveyors and, in some more complex cases, possibly those of a barrister. Estimates should be obtained.
Importantly, you should note that if you do serve a notice on the your landlord then you will be liable for the reasonable costs of the landlord in connection with any investigation the landlord is required to carry out, obtaining a valuation of your flat, and negotiating and granting a new lease to you.
There will also be the usual payments to third parties as with any conveyancing transaction including Stamp Duty Land Tax (depending on the price you pay), Land Registry fees and other incidental disbursements such as search fees.
As this is a specialist area any professional fees are unlikely to be cheap but we believe that we provide good value for money.
The ultimate cost will depend on a number of factors including the complexity of the transaction and how long it takes and importantly whether or not it is necessary for the matter to be referred to the Leasehold Valuation Tribunal.

Do we need a formal valuation?

No, but the statutory valuation methology is complex.

You need to know how much you are likely to have to pay even if only for the purposes of negotiating with the freeholder.
The notice served on the freeholder must state the proposed price, if you quote an unrealistic price you could invalidate the notice.
It is highly likely that the freeholder will employ a specialist valuer and the tenants will almost certainly need one to negotiate on their behalf. Appoint a Surveyor who specialises in this type of valuation.

How much do we have to pay?

It depends on

the amount and the level of ground rents
whether there are ground rent reviews
how many years are unexpired on the lease
whether your lease has less than 80 years unexpired
what the difference between the short lease value and extended lease value is (marriage value)
what the right capitalisation rate (investment multiplier) is for the postcode/are you live in
the freeholder's "reasonable" legal and valuation costs but not his costs for proceedings at the Leasehold Valuation Tribunal.
costs of serving an Initial Notice on the freeholder if he declines an informal negotiation.

My lease has 80 ½ years unexpired what can I do I am worried about marriage value?

How much more might it cost to buy the freehold if our leases when the leases drop below 80 years?

Do we have to pay the freeholder's costs?

Yes. By law you must pay the reasonable costs of the freeholder (and any intermediate landlord) of assessing whether you have the right to claim a statutory lease extension, dealing with the tenants notice (serving counter notice), also the landlord's valuation and conveyancing work. There is still a liability to pay the costs if the tenants withdraw from the process.

What are the other costs?

The main costs will be the professional fees, namely solicitors and surveyors/valuer as well as the landlord's costs. There may also be payments in respect of the conveyancing for example Stamp Duty Land Tax, Land Registry fees and incidental searches. You should bear in mind that there are a number of variables for example whether or not is it necessary for the claim to be referred to the leasehold valuation Tribunal and whether the claim is dealt with fairly speedily by way of negotiation with the freeholder.

Right To Manage

How many people does it take to start the Right to Manage process?

Who should stand as Directors in order to create the RTM Company?

The 1st lessees wanting to start the process

What type of Memorandum & Articles of Association should we create?

Memorandum & Articles of Association must be in a form as prescribed by Regulations under the Commonhold Leasehold Reform Act.

What is the acquisition date?

The day that residents take control.

Roughly how long will it take, to take control?

The timetable of the various stages is set down in law. You should allow about 6 months, it may take longer if the landlord objects.

When do we start being liable for the landlord's costs?

Once the Notice of Claim is served on the landlord and any other relevant party, the RTM company and its members are liable for the reasonable costs of those upon whom Notice is served. This includes the costs of their professional advisers.

What is the 50% rule?

For the Notice of Claim to be valid, at least 50% of the qualifying tenants must be members of the RTM company. We recommend that as many as possible sign up as this ensures a legal route to share RTM costs.

Do we have to let the Landlord be a member of the RTM company?

If he/she wants to YES

When did the Right to Manage come into effect?

By virtue of the provisions of the Commonhold and Leasehold Reform Act 2002 effective autumn of 2003.

Is this like the former application to LVT to appoint a manager?

No, because there is no need to prove any fault on the part of the freeholder or the current manager.

How small can the block be in order to be able to prepare a Right to Manage application?

2 Flats

What are the typical criteria we should think about?

Do the premises consist of a self-contained building, or part of a building, (part of a building can be classed as self-contained if it has vertical division, could be redeveloped independently and has, or could have, its own services)
At least 2/3rds of flat owners must "qualify", ie, hold the residue of a lease that was originally for more than 21 years

Do the 50% of leaseholders all have to be different flat owners?

No, there is no limit to the number of flats owned by one person.

We have commercial parts to our block, how does this affect things?

The commercial/non-residential content must be no more than 25% of the total floor area

Right to Manage does it matter how long we have owned our flat?

For Right to Manage does it matter how long we have lived in our flat?

For Right to Manage we rent out our flat as an investment, can we still be a qualifying tenant?

Yes

There are garages at our block, do these count as non residential parts of the premises?

A garage, parking space or storage area where used, or intended for use, in conjunction with a particular dwelling contained in the premises shall be taken to be occupied, or intended to be occupied, for residential purposes.

What is the criteria for determining the internal floor area?

For the purpose of determining the internal floor area of a building or of any part of a building, the floor or floors of the building or part shall be taken to extend (without interruption) throughout the whole of the interior of the building or part, except that the area of any common parts of the building or part shall be disregarded.

If we are a small block & our Freeholder/landlord lives in the block, what does this mean?

4 units is the critical number, if your block has 4 units and a resident landlord then the normal rights to not apply

What is the definition of a resident landlord?

the premises are not, and do not form part of, a purpose-built block of flats (that is, a building which, as constructed, contained two or more flats)
a relevant freeholder, or an adult member of a relevant freeholder's family, occupies a qualifying flat as his only or principal home

Our landlord is resident but he only just bought the freehold, how does this affect matters?

Broadly, the freeholder must have throughout the last twelve months occupied the flat as his only or principal home. There are other complex criteria and a case by case approach needs to be taken.

Leasehold Service Charges And Reserve Funds

What are service charges?: They cover all costs associated with the running of the communal parts of the property, e.g. cleaning, gardening, door entry systems and fire alarm maintenance.
How are service charges calculated?: A budget each year is prepared and is based on actual expenditure for the previous financial year. Where necessary a provision is made for future major expenditure such as internal or external repairs and redecoration.
How often are service charges paid?: Quarterly, or half-yearly, or annually Ð as per your lease. An invoice is sent to you in advance of the payment due date.
What if I can't afford to pay my service charge?: You will be in breach of the terms of your lease. However we will in certain circumstances accept monthly payments by standing order.
My service charge is higher than my neighbours. Why is this?: Services charges are usually allocated according to the size of the property. Your lease will tell you the percentage you have to pay.
How will I know what the service charge funds have been spent on?: Accounts are prepared to show annual expenditure at the property. Flat owners are able to inspect the invoices that make up the accounts.
Why do I have to pay into a reserve fund?: A reserve fund builds up sufficient funds to cover cyclical maintenance such as internal or external redecoration.

Leasehold Ground Rent

What is ground rent?: When your house was built the landowner (freeholder) may have issued a lease to the tenant. The lease contains many restrictions and conditions relating to the use of the property and the land it's on. An annual 'ground rent' is often one of those conditions or 'covenants' to give it its legal term.
Why do I pay ground rent?: Ground rent is payable to the owner of the land on which your property is built. The value and frequency of the rent due is specified in your lease.
Why is it only a few pounds a year?: Leases are often for 999 years, and in a typical Trafford suburb where houses were built in the 1920's or 1930's the ground rent of a few pounds was obviously worth a lot more in those days but has devalued with time and inflation. The amount is fixed for the duration of the lease.
What happens if I am late in paying the ground rent?: Often nothing happens because the original freeholder or their successors aren't too bothered about arrears of a few pounds and allow them to be paid late or carried into next year. It may be a condition of the lease that the end house of a terrace has to collect the rent from their neighbours. If an agent is appointed to enforce the terms of the lease then his job will be to ensure that the rent to be paid on the date it was due.
Being in arrears could leave you open to pay administation charges incurred by late payment and court fees for recovery.
Often they will approach your mortgage lender and get them to add the bill to your mortgage which could result in you paying the additional debt over many years with interest charges raising it to several hundred pounds.
An agent or Freeholder can now only forfeit (take back) your lease if they are granted leave to do so by a Leasehold Valuation Tribunal
What is a chief rent?: If you own the freehold on your home, you may still have to pay a small rent annually to the chief rent owner. You can buy the 'chief rent' in the same way that you can buy the ground rent.
Am I liable for unpaid rent by the previous owner of my house?: The landlord can recover up to six years arrears of rent and you can be liable for rent owing before you moved in although your conveyancing solicitor should have spotted this so get in touch with them.

Leasehold Maintenance And Insurance

What should I do if I am not happy with the gardener and cleaner?: Please inform us and we will deal with the matter promptly.
What insurance do I have to arrange?: Only the contents insurance. Building insurance is almost always covered within the service charge. Please consult your lease.

Leasehold Rules And Restrictions Of A Lease Covenants

Can I make alterations to my property?: You can only act in accordance with your lease. You will almost certainly be required to obtain permission for the work from the freeholder. Structural alterations are unlikely to be permitted.
Can I keep a pet?: This is stipulated in the lease. Where pets are permitted, this is usually subject to their not causing a nuisance or disturbance to

Leasehold Other Residents

What other covenants may apply to my house?: This depends on the terms in the lease or transfer document, most will contain restrictions requiring the consent of the freeholder or his agent before you can extend or improve the property. Similarly consent to sell the house or a requirement that you insure it in a particular way may apply.

Leasehold After Purchase

Where can I get a copy of my lease?: You can obtain a copy from the holder of the deeds this will usually be the mortgage lender.

Leaseholder Disputes, Complaints Procedure, Breach Of Lease, Response Times

What procedures are in place to deal with complaints?: Complaints are weighed up on their own merits. We have a complaints procedure which is approved by the RICS (Royal Institution of Chartered Surveyors) and complaints are dealt with by the relevant department who will cross work between teams to seek a resolution.
What Ringleys target turnaround time for letters: Letters - one week. Difficult letters are copied to the person managing quality and are discussed at our fortnightly Estate Division meeting to ensure that there are no slips where additional support/training needs to be provided.
What Ringleys target turnaround time for emails: E-mails - the same day/24 hours.
What Ringleys target turnaround time for phone calls: Phone-calls - our principles are that we don't really want to take phone messages we want to put you in touch with someone who can help you now!. This is why we have dedicated an assistant to every Property Manager and usually move the call to the person who can best solve it whether that might be someone from the Legal Team or Finance Team, etc. Phone calls should be returned the same day or at worst 24 hours.
What Ringleys target turnaround time for faxes: Faxes - the same day/36 hours. There will occasionally be periods where an Estate Manager is out of the office.

Client Money, Interest, Bank Accounts, Client Accounts

How do Ringley hold Clients' service charge monies?: Clients' service charge money would be kept in a discreet client account in which only monies from your blocks would be deposited.
How are Client bank accounts at Ringley managed?: All bank accounts are administered to the RICS Rules and Regulations and one of our standard processes controls bank reconciliations which are performed by the end of the full week period following.
What bank charges are leaseholders charged?: None provided the account is held in credit. Running 1 Client account is included within Ringley's management fee.

Service Charge Budget, Reserve Plans, 10 Year Plans, Major Works

What are major works?: Works requiring specification to ensure that tenders are received on a level playing field in such a fashion that they can be compared like for like and analysed for risk.
What is the fee structure for major works?: We have an in-house Building Engineering Team that can assist on major works projects scale fees depend on the contract sum and range from 8-15%. We also have experienced staff who can act as Planning Supervisor if the job will be subject to notification to the Health & Safety Executive.
Arguably major works could also be any that require Section 20 consultation procedures to be invoked.
Are Ringley registered under the Data Protection Act?: We are registered under the Data Protection Act - Registration number Z6912201.

Insurance, Insurance Claims, Loss Adjuster

Are Ringley FSA registered to deal with insurance matters?: Yes
What insurance commission does Ringley receive?: Clients can choose whether or not to insure on the Ringley block policy which offers them preferential rates of insurance. The insurance company does pay Ringley approximately 15% commission on premium income which we understand is below the norm. This is because many of our Clients are management companies and therefore Clients only have the right to insure on about 30% of our managed portfolio.
What are the details of Ringley's professional indemnity insurance.: Ringley's professional indemnity insurance is provided through HSBC and the sum insured is £5,000,000. We have never had a claim to date.

Legal, Rules, Regulations, Memorandum & Articles, Lease Covenants, Management Agreement

What does the Estates Director's quarterly pack contain?

An arrears list
A budget performance report which reports spending against budget to date
A news letter

How do you deal with lessees who are in breach of their lease?

It is difficult to answer this question without considering the type of breach. Common breaches include

failure to fix an overflow.
Parking in a space not demised to the car owner.
Alterations to which consent has not been granted.

A matter that may warrant litigation would always be discussed with directors as it is up to you to sanction such works. However, you need to be aware that since February 2005 a forfeiture notice cannot be served on any defaulting lessee without first applying to the Leasehold Valuation Tribunal to deem the matter is a valid breach.
Remedies include

Section 146 action for Forfeiture, with the consent of the Leasehold Valuation Tribunal
An order for specific performance, ie, a County Court order to do XX
A money judgement for damages

How do you deal with breaches of covenant?

We have a breach process tool that deals with the most common 17 breaches we regularly find, these range from breach of a “keep carpeted clause” to “pets” or barbeque's in the common areas.
Breaches are dealt with by 3 letters from the Estates Teams each giving a target date for action to have been confirmed to us by the lessee.
Our document tracking system automatically escalates cases to the caseworker when the 7 or 14 days for next action is reached.
Stage 4 is a pre-action letter from our Legal Services Team in accordance with the Civil Proceedure Rules chargeable to the lessee in default at £20 + Vat. What then follows is a notice of breach chargeable to the lessee in default at £125 + Vat.
Then depending on the chosen route of recourse the action would be

Treat the matter as an emergency, execute rights of entry to fix/repair and recharge to lessee
Start proceedings in County Court for money judgement for any direct loss
Start proceedings in Leasehold Valuation Tribunal to get sanction to serve a Section 146 forfeiture notice

What communication could a Client Director expect from Ringley?

Directors build a close relationship with an Estate Manager & his/her assistant, we do treat Directors as a special group of people and would deal with then 1st.
We also pre-notify Directors of site visits planned, send them emailed copies of minutes annoted with actions and likewise for site visits. All such information is also available on the client area of the web site.
Note - The Estate Manager is scheduled one day a week to be out of the site doing site visits. A little flexibility needs to be understood as property management is not a desk based job.

What is the notice period to terminate a management agreement?

Our notice period for disengagement is three months. The specific contract must be reviewed as if the initial period has not expired a set up fee may be chargeable. Also, if a fixed contract period has not expired there may be an extra termination fee.

What professional associations or trade bodies to which your firm belongs?

Royal Institution of Chartered Surveyors
Association of Residential Managing Agents
Association of Building Engineers

What services are excluded from the management fee?

The following are not part of the Ringley Management Package described in the Terms of Appointment

carrying out an inspection of the Property (other than the common parts thereof), or a building survey or valuation of the Property for security purposes, or preparing or checking an inventory;
offering vacant property to let, preparing tenancy agreements, advising the Client on rents, consulting Rent Officers and making submissions to the Rent Assessment Committee, advising the Client on the terms of any lease or negotiating the terms of any new or varied lease;
advising on right to manage, freehold purchase/enfranchisement applications and/or the sale of shares in any Freehold company to non freehold owners or any non demised parts of the building; including preparing statutory valuations, service of notices, formation of right to manage and/or freehold/management companies, preparation of EGM notices, attendance at meetings, changes to the company structure (Memorandum & Articles of association) to facilitate any grant/issue/allotment of shares, sale of shares, managing a bank account for the purpose, negotiating premiums, advising on how to deal with/allocate the proceeds of sale including grant of dividends, advance corporation tax and executing deed of variations to grant lease extensions;
post questionnaire or board resolution to vary a defective lease clause under S37 of the 1987 Landlord & Tenant Act to draft replacement lease clauses, prepare a case for Leasehold Valuation Tribunal and register changes to the lease with HM Land Registry;
initiating or responding to, conducting, negotiating with the parties, preparing evidence for and attending hearings or Leasehold Valuation Tribunal and otherwise dealing with any rent review, party wall proceedings, application for a grant or for consent, insurance claims, arbitration or litigation;
preparing statutory notices to include consultation notices to comply with landlord & tenant legislation
dealing with 3rd party company secretaries to maintain the legal ownership registers where notice of transfer is not received from a purchaser on sale and detective work is required to trace sales that are not notified to us, dealing with non panel accountants or an accountant who will not visit our offices to view bank, invoice & other audit records to which a time charge for copying original records will apply.
dealing with local government matters including registration of Houses in Multiple occupation, council tax valuations, planning permission, building regulations consent and grant applications;
advising on or assisting with enforcing contracts where the contracting parties do not include the Client/Client Company, or where Ringley were not the appointed managing agent/contract administrator at the time hence researching time is required;
supervising and verifying the performance of contractors or other professional consultants whose work would normally require verification by a Surveyor; ie, where repair or improvement works are procured via an informal tender situation as opposed to a project run by an Engineer under a JCT contract. Such works will attract the greater of an hourly rate fee for acting on the instructions of the Client or 5% whichever is the greater.
acting as liaison between Directors, Lessees for capital works projects on which Ringley are not appointed as Contract Administrator including the co-ordination of outside consultants, contractors. Such works to be remunerated at - Value of works £1-£50,000 - 3%, £50,-£100,000 - 2.5%, £100-£200,000 - 2%, £200-£300,000 - 2%, £300,000+ - 1.5%
preparing specifications for tender, supervising and measuring works the cost of which exceeds the specified expenditure limits and for non-routine matters and where expenditure is in excess of the limits contained in the Landlord and Tenant Acts 1985 and 1987 or as subsequently amended;
advising on safety or health matters to any part of the property including Access Audits, compliance with the Disability Discrimination Acts, Water Treatment or other requirements laid down by insurers, the Local Fire Officer or local government;
complying with requirements on Clients by their insurers or health & safety legislation insofar as they relate to the waste, neglect, negligence, lack of repair or compliance with IEE, gas safety or water regulations as applicable to individual flats;
after notifying a lessee in writing 2 times of a potential breach of covenant, preparing repairs and/or breach of covenant or forfeiture notices is chargeable;
any advertising and recruitment of staff on behalf of the Client;
supplying extra copies of statements of account and copies of any other documents;
if the Client is a company, acting as Company Secretary;
dealing or advising upon applications for assignment of tenancies or leases, sub-lettings, alterations and changes of use.
providing copies (other than odd 1 off copies) of supporting invoices to persons other than accountants/auditors, however all invoices will be made available for inspection at our offices during working hours with or without appointment.

How do you quality control your service?

We believe we are a market leader in the following monitored and internal quality controlled customer standards:-

Contractors, Maintenance, BACS

Should fees be chargeable for contractor selection?

Only for major work/refurbishment projects which we would define as works requiring specification to ensure that tenders are received on a level playing field in such a fashion that they can be compared like for like and analysed for risk. Otherwise depending on the complexity projects that exceed the section 20 statutory consultation limits could attract an hourly rate charge.

How do you select contractors?

Our panel of contractors covers all areas within the M25 and ranges from jobbing builders to major construction companies. Estate managers will either use contractors' pre-nominated by you, and allocate them to your site at the commencement of our term of management, or they will propose contractors whose performance they trust.
The criteria is typically as follows

Client nomination
Proven prior performance
Sole supplier
References, professional insurance, industry qualifications, etc.

How long does it take for a BACS payment to reach a contractor?

6 working days. 3 working days to leave the Client account for the site and 3 days to be credited to the contractor.

What is Ringley's out-of-hours service for emergencies?

We provide an out-of-hours service; on-call details for contractors and for your Property Manager are posted on our office and phone system switch which changes to emergency service at 5:45pm each weekday evening.

Service Charges, Reserve Funds, Ground Rent, Direct Debits, Credit Control

Do Leaseholders receive interest on service charges paid or paid into Client Accounts?

The Client bank account for the site will receive any interest the bank pays. We credit interest to the lessee's fund as it rightly belongs to them and reflects the credit balance held in the private bank account for the particular site.

Do I get a service charge or reserve fund refund if I sell my property?

When a lessee sells their property service charges are not refunded to the individual selling but held in the service charge pot as a benefit to the incoming purchaser.

How quickly does a direct debit post to a service charge payer's account?

72 hours after collection.

How can Ringley prove what service charge demands have been sent to a lessee?

Ringley's accounting system propersys keeps an audit trail of what system generated demands, reminders, final notices, letters before action sent to lessees.

What is the procedure at Ringley for dealing with unpaid service charges

We are appointed to uphold the covenants in the lease. Unpaid service charge is a breach of lease. If the lease requires payment within 21 days, then a lessee is in breach if service charge is not paid by this date.
There are 4 stages of pursuing money before court action is contemplated

Demand
Polite reminder
Final Notice
Letter of Claim

Anybody who faces court action would have been asked for the money a minimum of 4 times before court action is instructed. No-one is taken to court without being first given a letter prior to proceedings to comply with the civil proceedings rules.
Any Client/Group of Directors appointing Ringley will have agreed to the staged methodology is in the following extract from our Terms of Engagement for Management (Schedule 2.6):
2.6 To operate strict credit control and enforce the highest possible standards of all rent and service charge collection which may include

applying interest to arrears as stated in the lease
sending polite and final payment requests
carrying out a Land Registry search to verify ownership prior to stages (d) or (e)
instructing Ringley Legal Services to write to the Tenant advising on the implications of non-payment, the cost of which must initially be borne by the Client but will be charged to the defaulting Tenant's account
applying to the County Court for a money judgement, the court fee being initially borne by the Client but will be charged to the defaulting Tenant's account
in the unlikely event that a case cannot be determined by allocation questionnaires and specific court attendance is necessary Ringley will either (a) represent the Client at Court (in the presence of the Client) or (b) instruct legal representation using the direct access to representation route
applying to the County Court for an attachment to earnings order
applying to the Country Court for permission to enter the judgement on the charges register against the property
lodging a charge against the property title to prevent it being possible to sell the property without discharging the debt
writing to the defaulting Tenant's place of employment to seek enforcement of an attachment to earnings order

Can I pay by standing order

Ringley do not support standing order payments for service charges or ground rent because

if you pay on standing order say the 1st of month we don't get Bank statement until the end of the month,
we then have to reconcile perhaps 500 statements a month. You could therefore appear to be in arrears incorrectly and we may start taking credit control action against you as we work on a 90 day credit control cycle and action has to be taken during the month before the bank statements are received
- We operate individual client accounts for each and every site and we do not have the resources within the fee we receive to phone banks every day or check on-line to see who has paid into the bank or what standing orders have been received prior to the month end reconciliation

We do offer direct debit facilities which ensure the funds are electronically posted to your ledger within 72 hours.

Can I have your Bank account number as I want to pay over the internet

Ringley do not internet bank transfers for service charges or ground rent because

we will not see your payment until we get Bank statement until the end of the month,
we then have to reconcile perhaps 500 statements a month. You could therefore appear to be in arrears incorrectly and we may start taking credit control action against you as we work on a 90 day credit control cycle and action has to be taken during the month before the bank statements are received
- We operate individual client accounts for each and every site and we do not have the resources within the fee we receive to phone banks every day or check on-line to see who has paid into the bank or what standing orders have been received prior to the month end reconciliation

We do offer direct debit facilities which ensure the funds are electronically posted to your ledger within 72 hours.

Can't pay - I've just lost my tenant please I'll pay up by the end of the month

Ringley staff

should "Put a memo on the account" with name & initials & date.
Politely remind client that lease requires payment within 21 days of the due date

Can't pay - can I set up a direct debit to clear my arrears

To ensure we abide by what the lease states direct debits cannot be set up to clear service charge arrears, please pay by cheque or credit card to clear the arrears first.

Why have I got 2 direct debits I only asked for 1

On the direct debit mandate you authorised us to collect current estimated service charges.
The service charge budget includes both a day to day service charge and a reserve fund. There are two direct debits because the reserve fund is protected and held in a separate ledger to the day to day service charge.

Can you explain why I have got 2 items called service charge on my account

This would indicate bad group names set up by Ringley's finance team in the “P” “D” menu of propersys. There may be a service charge collected for the “estate” a separate service charge for “lifts” and a separate service charge for “flats”. To answer the question you need to refer to the service charge budget and get finance to rename the service charge groups in a meaningful fashion.

Can't pay - I'm not in arrears as I pay by direct debit/standing order. Can you explain the demand I just received?

We are obliged to send you a demand whatever your payment method in accordance with your lease.
This also serves as a check for you that your balance is decreasing to show that the DD is working.

Service charges - I'm in credit can I have a refund?

Yes of course, you can.

Service charges - I dispute the legal fees on my account, can you remove them?

In settling any dispute the benchmark will be the payment provisions set out in the lease and which states that payments must be made in 21 days of the due date, and provides for interest to be charged on all service charges in arrears. If at no point were you in arrears more than 21 days after the due date a manager can authorise a refund of legal charges.

Service Charges - service charge deposits on completion what does this mean?

A service charge completion may comprise a days based apportionment from the date you bought your flat up until the next due date, or it could be a service charge deposit. A service charge deposit represents is a pre-payment to put the service charge fund in credit to begin to make payments on behalf of residents and is not used towards your future service charge bill. If you wish to recover a service charge deposit you should do so when you are selling by charging the incoming purchaser a similar service charge deposit.

Service charges - year 1 accounting

At the end of the first from accounting year the residents have been in occupation for a reasonable length of time. It is the external auditors' job to carry out a days in occupation basis apportionment of all funds collected, and then at this time credits will be made to parties who have in effect paid more service charges on completion than is truly representative of their days in occupation and additional bills will be levied on Leaseholders where they have under-paid.
This is the normal accounting convention for all new build properties where funds are needed early on and where not all properties are sold simultaneously.

Service charges - why is the reserve fund separate on my bill?

The reserve fund forms part of the service charge budget, which is distributed at the beginning of each accounting year. In accordance with the code of practice for the residential managing agents we are now directed to split the entire service charge budget to show as service charge and reserve funds respectively. The reserve fund is in fact a provision for future cyclical works (internal and external), and is held in interest bearing client accounts for the benefit of current future Leaseholders.

Service charges - Arrears belong to the previous owner

The liability for service charges runs with the lease and it is for the purchasers and vendors' solicitors during the conveyancing process to agree any apportionment between the parties.
You will therefore need to instruct your solicitors to contact the vendor's solicitors should you feel that they should have paid off any arrears on your account prior to you purchasing the property.

Service charges - Accounts, year end deficit belongs to the previous owner

The liability for service charges runs with the lease and it is for the purchasers and vendors' solicitors during the conveyancing process to agree any apportionment between the parties. As part of the recommended Law Society's pre-contract Leasehold Enquiries usually a Solicitor will obtain copies of service charge accounts and if he/she is concerned should make a retention from the completion monies in respect of any perceived service charge deficits.
You will therefore need to instruct your solicitors to contact the vendor's solicitors should you feel that they should pay any deficit relating to an accounting year prior to your purchase.

The developer said they were going to pay my 1st years service charge?

Regrettably we cannot indemnity you from action/credit control or court proceedings whilst your service charge account remains in arrears. Because, we do not yet appear to have received any funds from the developer therefore the amount remains outstanding on your account. You will need to take this up with the developer and until we receive a cheque the Freeholder or management company may continue to take arrears action against you.

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* Covers any service charge arrears that falls into arrears during a leaseholdersupport.co.uk administration on a No win, No fee basis Applies to Service Charge Accounts not full company trading accounts * Covers any service charge arrears on any flat that falls into arrears in any block, provided the subscriber owns just 1 flat the block on a No win, No fee basis.