How To Buy A Flat - All You Need To Know About Apartment Living and Letting

HOW TO
BUY A FLAT
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HOW TO
BUY A FLAT
All you need to
know about
apartment
living and
letting
Liz Hodgkinson
howtobooks
DEDICATION
for my wonderful goddaughter Georgia
Published by How To Content,

A division of How To Books Ltd,
Spring Hill House, Spring Hill Road,
Begbroke, Oxford 0X5 1RX. United Kingdom.
Tel: (01865) 375794. Fax: (01865) 379162.
email: info@howtobooks.co.uk
http://www.howtobooks.co.uk
All rights reserved. No part of this work may be reproduced or stored in an information retrieval system
(other than for purposes of review) without the express permission of the publisher in writing.
The right of Liz Hodgkinson to be identified as the author of this work has been asserted by her in
accordance with the Copyright, Designs and Patents Act 1988.
© Copyright 2006 Liz Hodgkinson
First published in paperback 2006

First published in electronic form 2007
ISBN: 978 1 84803 040 4
Cover design by Baseline Arts Ltd, Oxford, UK

Produced for How To Books by Deer Park Productions, Tavistock, Devon, UK
Typeset by PDQ Typesetting, Newcastle-under-Lyme, Staffs, UK
NOTE: The material contained in this book is set out in good faith for general guidance and no liability
can be accepted for loss or expense incurred as a result of relying in particular circumstances on
statements made in the book. The laws and regulations are complex and liable to change, and readers
should check the current position with the relevant authorities before making personal arrangements.
Contents
Preface ix
Introduction 1
1 The History of Apartment Buildings 17

The first flats 18
Housing for the poor 21
Moving on 22
Flat living becomes stylish 24
The problems of tenure 25
A continuing problem 26
Reforming laws 28
The history of service charges 29
2 What Type of Flat is it Best to Buy? 33

Exploring the types of flat available 33
Conversion 34
Mansion block 36
Purpose-built blocks 37
Newbuilds 39
Warehouse conversions 42
Ex-local authority blocks 42
Small blocks 44
Large blocks 45
Flats over shops 46
Shell apartments 47
Shared ownership 47
Live/work units 49
Retirement/age exclusive apartments 51
Is there a best buy? 52
Where in the block? 54
3 The Lease 57
Questions to ask 58
The lease itself 60
V
vi/HOW TO BUY A FLAT
The main elements of a standard lease 61

Further convenants 63
Look for subletting clauses 65
Listed buildings 65
Where you own a share of the freehold 66
Leases of ex-local authority flats 66
Ex-local authority block service charges 67
Payment plans 68
Are leases legally binding? 69
What if you infringe the lease? 69
Major works 70
Service charges 70
Reasonable charges 71
Insurance 72
Ask for evidence of expenditure 72
Recovering service charges 73
Application to the Leasehold Valuation Tribunal 74
The Leasehold Advisory Service 76
Ground rent 77
Forfeiture and possession 77
Commonhold 79
The management of a block of flats 81
4 Management 85
Advantages of outside management 88
Appointing a managing agent 90
The set-up 94
What a good managing agent will do 95
Code of practice 97
Forming a Residents' Association 98
Where you have enfranchised 102
5 Increasing the Value of Your Flat 104

What you need to know before you buy 106
Extending the lease 107
The process 111
Getting started 113
Which is better, a lease extension or collective enfranchisement? 117
C O N T E N T S / vii
Very short leases 118

Right to manage 119
How to go about setting up an RTM 120
Buying the freehold, or, collective enfranchisement 124
Making it work 125
Get moving! 130
Run the company properly 134
6 Ex-local Authority Blocks 136

Collective enfranchisement 136
Leases shorter than 80 years 137
A note on mortgages 138
Social tenants 139
Service charges 139
Residents' Associations 142
Breach of lease 142
Investment value 143
Is there a best buy? 143
7 Letting a Flat 145

The lease 145
Restrictive subletting 146 146
What kind of subletting is allowed? 148
Buying a flat to let 150
Carrying out building work 153
Being a good (absentee) landlord 155
Finding tenants 156
Your tenant's responsibilities 158
Types of tenancy 159
Short lets 160
Holiday lets 161
Leasing to a housing association or local council 163
Letting out your own home 164
Tax matters 165
8 When Things Go Wrong 167

These are the best solutions 168
What if problems persist? 176
In some cases, mediation may be the answer 184
viii / H O W T O B U Y A FLAT
Listed buildings 186
9 Buying Abroad 191

Apartments in America 193
Renting out 194
Property clubs 195
The costs stack up 197
Timeshare apartments 199
Inheritance and SIPPS 200
10 Conclusions 202
Resources 208
Index 212
Preface
Before long, there will be more people living in flats or

apartments than houses. All over the world, more apartment
blocks than separate houses are being built, even in countries
which still have plenty of building land left.
This means that in future, large numbers of people are going to

have to take on board a completely different way of living and
relating to neighbours.
When you live in a flat, you may have people above and below
you as well as next door and along the corridor. With flats,
everybody is interconnected in a way that does not happen with
even the most closely-packed terraced houses, and because of this
there have to be strict rules to ensure that all residents behave in a
responsible and community-minded fashion.
Not only that, but buying a flat is a completely different process

from buying a house.
When you buy a house, you purchase the freehold and that is
that. To all intents and purposes, you own the land on which
your house stands until the end of time, or until you come to sell.
This applies even with terraced or semi-detached houses.
Flats, though, are usually sold leasehold, which means in effect

that you buy a length of tenure, rather than the actual property.
ix
x / H O W TO BUY A FLAT
Your flat may be sold with a specific length of lease remaining.

Or, it may be sold with a share of the freehold. Or, it may be sold
'commonhold'. There may be several layers of ownership, such as
'head leaseholder' or 'under-leaseholder'. There may be managing
agents, residents' committees and a Board of Directors, none of
which apply when you buy a house.
Then, when you buy a flat, shelling out money does not end with
the purchase. You have to continue to pay monthly service
charges, to ensure the building remains in good repair. And you
must legally abide by the terms of the lease you have signed
before completion.
What does it all mean? What are your rights, and what are your
responsibilities when you buy a flat? This book explains all, and
tells how to get the very best out of this modern and increasingly
common way of living.
Flats can be safer, warmer, cleaner, easier and cheaper to run and
also friendlier than houses. They are ideal for single people, young
couples, busy workers, older people downsizing or, in fact,
anybody who does not want the fuss and bother of looking after
an entire house. Apartments are often in vastly better and more
central locations than houses, and there is a huge choice of styles
available.
The vast majority of property investors buy flats, rather than

houses, to let out. But before buying a flat, either to live in
yourself, or rent out, you need to know exactly what you are
letting yourself in for.
Liz Hodgkinson
Introduction
Nowadays, ever more people are living in flats rather than whole
houses. At one time, flat living was relatively rare but in England
and Wales at least, more flats than houses have been built since
2003, and over 100,000 new flats are now being built each year.
In April 2000, just 16.5 per cent of properties bought in Britain

were flats, but by March 2005, this figure had risen to 20.5 per
cent. Over 72 per cent of all properties bought in London are now
flats, and in 2004, 40 per cent of all homes built by Barratt,
Britain's biggest housebuilder, were flats. This is more than twice
as many as ten years previously.
Worldwide, the vast majority of newbuild properties are

apartment blocks rather than houses, and as the population
inexorably expands and becomes ever more urban, it seems that
separate houses will one day be the rarer type of dwelling.
But the ever-increasing popularity of flat living is not only to do

with population growth and housing demand.
CHEAPER FOR DEVELOPERS

One significant aspect is that, so far as developers and builders
are concerned, it is cheaper and easier to build blocks of flats
rather than individual houses.
1
2 / H O W TO BUY A FLAT
Where land is scarce but demand is high, as in waterfront locations

and inner cities, for instance, it may no longer be possible to build
separate houses for everybody. Also, even where there is space, it is
easier to obtain planning permission for apartment blocks which
will house many people, than for a few detached five-bedroom
houses standing in their own landscaped gardens. As you can build
more dwellings on less land, acquiring land is cheaper, too. Then
there is great encouragement to build on brownfield sites - where
there has already been a building of some kind - rather than on
greenfield sites.
It is most common for apartment blocks to be built on brownfield

sites; greenfield sites are usually reserved for separate houses, but
it is much more difficult to get planning permission to build on
these sites than where it is already built up.
Apartments can be squeezed in where it would be impossible to

put a house, such as on top of supermarkets, for instance, and all
kinds of previously non-residential premises such as fire stations,
warehouses, libraries, schools, factories and police stations can
quite easily be converted, and are being converted - into
apartment buildings. For example, The Old Fire Station, the Old
Brewery, the Old Candle Factory are becoming very smart
addresses.
It is also easier and cheaper to lay on services such as electricity,

gas and water to an apartment block than to a series of separate
houses. Architects like the challenge of apartment blocks because
they can go to town, whereas they are severely restricted to
thinking 'inside the box' with separate houses.
INTRODUCTION / 3
ALTERING DEMOGRAPHICS
There was once a distinct stigma about living in a flat rather than
a house but this is fast disappearing and cost and density are not
the only reasons for this. Ever more people are now living on
their own, and young singles and couples, divorced and separated
people and the elderly, increasingly do not want to live in a whole
house but prefer the ease and security of a flat. Most retirement
and 'age-exclusive' housing, for instance, consists of apartments
rather than houses, and for the majority of first-time buyers, their
starter home is now a flat, not a house.
ADVANTAGES OF FLAT LIVING

Nowadays, flats afford more lifestyle and location options than
houses, and depending on pocket and preference, you can go for a
tiny studio in a very central location, or have a huge rambling flat
in an imposing Edwardian mansion block.
You can go for a .characterful Victorian conversion or an ultra-

modern apartment in an award-winning new building.
Flats tend to be more secure than houses and the modern ones at
least, have far more amenities. It might be difficult to afford your
own private gym or swimming pool with a house, but spas and
fitness centres are increasingly a factor of even quite modest
blocks of flats.
Plus, with a flat, you can have the modern equivalent of servants
or staff, such as porters, gardeners, valet parking, painters and
decorators and cleaners. And the more people there are to share
each amenity, the cheaper it becomes.
When you buy a flat, you can have a much more luxurious style of
living than you would be able to afford with a house. You can
also enjoy stupendous views on the top storeys of an apartment
building; views which would be inaccessible with even the tallest
house.
If you are away a lot or like to travel, you can lock up and leave a
flat in a way that would be extremely difficult with a house.
Because so much of the building is shared, it is usually cheaper to

live in a flat than a house. Utility bills are vastly cheaper, and as
all works and exterior decoration are shared between the
residents, renovation and upkeep costs less.
Also, size for size, flats feel more spacious than houses. A house
of 2,500 square feet can feel tight, as corridors, stairwells, halls
and landings have to be squeezed into this footage, whereas a flat
of the same size can feel extremely spacious.
DISDAVANTAGES TO FLAT LIVING

The overwhelming drawback to buying a flat is that the property
will almost always be sold leasehold rather than freehold which
means, in effect, that you are buying a length of tenure rather than
the property outright. By contrast, when you buy a house, you buy
the freehold, which means you own the property in perpetuity.
Apart from the extremely complex laws concerning the tenure of

apartment blocks, there is also the fact that you may have up to
200 near neighbours to contend with, all living on top of each
other.
N T R O D U C T I O N / 5
UNDERSTANDING LEASEHOLD LAW

Many laws relating to the tenure of apartments are difficult to
understand and even conveyancing solicitors often do not fully
appreciate all their complexities and subtleties. Nor do mortgage
lenders, it must be said.
Although you enjoy many ownership rights with a long lease which
does not happen when you rent month by month, as the lease runs
down, your flat will be worth ever less, and by the time the term is
up, your stake is worth nothing. At this time, it will automatically
revert to the freeholder, or landlord. You often see examples of the
rundown lease in very upmarket London postcodes, where 16-year
leases are frequently offered for sale in places like Eaton Square.
Often, such leases cost around £500,000 - about the price it would
cost to rent that property for a similar length of time.
The lease itself is a lengthy, legally-binding document written in

offputtingly archaic and tortuous legalese. Many leaseholders have
never even glanced at the lease before buying and have no idea of
its terms. Then they are later appalled if they are accused of
breaching one of its hundreds of clauses and schedules.
Strictly speaking, a leaseholder is known as a tenant, and

somebody who rents from the leaseholder is referred to as a sub-
tenant. The actual owner of the property is the freeholder, or
landlord, and this means the person who owns the actual building
and ultimately, the units within it.
Leasehold law comes somewhere between owning and renting and

is in many ways a horrible hybrid which governments have been
trying to simplify for decades, even now without complete success.

In fact, some legal experts claim that every time the government
attempts to simplify leasehold laws, it ends up making them even
more complicated.
Summary
To sum up, when you buy a flat, you buy a length of lease rather
than outright ownership. New leases tend to be either 99 years or
125 years long, but can be 999 years. Although you can sell this
lease on to another buyer, the shorter the lease gets, the less
valuable the property becomes. So, a lease is a wasting asset.
Leases can also in extreme cases be forfeited, for persistent and

wilful breaching of the clauses. Where this happens, the
leaseholder loses everything, even when there are many years left
on the lease.
LEASEHOLD WITH A SHARE OF THE FREEHOLD

To make matters even more complicated, some flats are sold
leasehold with a share of the freehold. This means there is no
outside freeholder or landlord, and the residents collectively own
the building. In other words, the lunatics are running the asylum
or, to put it more kindly, the shareholders own the company, and
can set their own agenda.
But even if there is an outside freeholder, all is not lost as it is

now possible to enfranchise, which means the leaseholders can get
together to buy the freehold from the landlord, and so take
control. It is also legally possible in many cases to extend short
leases by 90 years, at a price, of course.
I N T R O D U C T I O N / 7
Leaseholders subject to an outside freeholder can also exercise

Right to Manage, which is another way of taking control.
Leasehold flats are becoming an ever more secure way to own a
home, but there are still many anomalies. Because leasehold law is
so very complex, there are now firms of lawyers and experts
specialising entirely in this aspect.
COMMONHOLD
Since 2004, when the Commonhold and Leasehold Reform Act of
2002 was implemented it has also been theoretically possible to
buy flats with a new type of tenure known as Commonhold. Here,
there is no outside freeholder, and the commonholders collectively
own the common parts as well as their own individual units. But
the new Commonhold, as will be explained later, is just as
complicated as the old leasehold.
Other problems
There are very many laws and regulations relating to apartment
living, not just because of the ramifications of leasehold and
commonhold laws, but also because ways have to be found of
ensuring that residents living cheek by jowl and sharing many
common areas, are enabled to exist in reasonable harmony with
each other.
A NATURAL WAY OF LIVING?

Although living in a flat makes such a lot of sense these days from
so many points of view, the real problems arise not so much
because of leasehold/freehold issues, important though they are,
but because it is basically unnatural for humans, and indeed, most
species, to live on top of one another.
Apart from some insects like ants and honeybees, most creatures
have their own individual dens, lairs or nests. Even when masses
of birds congregate on a cliff, you will notice that each keeps to
its own space, however small. Humans are no different. Notice
how all passengers try to maintain their own space in a crowded
tube train, for instance, and pretend that the traveller jammed up
tight against them is not really there at all. There is a deep
instinct to be territorial, to mark out your own space and with flat
living, you cannot really do this. True, you will have your own
lockable front door, but it will most likely be on a shared
corridor. And, as with a hotel room, you will usually have people
above and below and be able to hear their footsteps and comings
and goings.
This is why, in the past, great lords and aristocrats built their own
massive homes well away from prying eyes. The richer you were,
the more you could afford to indulge this basic instinct for
privacy. It was only the desperately poor people who had to live
on top of each other, in tenements and rookeries or attics and
garrets. In the past, success in life meant having your very own
house and, until very recently, this remained the aspiration of
most people.
It is still true that rich and successful people buy large detached
houses in their own grounds but it is also true that these same
rich and successful people will often own a modern flat in a
centrally-located apartment, so as to have the best of both worlds.
One only has to think of Jeffrey Archer, with his main home, the
Old Vicarage, Grantchester and London penthouse flat
overlooking the river.
But however lavishly appointed your flat is, you cannot get away
from the fact that you will be sharing a roof, foundations,
common parts and common amenities, with a load of strangers.
When individual flats change hands, you have no control over who
buys the flat next door to you, or above or below you.
THE NATURE OF INTERCONNECTION

Flat living means that the fabric of your home will be connected
to other people's homes in a way that does not happen with even
the most closely packed terraced houses.
You will share pipework, for instance, and you will share external
walls, drains and guttering. You will probably share a lift and a
main front door and although each flat dweller will have a
separate electricity, gas and water meter, the supply will come
from a common source. You will most likely share a common
television aerial. If a neighbour leaves a tap running on the top
floor, this will eventually flood the basement. If renovations are
being carried on in one flat, the whole building may be affected.
When major works are being carried out to one part of the
building, this often means scaffolding will go past your windows,
blocking out your light.
Because of this close interconnection, there are strict rules on

what each owner is allowed to do. Unlike living in a separate
house, compromises have to be made. You may not be allowed to
hang washing out of the window, to vacuum the place or use the
washing machine at certain hours; you will not be allowed to put
rubbish in the corridors or leave bikes or prams in the hall - all
of which you could do if you so wished in your own home.
You may not be allowed a satellite dish, and in some very

upmarket blocks, you may not even be allowed to choose your
own type of curtains. You will certainly not be allowed to choose
your own type of window, as with apartment buildings a uniform
look is always desired.
So, a level of conformity is essential if flat living is to work.
RUNNING THE BUILDING

Unlike a separate house, a block of flats has to be run, and run
by somebody, adding further to the complications.
Where there is an outside freeholder, there will usually be

managing agents appointed by that freeholder. Managing agents
do not own the block and are simply employees of the freeholder
or landlord. But they are given powers to run the building and it
is their duty to make sure service charges are collected, that
quotations are obtained for major works, and for ensuring that
the terms of the lease are met by every occupant.
Even when the block is very small, as with a house divided into
two flats, somebody still has to be responsible for insurance,
exterior works and general maintenance.
COSTS CAN GO ON...

Because common and exterior parts have to be constantly
maintained in an apartment building, for the good of all, you
have not finished shelling out when you buy a flat. Every month
or every quarter, you are required to pay service charges for
cleaning, porterage, rubbish clearance, exterior decoration,
gardening and also any services which are, or may be, used by all
residents, such as the lift.
These charges can vary from a few hundred pounds each year in a
small, easily-maintained block, to £10,000 or more in a luxury
block. It is your duty as a leaseholder to pay these charges,
whether or not you agree with the amount.
There may also be extra levies raised from time to time, to pay for
major works such as a new roof, which are not covered by
ordinary charges.
There are now ways that excessive charges to leaseholders can be

challenged, in tribunals and courts, but if they are deemed to be
'reasonable' you have a legal duty to pay them. If nobody pays
service charges, the block may become dilapidated and decrease in
value, so everybody eventually loses out.
So it is very much up to every occupant to pull their weight, to

maintain the integrity and value of the building and each
individual unit within it.
THE PROS AND CONS OF LIVING IN A FLAT

Here are the main pros and cons of living in a flat.
Pros
+ You have neighbours who can look out for you.
«• You may well have a porter who can also look out for you.
+ Living in a flat is cheaper than living in a house.
* Utility bills are lower in a flat.
+ Flats tend to be more secure than houses.
+ There is a greater choice of location and size with a flat.
* Flats are friendlier than houses and tend to be nearer to shops,
transport links and restaurants and bars.
* There is less risk of burglary in a flat.

+ Leasehold law, although complex, is much fairer than it used to
be and there is now almost as much security of tenure with a flat
as with a house.
Cons
+ You are never the outright owner.
+ You have to be prepared for communal living.
+ You cannot maintain the block on your own as this depends on
a group effort.
+ Flats can be noisy.
+ You are more intimately connected with your neighbours than in
a house.
4 It is not always easy to soundproof flats.
* Neighbour disputes are common.
+ You are dependent on everybody paying their way.
* You inevitably have less control over your environment than in a
house.
+ Factions and splinter groups can form.
+ You have to make compromises.
+ The value of a flat may not rise as much as with a house.
CASE STUDIES
I have found that when flat living works, it works wonderfully

well. Although at times it can feel like being in the midst of a
large dysfunctional family where warring factions abound, when
everybody pulls together, there can be a lot of friendliness and
fun when living in a flat.
For most of my life I have lived in a house but just recently I

sold my house and bought two flats instead as my homes. This
I N T R O D U C T I O N /13
means I have a seafront home and a central London home,

either of which can be easily locked up and left. Also, I can
constantly escape if one or the other gets too much! If I feel like
a few days in London, I can just lock up my seafront flat and
head off - and vice versa.
Because I am always meeting my neighbours in the corridor, lift

or at the front door, I have formed friendships that could not
have happened as a houseowner. My flats are manageable, easy
to keep clean and relatively cheap to run. There is no way I
could afford two houses in similar locations, so I have choice
and freedom by living in the flats instead.
Also, now that I am living on my own, being in a flat is much

less lonely than inhabiting a whole house by myself.
All this does not mean there are never any arguments or
disagreements. The haven of peace I hoped for in my seafront
flat has been constantly disrupted by noisy neighbours, residents
not on speaking terms, fierce disputes over service charges, cars
being abandoned at the back, rubbish deposited in common
parts, fridges, washing machines and other household goods
being dumped inside and outside the building, builders' rubble
languishing in the hall, leaking taps and toilets, and bitter court
battles with debtors.
The Annual General Meeting has at times degenerated into a

verbal Punch and Judy show.
And it is supposed to be an upmarket building!

1 4 / H O W TO BUY A F L A T
Life in the London flat has been quieter and less full of incident
but I still find I have the neighbour from hell downstairs who
chainsmokes, never seems to clear out his rubbish, and who
also keeps threatening to report me to the Environmental
Department for employing builders who make a noise.
And I can always hear when people go in and out of the

building, and when my neighbours above are in residence.
Wendy Perriam's story

In 2005, novelist Wendy Perriam moved with her husband Alan
into a 9th floor flat in Dolphin Square, Central London, after
spending the previous 30 years in a large detached house in
Surbiton, Surrey.
Quite a life change. As regards flat living, Wendy says:
On the plus side, living in a flat is both friendlier and easier

than living in a house. I like the fact that we are now part
of a community and you are always meeting people - in
the lifts, on the stairs, in the gym and the swimming pool.
We hardly knew who our neighbours were in Surbiton.
I also like the fact we don't need a car any more, and all
events, such as the theatre or ballet, are in easy distance.
Also on the plus side, we don't have any maintenance in

the flat, as it's all taken care of by the management
company. There were always jobs to do in the house and
it was endless, expensive work to keep it going.
I N T R O D U C T I O N /15
On the minus side, says Wendy, flats are far noisier than houses
and there is far less storage space.
The kitchen is much smaller and everything has to be fitted

in. We had a separate washer and tumble drier in the
house, and they were both kept in an outhouse. In the flat,
they have to be in the kitchen and we do not have room
for a separate washer and drier. We have a washer-drier
and it seems to be going all the time with no escape.
When we moved here, it took months to get rid of stuff in

the cellar and the attic, and I sold 870 books for 10p
each. Although we spent a lot of money building
bookshelves in the flat, there was never going to be
enough room for all my books, or my archive material,
which at the moment is in my elderly father's garage.
But, decluttering gives you a good feeling. Here on the 9th

floor we have wonderful views, which of course we never
got with the house, but living in a flat means you have
absolutely no idea of the weather, as it always seems
warm in the building.
So I have to go down nine floors and put my head out of

the main door to know whether it's cold or hot, windy or
calm.
But mainly, flat living puts a different perspective on every

aspect of life. It is emphatically not living in a mini-house;
it is a totally different concept of living.
IB / H O W T O B U Y A F L A T
OTHER ASPECTS OF FLAT LIVING

Neighbour disputes are common with all types of housing, but
they are intensified in flats as it is less easy to escape your
tormentors. You are always likely to be meeting them at the
communal front door, in the lift or the stairs. You cannot escape
your neighbours in a flat as you can with a house, and there are
always likely to be people not on speaking terms with each other,
or somebody who makes life hell for others.
To sum up, it can be a complicated matter to live in a flat. To find

out why, we will now take a look at the peculiar history of
apartments and apartment living in Great Britain.
1
The History of Apartment Buildings
For most of recorded time, humans have lived in houses or, at

least, in separate dwellings. Even though extended families may, at
times, have lived in the same house or hut, they will always have
been connected by blood or marriage. It was not the case, until
fairly recently, that unconnected people lived permanently under
the same roof, unless it was in an Upstairs, Downstairs type of
situation, where some inhabitants were servants or slaves.
Flats, where everybody lives in a separate unit in the same building,

and where everybody is equal, are a relatively modern invention,
and can still be seen as an experiment in living that has only been
partially successful. It was only really when high-density housing
was needed, mainly in urban areas, that the kind of communal
residential buildings we now know as flats, came into existence.
In the past, it was mainly poor people, servants and apprentices

or those who had no other choice who lived in parts of houses
such as attics, basements, garrets, rookeries, and very often in
parts of houses not originally designed for human habitation. In
any case, where attics and basements were intended for residential
use, they were vastly inferior in style and construction to the rest
of the house.
Most British people aspired to live in their own houses, although

apartment living started to become popular in many European
17
cities during the nineteenth century. Apartment house

construction in Scotland, however, dates back to the sixteenth
century, when blocks of flats were built in Edinburgh. In fact, the
word 'flat' to denote a suite of rooms in a larger building comes
from the Scottish word 'flaet', meaning a floor, or a storey.
In Scottish law, the term 'common interest' was used to describe

the tenure rights of occupants, and enabled residents to own not
only their individual apartments, but also to own rights in the
common parts. This law is an early version of the co-ops and
condominiums in America, where residents collectively own the
building, and is very different from the leasehold laws that came
to be established for British blocks of flats.
THE FIRST FLATS

The first blocks of flats to be built in Britain were in central
London, and were of two very different types: housing for the
affluent middle and professional classes, and housing for the very
poor.
And never the twain should meet - at least, not until previously
high-class apartment blocks fell into disrepair and became
inhabited by squatters and the homeless.
The first upper-class blocks of flats were built in Victoria, London,

in 1853. In 1886 the most prestigious apartment building of its time,
Albert Hall Mansions, was completed for very well-to-do people.
In the mid-nineteenth century, what were known as 'catering flats'

began to be built to offer residential accommodation to affluent
THE H I S T O R Y OF A P A R T M E N T B U I L D I N G S /19
people who wanted a pied-a-terre in town in addition to their

country pile. The flats were aimed at single people or childless
couples (not so very different from today) and some were
segregated by sex, and known as 'gentlemen's apartments' or
'ladies' apartments'. The original blocks of flats aimed at the
affluent were not designed for family occupation, and consisted of
separate suites of rooms intended to be inhabited by people who
were not related to each other and, indeed, very likely did not
even know each other. As such, this was a brand new way of
living, aimed at those who wanted a self-contained type of life on
their own rather than be surrounded by their families, as in the
past.
In the novels of Jane Austen, Dickens, Thackeray, the Brontes,

George Eliot, Thomas Hardy and Anthony Trollope, nobody, but
nobody, lives on their own apart from misers and those shunned
by society. It was considered a terribly unnatural way to live, and
not something a normally sociable person would ever want. In any
case, when the only form of housing was separate houses, it was
not really possible to live alone.
The advent of flats gradually changed all those perceptions, until

you get to the novels of Anita Brookner, where just about all of
her central characters live in solitude in a hermetically-sealed
London flat.
The novelist Henry James, a lifelong celibate, lived for much of his
life in one of these original central London flats in Carlyle
Mansions, Cheyne Walk, Chelsea.
These early flats were luxurious for the time and were intended to
combine the best of private living with hotel facilities. They
consisted of self-contained suites of various sizes, where
housekeeping, cleaning and catering services were often on offer.
There was a common dining room where residents could eat and
also billiard rooms and games rooms. All these extra services were
included in the rent and initially at least it was not possible to buy
or lease these suites. In time, though, residents wanted more
security of tenure and began to buy leases, or long rents, from the
owners.
One reason these apartments were built in the first place was to
overcome the servant problem, becoming acute towards the end of
the nineteenth century. These upmarket apartments did not need
droves of servants, although Henry James had his faithful
manservant with him, as many services were provided by the
management.
Not all that popular

But in general, the demand for flats at this time was not great,
and according to Norbert Schrenauer, author of the mighty tome
6000 Years of Housing, there were two main reasons for this: fear
of the spread of infection from such close living, and the problem
of noise. Apparently, too, the innate conservatism of the building
industry at the time meant that developers tended to stick to the
more traditional type of housing.
Also, British people continued to resist flat living where they had
the choice, preferring their own house, however humble, with its
own front door and garden, than life in an anonymous block of
flats.
THE H I S T O R Y OF A P A R T M E N T B U I L D I N G S / 21
HOUSING FOR THE POOR

There were, though, other apartment buildings going up in mid-
Victorian times, and these were aimed at a quite different sector of
the population from Albert Hall Mansions and the like: the urban
poor, or very poor.
Flats for these people were built by philanthropists such as Peabody

and Guinness, and indeed, you can still see antiquated-looking
buildings bearing the names Peabody Buildings and Guinness
Buildings in ornate Victorian lettering, in many parts of London.
The first apartment building of this type was opened on February

29, 1864 in Spitalfields, in the East End of London, by the
American philanthropist George Peabody.
The building consisted of seven tenements of three rooms at five

shillings (25p) a week; 42 tenements of two rooms at four shillings
(20p) a week; six tenements of two rooms at 3/6 (IS'Ap) a week,
and two tenements of one room at 2/6 (12 Vip) a week.
The living rooms in these early tenements measured 13' by 10' and
the ceilings were eight feet high. Staircases and corridors were lit
by gas fixtures and there were laundries on the top floor. There
were no bathrooms in the individual tenements but lavatories on
every floor. There was also the unimaginable luxury that hot baths
were available simply by asking the superintendent for a key.
These tenements were intended for poor people 'of good

character' and were highly innovative for the time. The rents, at
least in the Peabody Buildings, were set 'at cost' which meant that
22 / H O W TO BUY A F L A T
they simply covered what the building cost to run, with no profits
for anybody.
Also in Victorian times, what we now know as maisonettes were

built for working-class people in large industrial towns such as
Newcastle-upon-Tyne and Liverpool. These maisonettes consisted
of a separate upstairs and downstairs in a long terrace, with two
front doors side by side. One family would live upstairs and the
other, downstairs, but be completely separate from each other.
Even the back yards at the rear of the property were separate, so
that each family had complete privacy, even though living literally
on top of each other.
My first married home was one of these maisonettes and consisted

of three bedrooms, one living room, a tiny kitchen and bathroom
and dingy backyard. The rent in 1965 for this unfurnished
upstairs maisonette was £3.10s (£3.50) a week. Not long ago, a
friend returned to the area and said the street was completely
unspoilt, by which he meant unmodernised. These maisonettes
now mainly house social tenants.
In the 1920s and 30s, more blocks of flats were built by

philanthropists for the urban poor, but the aspiration was still to
have a complete house rather than live in a flat.
MOVING ON
In the 1940s, especially just after the Second World War, councils
and local authorities started building blocks of flats, again often
very innovative for their time.
The 'children's laureate', writer Jacqueline Wilson, has recalled

how she went to live with her family in a council flat in Kingston,
Surrey, in the 1950s and could not believe the luxury - there was
hot water on tap, central heating and a bathroom ... these were all
amenities which were certainly not automatic in working-class
housing at the time.
Also around this time, existing houses in areas such as Netting

Hill, West London, had pretty much fallen into disrepair, and
were bought cheaply by slum landlords with the idea of turning
them into nasty flats for poor people and immigrants. These
cheap rented dwellings gave flats a bad name. One such dwelling,
10 Rillington Place, was a dismal, dilapidated tiny terrace house
badly converted into three flats. On the top floor lived Beryl and
Timothy Evans and on the bottom floor, the serial killer John
Christie. After Christie left the flat, some West Indians, recent
immigrants, moved in and noticed a strange, very nasty smell in
the place. It came from decomposing bodies walled up in the
kitchen. The new tenants called the police and Christie was
eventually hanged for the murder of at least five women. Soon
after this, Rillington Place was pulled down and the street was
renamed Ruston Mews. But until it was comprehensively
gentrified in the 1980s and 90s, Notting Hill was full of these slum
flats and, indeed, was notorious for them.
During the 1950s and 60s, council flats continued to be built but by
this time, they tended to be tower blocks, which initially seemed a
good idea but the high-rise soon became synonymous with sink
estates. Although the term high-rise is one of approbation in
America, in the UK it is now always used pejoratively.
Until the mid-twentieth century, with the grand exception of the

imposing mansion blocks in places like Knightsbridge and
Belgravia, flats were very much seen as housing for poor people
who could not afford a proper house. The 1960s song, 'My old
man's a dustman/ He wears a dustman's hat/ He wears gorblimey
trousers/ and he lives in a council flat' summed up the prevailing
conception of council flats being the very lowest in housing
options.
But before long, luxury blocks of flats were being built which
were aimed at professional people. These luxury flats tended to be
in ultra-desirable locations where it was no longer possible or
affordable to have separate houses. One of my early boyfriends, in
the 1960s, lived with his parents in a modern flat overlooking Kew
Gardens. This seemed to me very glamorous, as I had never
before known anybody who lived in a flat.
Also in the 1960s, 'bachelor flats' or what we would now call

studio flats, were designed to give single people self-contained
places of their own. Before this, as we read in the novels of
Barbara Pym, single working people of limited or ordinary means
had to resort to 'rooms' where they would often have to share
bathrooms and kitchens.
FLAT LIVING BECOMES STYLISH

Although as the twentieth century progressed, more people in
London started living in flats, owing to considerations of space
and money, prevailing attitudes towards flat living only started to
improve in the mid-1990s, when ever smarter and trendier
apartment blocks began to be constructed. The buy-to-let
phenomenon, plus advances in building technology, meant that
flats were, finally, becoming highly desirable and, in many cases,

more desirable than houses.
For just as apartment buildings of the nineteenth century had

laundries, games rooms, common dining rooms and lifts - all very
innovative for the time - so present-day apartments also usher in
many new ideas in housing. The more luxurious buildings now
offer spas, gyms, 24-hour concierge services, underground valet
parking and swimming pools, whereas the Peabody Trust is now
opting for modular, prefabricated housing which provides cheap,
contemporary flats.
The Peabody Trust, for instance, developed a new concept of

modular housing in 1998 in Murray Grove, Hackney, where the
finished apartments were available at cost rent, adhering to the
original Peabody principle. The Murray Grove building is aimed
at young singles and couples who cannot afford a mortgage but
who do not qualify for social housing. Needless to say, the
demand is huge.
THE PROBLEMS OF TENURE

So far as Britons were concerned, there was always an inherent
problem with the tenure of apartments, for those not content
merely to rent week by week. It was this factor, really, which
militated most against flat living becoming truly desirable. The
original council flats, mansion-block apartments and Peabody-
type buildings were all rented rather than owned.
At time went on, it was really the problems with tenure and
ownership which prevented more people from buying flats, as few
understood the ramifications of leasehold. Most people who had a
choice did not like the idea of leasehold, as this was very much seen
as a kind of second-best way of owning, and not the real thing at all.
By contrast, everybody understood what freehold meant and

where they could, people preferred to buy a freehold property they
would own in perpetuity.
Where council flats were concerned, everything changed anyway

with the right-to-buy ushered in by Mrs Thatcher in the 1980s,
where former council tenants could buy their lease at a massive
discount, and then sell it on if they wished after living there for a
minimum of three years. Thus, council flats went onto the open
market in the late 1980s, and soon began to compete with private
housing, as these flats were often in excellent locations. Most of
these original leases were for 125 years and, indeed still are, for
council tenants buying long leases.
Although it was relatively easy for a local authority to sell

separate houses, establishing leases for council flats for previous
tenants who wished to buy, was complicated, as it meant there
would be a mixture of leaseholders and tenants in the same block.
These problems have still not been fully ironed out, and make
buying a former council property a more difficult endeavour than
buying a flat in the private sector.
A CONTINUING PROBLEM
What we now understand as leasehold law developed piecemeal as
more people became interested in buying their flats or, at least, in
buying a long lease. But our complicated system goes back to the
Norman Conquest, when William the Conqueror annexed all the
land in the country for himself.
William declared that all the land belonged to him and then gave
it away to his followers in return for services to the king.
These new landholders were originally known as tenants and their

holdings, as tenures. Lords who held land from the king in time
divided up their holdings and parcelled it out to subordinate
tenants, who also owed them some kind of service. This is how
the feudal land laws, remnants of which remain in place to this
day, came into existence and eventually affected modern leasehold
flats.
The point about tenure is that the landholder did not absolutely
own the land but derived right of possession from somebody else,
and for a specified time. During the Middle Ages, there were
three types of ownership in existence: 'estate in fee simple'; 'estate
in fee tail' and 'life estate'.
The types of ownership

Briefly, the first type of ownership meant that land could be
inherited by the owner's male heirs according to the system of
primogeniture; the second type of ownership meant that there was
an identified line of succession outside which the land could not
be transferred, and the third simply lasted for the life of the
tenant, and ended on his death.
Part of the plot of Jane Austen's Pride and Prejudice hinges on the
concept of entail; Mrs Bennet wants Elizabeth to marry the
ghastly Mr Collins because the estate is entailed and would pass
directly to him on Mr Bennet's death. Be that as it may, no
Bennet daughter was prepared to marry Mr Collins for the sake
of securing the property.
Nowadays, the only vestige of the old land laws is the 'estate in fee
simple' which means in effect that if you buy a house which stands
on its own land, you will own that piece of property in perpetuity,
or until you come to sell. That is what is meant nowadays by
freehold. But if you own an apartment, say on the third floor of a
block, you cannot own the freehold because your property does
not stand directly on the land.
The term leasehold, which denotes the number of years remaining

on the lease, is in many ways a lingering reminder of the old
feudal system which meant that after the number of years was up,
the land or estate reverted to the lord.
But the old idea that property eventually belongs to the Crown
persists in the fact that if leasehold buildings which have become
limited companies do not make proper annual returns to
Companies House, the whole thing can revert to ownership by the
Crown and individual leaseholders lose everything.
REFORMING LAWS
The Law of Property Act, 1925, was an attempt to rationalise
land laws and bring them in tune with modern times and reflect
modern usage. But although much was done to sweep away the
old feudal laws, the concepts of freehold and leasehold became
enshrined in the new laws. In most other countries, you can buy
the freehold of an apartment and still own the land on which it is
built, through the system of co-operative ownership.
For some reason though, British governments have never quite

succeeded in doing away with old leasehold laws where you can't
buy your flat but only a length of tenure.
It is true that there are some freehold flats in this country, but
they are a legal fiction, and never worth very much on the open
market. This is because mortgage lenders are reluctant to lend
money on a property which does not conform to known laws, as
they fear they will not be able to repossess should the mortgagee
fall into arrears.
But as flat living becomes ever more the norm, leaseholders are
acquiring more security of tenure. When relatively few people
lived in flats, it was not really worth the government's time
reforming the laws, but now things have changed.
Present-day leaseholders can collectively enfranchise, which means

they can buy the freehold from the landlord. Individually
leaseholders have the right to extend their lease to 90 years, at a
'reasonable' cost, and they can exercise the Right to Manage,
without having to prove any dereliction on the part of the
freeholder or managing agents.
THE HISTORY OF SERVICE CHARGES

Service charges are always a bone of contention in blocks of flats
as nobody likes paying them. At first the whole system seems
unfair. You, the leaseholder, buy the lease, and then have to keep
paying for repairs when you never own the place.
This does not happen if you are an ordinary tenant on an

Assured Shorthold Tenancy, so why does it happen when you buy
a lease?
When people first began to live in apartment buildings, they

almost always rented from the landlord or freeholder. This rent
would include all services, often including what we would now call
utility bills, such as for heating, lighting and water.
But then, as time went on, occupants wanted more security of

tenure, and so leases began to be offered - 5 years, 10 years, 20
years and so on. As leases lengthened, occupants started to sell
these leases, or what was left on them, to others.
Once leases began to be sold on the open market, money was no

longer paid to the landlord, but to the outgoing leaseholder. This
meant that the freeholder would now have no income from selling
the leases and no way of funding the running of the building.
So service charges were introduced, whereby all leaseholders had

to pay an annual amount to the freeholder for running the place,
otherwise it would rapidly fall into disrepair.
But as nobody liked paying service charges and everybody almost

always thought they were too high, ways had to be formulated
both for ensuring that service charges were paid and, also, that
freeholders were not unduly profiting from their leaseholders.
Then as time went on, the original freeholders died or sold on the
freehold to others, and, in this way, leasehold law and flat living
gradually became ridiculously complicated. Half the time,
leaseholders had no idea who the freeholder was. It could be an
individual, a company or a consortium, even an insurance or
finance company.
THE H I S T O R Y OF A P A R T M E N T B U I L D I N G S /31
Then, original leases began to run down and lose their value. So,
again, a way had to be found of ensuring that long leaseholders
could continue to live in their homes. That was when the right to
a lease extension came in.
Variables
These are the variables that can exist in a block of flats:
+ Leaseholders with an outside freeholder.

+ Leaseholders with a share of the freehold who have formed a
company limited by guarantee.
* Outside managing agents.
+ There is a head leaseholder below the freeholder.
+ The block is self-managed.
* There is a Residents' Association.
+ There are some leaseholders and some tenants paying monthly
rent (ex-local authority blocks).
+ There may be many absentee landlords subletting.
+ In rare cases, the flats themselves may be freehold.
* The building may be Commonhold.
* The leases may all be the same.
+ The leases may be very different from each other.
+ There may be leaseholders with wildly varying lengths of lease
left.
+ There may be a sinking fund.
* There may be no sinking fund.
* The block may be well run.
* The block may be badly run.
+ With some new blocks, the tenure may be something new -
commonhold.
Many people still see flats as types of cheap houses, without really
understanding that in effect, when they buy a flat, they are buying
into a morass of complications which often even the most astute
legal brains fail to untangle satisfactorily.
And none of the above remotely apply when you buy a house.
You just buy the house and that's it. And just to make things
even more complicated, there are very many types of flats you can
buy.
2
What Type of Flat is it Best to Buy?
Depending on your price range, location and preference, there are

a large number of options available when buying an apartment.
You will have usually far more choice than when buying a house.
You can buy new, old, trendy and contemporary or grand and
traditional apartments. A small or large apartment, perhaps on
the ground floor or a penthouse.
Obviously, you want to buy a flat that will, with any luck, increase
in value over time, but apart from the considerations of the length
of the lease, management structure and leasehold/freehold issues,
there is still a lot to think about.
EXPLORING THE TYPES OF FLAT AVAILABLE

There are very many types of apartments on offer, such as:
+ conversion
* mansion block
+ purpose-built block
+ maisonette
* newbuild
* warehouse or other conversion from former non-residential
premises
* ex-local authority block
+ small block
+ large block
33
* flats over shops

4 shell apartments
+ shared ownership
+ live/work units
+ retirement or 'age exclusive' apartments.
We will take a look at each of these in turn.
CONVERSION
These are most often Victorian or Georgian conversions, cut-
downs from a bigger house, although they can also be Edwardian
or 1930s semis, if large enough.
Advantages
There are not usually many apartments in each house, possibly
five or six maximum. Conversions also usually have low service
charges and are frequently sold with a share of the freehold.
Because of the small number of units in each house, you are
unlikely to get the level of administrative problems which can
occur in larger blocks. Most conversions are in urban locations,
and enable you to live in an area you might not otherwise be able
to afford.
Newspaper stories of former broom cupboards being sold as

studio apartments in very expensive areas such as Knightsbridge
and Chelsea, for instance, remind us that these tiny conversions
enable buyers with very small budgets to live in self-contained
apartments in trendy and central locations.
If location is more important than size, then you are most likely
to find what you are looking for in a conversion.
WHAT TYPE OF F L A T IS IT B E S T TO B U Y ? / 35
Disadvantages
In older conversions, some of the rooms may be tiny, such as
kitchens and bathrooms. Also the conversion may have been done
amateurishly before present day building regulations were in
force. Because walls can be thin, conversions are often very noisy
places to live in.
Very often, common parts are dilapidated and rundown and there
are likely to be areas nobody bothers about, especially if all the
residents jointly own the freehold. When I lived in a conversion,
there was a cupboard at the top of one landing that seemed to
belong to nobody; consequently it was full of rubbish, and none
of the residents would take the responsibility of clearing it out.
In most conversions, the apartments are far from being equal in

size or grandeur. There will usually be one grand flat, which
constituted the family's living quarters in Victorian days, and then
as you go upstairs, the flats get smaller and less well appointed, as
they were usually the original servants' quarters.
This inequality can lead to disputes over apportionment of the

service charges, especially as such conversions are usually too
small to make it worth bothering with managing agents. It is
most usual for one of the residents to take responsibility for
management; or, as happened in my case, we took it in turns.
Conversions work well when everybody gets on, as we did, but

they can be a nightmare if you have a problem or non-paying
neighbour.
Common parts tend to be small and narrow landings and halls

from the former house. So there is often nowhere to put bikes, for
instance, which means they are found in the hall and this can look
messy and depressing. There may also be problems with parking,
especially where there are now four or five homes in what was
formerly a single dwelling.
MANSION BLOCK
These, the first 'purpose built' blocks date back to late Victorian
and early Edwardian days and are often extremely grand and
imposing.
Advantages
As the flats are not cut-downs from a whole house, they are not
subject to the inequalities of size that happens in conversions.
Also, as they were originally built to be flats, there is less danger
of the gimcrack kind of adaptation you can find in conversions.
Although the individual flats in mansion blocks may be of varying

sizes, they were all at least intended to be flats, right from the
start. Common parts tend to be well kept, there is often a resident
porter or caretaker, and a contractor employed to clean windows
and maintain the exterior. Communal gardens are usually also
very well kept. Mansion blocks tend to be found in central
locations in big cities.
Other advantages are that they have high ceilings and the rooms
are a good size.
Disadvantages
There may be an antiquated communal heating and hot water
system in place, and this hikes up service charges. These tend to
WHAT T Y P E OF FLAT IS IT B E S T TO BUY? / 37
be high anyway with mansion blocks, as there are often luxurious

carpets and expensive wallpaper in common parts. The decor is
often extremely traditional. There may not be a car park or any
parking facilities as these blocks were often built before cars were
invented.
Many residents will have been living there for decades, and if a
large number are pensioners, it can be difficult to collect money
for the major repairs which mansion blocks will certainly need
from time to time.
Another disadvantage is that drainage and plumbing systems were

put in before the days of power showers, en suite bathrooms,
dishwashers and washing machines, so often the existing system
cannot cope and has to be redone at huge expense. Leaks are
common in mansion blocks and it may be difficult to discover
their origin.
Also, many mansion blocks are huge, dark and forbidding,

especially in London, and you may never get to know your
neighbours.
PURPOSE-BUILT BLOCKS
These were built from the 1930s, as the demand for apartments
increased, and many, such as the art deco Embassy Court in
Brighton, have now become listed buildings. They have a very
different look from the Edwardian mansion blocks, which are
usually redbrick and very ornate.
Purpose-built (PB) blocks are more modest in appearance,

although they again often have resident porters and well
maintained, if more modest, common parts than mansion blocks.
Advantages
As with the mansion blocks, they are not cut-downs from bigger
houses, so each flat is usually a decent size. Again, they tend to be
in very central locations, and enable you to live in a location
where you might not be able to afford a whole house.
Security is usually excellent, and the block will almost always be

managed by professional managing agents. PB blocks may or may
not come with a share of the freehold but these days there will
almost always be a residents' association which keeps a close eye
on expenditure and the upkeep of the fabric.
Disadvantages
As with mansion blocks, the older PB blocks often have
communal central heating and hot water. This not only hikes up
the service charges, but means you cannot control their
operations. Consequently you can be boiling in October when the
central heating is turned on, and freezing in May, when it is
turned off. Also, as everybody in the block is likely to be having a
bath or shower at more or less the same time, the 'hot' water can
at times be tepid or even cold.
It is usually too expensive and difficult to untangle the pipework

so that everybody can put in an individual system. These
communal systems usually date back to the 1960s, after which
individual systems were put in using Combi boilers.
WHAT T Y P E OF FLAT IS IT B E S T TO BUY? / 39
Flats in PB blocks can seem suspiciously cheap and there are

good reasons for this; high service charges and, often, high prices
to be paid for lease extensions. In some older PB blocks, leases
can be very short, as well.
NEWBUILDS
These are springing up all over the place and often incorporate
trendy new features enabling luxury living at a fraction of the cost
of buying a house in a similar location.
Advantages
Even quite modestly-priced apartments in new blocks are often
sold with fitted kitchens, bathrooms, carpets and curtains included
in the price. If you get in early, you can usually choose your
carpets, worktop finish and tiling from a range. Security is tight
and there may well be an underground car park, gym, spa,
swimming pool, laundry and dry cleaning facilities and possibly
even an art gallery or shops. Locations are usually excellent, as
newbuilds tend to be constructed where there are good transport
links. From the higher flats, views may be stunning.
There will also be a 10-year building certificate in place.

Soundproofing is usually excellent, and many new design features
will be incorporated.
Disadvantages
Newbuilds are very heavily marketed, with beautifully-designed
showhomes to gawp at, plus 'incentives' such as your stamp duty
paid or a 'guaranteed six per cent rental' if you intend to rent out
the apartment. And sometimes there may be a cash incentive on
top of all this. If you buy offplan at an early stage, you can also
often secure what seems like a massive discount.
But beware! Developers are not primarily in the business of giving

you money, but making money for themselves. There may be
hidden disincentives if you look hard, such as the flat not being
sold with a share of the freehold, and service charges being hiked
up after a couple of years of being kept artificially low.
In addition, there are often a lot of investor buyers with

newbuilds, often from consortia in Hong Kong or somewhere who
buy up many apartments in the block at a huge discount. So there
may be many absentee landlords renting out properties, which
means a large transient population. In one newbuild block in
London, a single investor bought up 26 units at a stroke, all to
rent out.
Also, there are many property clubs in existence which purport to

sell newbuild flats for a discounted price, at an early stage of the
construction. Many people nowadays are 'buying to flip' which
means they never intend to live there themselves or even rent the
place out, but to sell straight on at a profit. This can mean a lot
of empty flats when you move in; some buy-to-flip flats can take
two or three years to sell. In the meantime, they stay empty with
permanent 'For Sale' notices which look dreary and depressing,
and as if everybody has cynically bought as an investment rather
than a home.
With a newbuild, it may take a long time to recoup the investment

and you may also be living surrounded by rubble and building
works, as apartments are 'released' usually in phases, long before
the development is fully completed. There is also likely to be a
long snagging list, even with the building certificate in place. The
WHAT TYPE OF F L A T IS IT BEST TO BUY? / 41
first people into a new block often find many things go wrong as
the place has not been tried and tested.
You may also discover that you buy into a trendy, contemporary
apartment which starts to look distinctly old-fashioned after a few
years. Many newbuilds are sold with kitchens and bathrooms
already in place, and with kitchens this usually means black
granite or other feature which will inevitably, like the latest
fashion in clothes, have a fixed life, after which it will look
horribly dated.
Ceilings tend to be low in newbuilds, and windows are usually

plastic (UPVC) which start to look distinctly dingy after a few
years.
Developers often sell on the freehold upon completion, which can

mean insecurity about who will eventually own the place. Also, it
takes time for residents' associations to be formed; this can be
difficult if there are many investors buying, either to flip or to rent
out. Only owner-occupiers will be interested in forming such
associations.
•l i T^JM|
A note on 'discounts': they are not always what they appear. One buyer was told
that a two-bedroom newbuild was on the market at £220,000, but because she
belonged to a property club, she could buy it a discount for £193,000. However, it
was valued by a local estate agent at £173,000 - and she couldn't even sell it at
that price.
WAREHOUSE CONVERSIONS
These are rapidly turning into trendy homes and are extremely
popular for 'loft living'. Most often, these are new conversions
from buildings not originally intended to be for residential use,
such as old police stations, factories, industrial units, fire stations,
post offices, schools, colleges and barns and outbuildings.
Advantages
Large spaces and central locations, plus a definite style cachet,
make these apartments very popular.
Disadvantages
They can look barn-like and forbidding, and are often sold in an
unfinished state, so you will have to do a lot of the work yourself,
which can be costly and time-consuming. Loft and barn
conversions can be difficult to make cosy.
EX-LOCAL AUTHORITY BLOCKS

A lot of flats in these blocks have come onto the open market
since the original buyers, former council tenants who bought at a
huge discount under Mrs Thatcher's right to buy scheme, have
sold and moved on. At one time, flats in these blocks were
distinctly cheaper than others; now, depending on location and the
condition of the estate, they often go for much the same price as
any other flat of a comparable size.
Advantages
The flats are often surprisingly roomy, with good storage and big,
square rooms. In addition, they are often in excellent locations,
and have well-kept communal gardens.
WHAT T Y P E OF FLAT IS IT B E S T TO B U Y ? / 43
Service charges are usually low, when compared to comparable

private flats in similar locations. Very often there will be a balcony
which gives at least some outside space.
Security is usually good and caretaking services are provided in

the service charges. Also, rubbish is collected regularly.
The buildings are looked after by the local council, so there are
rarely serious management problems. Also, nobody is making a
profit as in the private sector, as local councils are not allowed to
make a profit.
Disadvantages
They can be on rundown estates. These blocks rarely have any
architectural features of merit, and can look forbidding and
offputting, even if inside they are often a pleasant surprise.
If buying into a high-rise or tower block, leases can be short and

it may be difficult to extend, which means it is impossible to get a
mortgage. There will be little or no resale value if you buy on a
short lease higher than the seventh floor.
Common parts and lifts may be covered in graffiti or vandalised.

Values are unlikely to increase significantly even with a long lease
on a first or second floor flat where there is a high proportion of
council tenants, homeless or rehoused people.
You are buying into mixed tenure. In the majority of ex-local

authority blocks, there will be a mix of leaseholders, tenants of
leaseholders, property investors and social tenants. This means
44/HOW TO BUY A FLAT
that these blocks tend to have a lower value than in the private
sector.
Service charges usually seem low and this is because local

authorities are not allowed to amass a sinking fund. This means
that whenever major repairs are indicated, you are charged for
your percentage share under the lease, which could come to four
or five figures unexpectedly.
Even when the common parts are clean and tidy, they are rarely
warm or welcoming, as most council blocks were originally built
as cheaply as possible.
SMALL BLOCKS
Apartment buildings vary enormously in size, from a two-
maisonette building to a very large block containing four or five
hundred flats. As ever, the definition of a 'flat' is where you share
roof and foundations, and possibly, some external walls.
A 'small block' is usually one where there are six or fewer units in
the building.
Advantages
With small blocks, you almost always know your neighbours, there
is no real need for outside management adding to the running
costs, and provided you are all neighbourly, you can sort out
repair and maintenance matters amicably and without fuss. Small
blocks are necessarily cheaper to run than large blocks; you may
not need to employ outside caretaking and cleaning services and
will probably not have to go to the expense of a lift.
WHAT TYPE OF FLAT IS IT BEST TO B U Y ? / 45
Disadvantages
Small blocks can be a nightmare where there are feuding
neighbours, or one owner who refuses to co-operate. Also, you are
not likely to enjoy the amenities of a large block such as
underground carpark, communal gardens or a gym, for instance.
LARGE BLOCKS
By far the great majority of newbuilds are large blocks, as these
are more cost-effective for developers. But there are also many
large blocks dating back to Victorian and Edwardian days, and
every decade up to the present time. Large blocks can contain
several hundred individual apartments.
Advantages
You can be more anonymous in a large block; this is an
advantage for some, but a disadvantage for others. There is likely
to be better security and cleaning arrangements in a large block
and of course, there is a greater choice of properties within the
block. Neighbour disputes tend to be less personal, and as flats
are frequently changing hands in a large block, even quite serious
disputes do not usually last long.
It is easier to club together and buy the freehold in a large block,

to exercise the Right to Manage, and to form a Residents'
Association. In a large block, there is safety in numbers!
Disadvantages
Large blocks cost far more to run than small blocks, so service
charges will be higher. Large apartment buildings can also be
forbidding, and repairs expensive and difficult to carry out as they
almost always need scaffolding. There will often be at least one or
two debtors and vexatious owners in a large block. Large blocks
also definitely need outside managing agents, and this also hikes
up the cost of service charges.
The older the block, the more likely it is to have fallen into at
least some disrepair, and need major renovation or updating. Lifts
in large blocks, for instance, can be very expensive to repair or
replace.
FLATS OVER SHOPS

In recent years, the government has been trying to persuade
people to invest in flats over shops, which have historically had a
bad reputation.
Advantages
Such flats are usually in excellent locations, as they are in
shopping areas, and being over a shop means they are cheaper to
buy than a comparable flat not over a shop.
Disadvantages
Disadvantages
The lease situation will usually involve the shop, and be
complicated, as it is part-commercial and part-residential. This
means the landlord is very likely to be a company or corporation,
rather than a person. You will have no say in the kind of shop
you are over, and if you are over commercial premises which turns
into an off-licence, betting shop or charity shop, your flat may lose
value.
Flats over shops are less easy to sell than others, and often have
extremely dismal, dilapidated common parts and nasty doors.
Common parts also tend to be very dark and poorly lit.
WHAT TYPE OF F L A T IS IT BEST TO B U Y ? / 47
SHELL APARTMENTS
These are sold as 'shells' where in effect you buy an empty space
already marked out as a flat, but possibly without already being
divided into rooms. There may not be a kitchen, bathrooms,
flooring or any storage when you buy the apartment. In a way,
shell apartments are the complete opposite to standard newbuilds,
which come ready with fully-fitted kitchens and bathrooms,
carpets and other flooring.
Advantages
Shell apartments are almost always in large cities and unlike
warehouse conversions, which they resemble in some ways, tend to
be built from scratch. They are usually large, and mean you can
totally stamp your own personality on your home, which can be
difficult with the average newbuild apartment. Shell apartments
can be made to look strikingly individual.
Disadvantages
It can be difficult to budget, as obviously everything you put in
will be at extra cost to yourself, and it may also be difficult to
visualise exactly what it will look like when finished. Shell
apartments are usually aimed at the high end of the market and
will be expensive in the first place.
It can also be hard to make these apartments look cosy.
You need to have quite a lot of the interior designer and architect
about you to make a shell apartment work successfully.
SHARED OWNERSHIP
In this case, you buy part of an apartment and rent the other
part. You can buy with up to four other people, and buy a share
on which you can get a mortgage. You then pay ordinary rent for
the remaining share that you do not own. As time goes on, you
can increase your share and eventually own your home outright.
Mainly, the owners are housing associations or other social
landlords or non-profit organisations, and this part-rent, part-buy
scheme is seen as a way of helping those on low incomes onto the
property ladder. In effect, you buy your home in stages.
Buyers must be considered to be in housing need who cannot

afford the price of properties for sale on the open market.
Once you have bought a share, however, you will become

responsible for service charges and a share of any renovation
work on the building.
This type of housing is often known as 'affordable' or 'key

worker' housing.
Advantages
This is a good way for young people of limited means to get into
property ownership and in exchange for buying a share, you will
be given a lease of, typically, 99 years.
There is high demand for these units and you will not usually find
it difficult to sell your share, or the property outright if you have
acquired 100 per cent of the shares.
Disadvantages
You are neither one thing nor the other; neither a real renter nor
a real owner and, in some ways, can experience the disadvantages
of both. And unless you own the property outright, you may have
WHAT TYPE OF F L A T IS IT B E S T TO BUY? / 49
to sell your share to a prospective buyer nominated by the social

landlord. In some areas, the social landlord may also restrict your
ability to buy further shares in your home, and may reserve the
right to buy back the property from you.
You must also obtain permission from the landlord to carry out
any internal improvements or alterations.
LIVE/WORK UNITS
These are a relatively new idea, and refer to a combination of
living and working units in a single, purpose-designed type of
accommodation. This idea is very different from working from
home, as the workspace will be a dedicated commercial unit.
Live/work units can be a good idea for people who are setting up
their first business and may not be able to obtain separate finance
for business premises.
So far as tax is concerned, live/work is not currently a recognised

term, and is classified under the old-fashioned phrase 'composite
hereditament'. This means it contains both domestic and non-
domestic property, but there must be some domestic use involved.
Live/work units cannot just be regarded as cheap offices.
The part of the unit used for living is rated under ordinary
council tax bands, and the work area will be charged under
business rates. A Valuation Officer will have to come round in
each case and make an assessment.
You can get either a residential mortgage, a commercial mortgage

or a mixture of the two. In normal cases, live/work units are
mortgageable in the same way as ordinary residential units.
Advantages
The advantages are obvious! You can live and work in the same
space, yet have clearly defined areas for each activity, so you are
not running a business on your kitchen table. Ordinary leases do
not normally allow businesses to be run from residential premises,
so these units are a breakthrough. Most live/work units are sold
on leases of at least 100 years and the ground rents and service
charges applicable are very similar to those of ordinary residential
apartments.
Disadvantages
Well, you can never escape from your work or shut the door on
the office and go home, because your home and office are in the
same space. There may well be restrictions on the type of business
you can run from such a unit, or whether you can have employees,
and it may be difficult to expand your business as there is nowhere
for it to go.
The Capital Gains Tax situation could be difficult when you come
to sell, as you will be liable for the business part of the property
and not for the living part.
You would also have to sell your unit to another live/work buyer,
so it could take longer to sell than a purely residential unit and is
also unlikely to increase in value as much as a fully residential
property.
WHAT TYPE OF FLAT IS IT BEST TO B U Y ? / 51
RETIREMENT/AGE EXCLUSIVE APARTMENTS

Nowadays, there is a huge choice of apartments aimed at older
people, from the simple 'age exclusive' home where you have to
be, typically, 50 or over to buy into the development, to whole
estates which offer a full range of hospital and nursing services.
Retirement homes come at every end of the market, from exclusive

apartments in gated developments to cheap mass-produced
housing.
Many retirement homes also have visitor suites which you can
book, communal dining and games rooms, and a warden or
concierge on duty. Most also have a 'panic button' which you can
press for immediate medical assistance.
Retirement apartments are the fastest growing sector of the

housing market and, for the developers at least, one of the most
profitable.
Advantages
As these apartments are purpose-built for older people, they will
often have wider doors than usual, for wheelchair use, easy-access
bathrooms and other features designed to make life easy for older
and less able people.
Disadvantages
All your neighbours are old or elderly! My former mother-in-law,
who ended her days in a sheltered home, complained that
everybody around her was deaf, and she missed the lively chatter
and mobility of younger people. The biggest disadvantage,
however luxurious the development, is perhaps this 'ghetto' aspect.
Service charges tend to be high, as there are more services than

usual provided in these homes, and locations are not always as
good as they might be. In many instances, you have to pay a
premium back to the developers when you sell, and in any case
you cannot sell on the open market; only to other qualifying
people.
Some retirement apartments are very small and dark, while others
can be truly luxurious. This all depends on your pocket.
Only reasonably active older people are allowed in sheltered

accommodation, as if you need round-the-clock or hospital care,
you will not be allowed to buy. Originally, most sheltered homes
had live-in wardens, but few do now, and most have assistants
who come in only for a couple of hours or so a day.
IS THERE A BEST BUY?

Probably not, as each type of flat has its particular pros and cons.
The only way to look at the situation is to ask whether you can
see yourself living in the place, and fitting into its existing
structure. Some older people, for instance, would not dream of
going into 'age-exclusive' apartments, while for others it is a
wonderful luxury to be in a flat designed with their needs in mind.
For some people, price is the main criterion, whereas for others,
space or nearness to main transport links, shops and theatres will
take precedence. One friend has a gorgeous flat in Covent Garden
which is above commercial premises. She is near to everything, but
there is nowhere at all to park.
WHAT TYPE OF FLAT IS IT BEST TO BUY? /53
There is no such thing as a wonderful apartment which has all the

advantages and none of the disadvantages, so you have to ask
yourself how important, for instance, are architectural features or
a period feel against convenience or low service charges.
I would say these are the main aspects to look out for when
considering which flat to buy:
Parking provision
This is particularly important in large cities, as if the entire
building is on double yellow lines with nowhere to park, you will
be forever driving round the area. If there is a garage priced as an
extra, as is often the case, go for it.
Most modern blocks of flats are built with underground parking;

pre-1960s blocks are unlikely to have this facility and ex-local
authority blocks almost never offer it.
Neat and tidy common parts

This indicates the building is well run and that most service
charges are paid on time. First impressions count when you to go
to view a flat.
A caretaker
In very large blocks, the caretaker may live in. There should
always be somebody in charge of caretaking, rather than relying
on contract cleaners.
Cleanliness of windows and type of curtains

This is maybe your biggest indicator of the type of neighbours you
will have under the roof. Dingy, yellowing, nicotine-stained net
curtains, filthy broken windows and cardboard or sacking up at

the windows should all be your signals to steer well clear.
Condition of the exterior

This also indicates whether there is enough money being raised, or
raisable, to keep the building in good repair.
The state of communal gardens, porches and driveways

Again, the cleaner and smarter these are, the more you can buy
with confidence.
Other points
From experience, I would say that one thing to avoid is communal
heating and hot water systems which are not only fiendishly
expensive, but are always going wrong. And the hotness of the
water is never guaranteed.
Buying with a share of the freehold, although often

recommended, can also have its problems as very often, residents
argue among themselves. Both Lease and the Citizens Advice
Bureau say that neighbour disputes in blocks of flats have greatly
increased since collective enfranchisement became popular.
WHERE IN THE BLOCK?

The choice does not end with deciding on the type of flat you
prefer. There is also a choice of storey: you can live at the top, in
the basement, on the ground floor, or go for a garden flat.
Best buy
Is there a best buy here?
WHAT TYPE OF F L A T IS IT BEST TO B U Y ? / 55
Most definitely. I would always recommend buying a first- or

second-floor flat, with a balcony. You can easily get cabin fever
when contained in a flat, especially at weekends, and even a little
outside space such as a balcony or patio makes a world of
difference.
I would tend to avoid a ground floor flat, especially where you are
at street level, as you are then subject to all the noises and
possible vandalism of the street. You are also liable to be
disturbed by the front door continually opening and shutting, and
the sound of other people's doorbells. If your flat opens straight
into the hall, there will be comings and goings which are not
noticed on other levels.
The only flats that come with gardens, apart from roof gardens,
will be at ground floor or basement level and here you have to
offset the disadvantages of being on this level, with the advantage
of outside space. Do not buy a basement flat with no outside
space; it is like living in a prison. In older buildings, it can be
difficult to get rid of damp in a basement.
The highest premiums are, of course, reserved for penthouse flats,

particularly where these have a stunning view and perhaps a roof
garden. Penthouse flats can easily go for twice as much as others
in the same block, and increase in value more quickly. Of course,
penthouse flats are only popular in buildings with a lift. Few
people want to trudge up six or seven flights of stairs and you may
have trouble getting tradesmen to deliver without a lift.
Wherever possible, go for a flat with a view as these also

command a premium price.
Hi if I E.^1
If you are buying a flat with the intention of letting it out rather than living in it
yourself, exactly the same strictures apply. In general, tenants value the same
things that owners value and even as an absentee owner, you will still want to
know that your purchase will gain, not lose, value over time.
As ever, the most fundamental aspect of buying a flat is the lease.

We will now take a look at the ramifications and complications of
this often troublesome document.
3
The Lease
The lease is by far the most important aspect of any flat purchase,
as it governs the behaviour both of residents and the freeholder, if
there is an outside freeholder. Even if there is not, and the lease is
sold with a share of the freehold, there will still be a 'leaseholder'
and a 'freeholder' or 'landlord', even if the leaseholders and
landlords are one and the same.
In situations where the residents have enfranchised, the landlord

will have become a limited company, so that if the building is
called Fairview Court, the landlord will be Fairview Court Ltd,
where each resident is a shareholder and there is a Board of
Directors and a Secretary.
There has to be some kind of separation into freeholder and

leaseholder for the thing to work, to ensure that service charges
are met, common parts are looked after and repairs are carried
out. Even when the 'lunatics run the asylum', there has to be some
legally-binding document in place that ensures the smooth
running of the building.
There may or may not be managing agents, as this is not a legal

requirement. But, in any case, the limited company acting as the
landlord has the same powers as an outside landlord, and can
forfeit leases or put a charge on a property.
57
Now you can see how it becomes complicated to buy a flat! The
lease is a legally binding document on both sides, and there could
be serious penalties for breaches. When you sign a lease, you enter
into the terms of that lease, so it is as well to know what you are
signing.
QUESTIONS TO ASK
If you are interested in a lovely flat in a wonderful location you
need to ask - and have satisfactory answers to - the following
questions before ever making an offer:
1. How long is the lease? Very often, on estate agents' particulars, it

says 'to be advised'. They want to get you through the door
before they tell you the bad news, by which time, they hope, you
will have fallen irrevocably in love with the flat. Be very careful
of properties where the lease is 80 years or less, as it will then be
difficult to obtain a mortgage. And even more difficult to sell!
2. Is the flat being sold with a share of the freehold? Nowadays,
estate agents often put this on the particulars, but not always.
Always buy with a share of the freehold where possible, as this
means there is no outsider in overall charge.
3. If the flat is not sold with a share of the freehold, who is the
landlord or freeholder? Is anything known about this person or
company? Do they generally have a good reputation? It is
important to remember that estate agents do not always know
themselves who is the landlord, so it is up to you to find out,
especially if they look blank when you ask them.
4. Is there more than one leaseholder? In other words, is there a
complicated layer of ownership where there is a landlord, a head
leaseholder and ordinary leaseholders, such as you, the buyer?
This often happens with mansion blocks in London.
T H E L E A S E / 59
5. Are there any plans to enfranchise? If so, how advanced are

these plans? And how much is it likely to cost everybody?
6. What are the service charges?
7. Are there any plans for major works?
8. Is there a sinking fund in place? If so, how much is it?
9. If the lease is shorter than 80 years, can it be extended, and how
much would a lease extension cost?
10. Are there any serious debtors in the building?
11. Are there managing agents?
12. Is there a Residents' Association?
13. Is subletting allowed? Under what terms? (This is particularly
important to know if you are buying your property as an
investment.)
14. Is there a lift?
15. Is there a communal heating and hot water system? Wherever
possible, avoid these blocks.
16. Is there a resident porter? Remember, that the more services
there are, the more expensive the building is to run, and the
higher the service charges.
17. Are all the leases the same? In older buildings, some leases may
be different from others. In new buildings, all leases are usually
identical. Before buying into an older block, ask if all leases are
identical, as having differing leases can cause enfranchisement
problems.
Although some of these questions may appear pernickety, it is

worth remembering that once you are in, it may be difficult, if not
impossible, to change anything. And very often, solicitors do not
ask all of these questions. Many conveyancing solicitors,

themselves living in secluded mansions in the suburbs, may not
understand leasehold law all that well. It is a specialised area,
rapidly becoming ever more specialised as laws change and ever
more tribunals, regulations and associations start up.
THE LEASE ITSELF

This is usually couched in antiquated legalese and as such, is often
not readily comprehensible to the layperson. Because of this, few
people buying into leasehold properties ever read the lease or ask
to have any clauses they do not understand explained to them.
Then, whenever disputes arise, complainants are first asked to

'refer to the lease' when they may never have even glanced at it
before buying into the building.
It is tempting, when documents are written in archaic and

unfamiliar language, to imagine they contain some mystic
elements beyond the powers of ordinary people to understand. But
also, because they seem very stern and legal, there is also the
temptation to believe that therefore they must necessarily be fair
and above board.
This is by no means always the case. Don't forget that leases are
deliberately couched in arcane language to befuddle you, the
buyer, and make you think you need a solicitor who charges £200
an hour or more to explain everything. Before buying, always ask
to see a copy of the lease; nay, insist on it as once you have
signed, it will be too late to undo any clauses you may not like.
If your vendor or solicitor demurs, you can obtain a copy of the

lease in any case from the Official Copy Deeds Section of the
Land Registry. In recent years, the formerly impenetrable Land
Registry has become much more user-friendly and a lot of useful
information is obtainable from their website.
THE MAIN ELEMENTS OF A STANDARD LEASE

A typical lease may be 20 or 30 pages long, and it is always
written in unpunctuated English. There are no commas, semi
colons or full stops. Here is a guide to the main elements of a
standard lease:
The current law under which your property is registered to you is

the H.M. Land Registry Land Registration Act 2002. This applies
even if your lease was issued before this date.
The lease will contain a title number, which is the title number of
your property registered with the Land Registry. The property
address will then be given, together with the date of the lease,
which is the first purchase of the lease and not necessarily your
purchase.
The particulars will also include details of the lessor, who is your
landlord and original lessee. Your property is referred to in the
lease as the 'demised property'.
The term 'other demised property' relates to other property

included in your lease that you may also own, apart from your
actual dwelling, such as a garage, garden shed, garden or
outbuildings which are being sold along with the flat.
The term 'premium' refers to the original price paid for the flat.
This will be shown in words and figures.
Next will be a series of 'schedules' which set out the terms and
conditions under which the lease is granted, and covers
obligations on both sides. There will be clauses to say that if you
do not pay the ground rent or other money you should pay under
the lease or break any of the covenants you have signed for, you
may be subject to forfeiture of the lease.
There will also be a reference to service charges. The landlord

provides these services, for which you will have to pay a share,
usually a percentage set out in the lease. The percentage payable is
most often based on the size of your flat, expressed in terms of
square metres or square feet. Most often, in modern leases,
percentages are expressed per square foot of the property.
The 'Common Parts' referred to in the lease means all those parts
of the property not exclusively enjoyed by the lessee, such as
stairs, lift, main door and communal gardens.
The lease will have a plan attached which shows the boundaries of
your particular property. This is usually outlined in red. There will
be a reference to the conduits, pipes and drains which only serve
your flat but which may not be situated entirely in your home.
There will also be a paragraph referring to 'internal plastered

coverings and other materials on the walls bounding the Demised
Premises' (or some such phrase) and this tells you which is your
exclusive property and which belongs to the landlord. For
instance, windows and window frames are usually the landlord's

responsibility although the inside of the frames are your
responsibility to maintain.
The whole of the internal walls will be your responsibility

including the plaster and any tiles.
There will also be a schedule telling you what rights you have to
use other parts of the property such as the entrance hall, lift and
stairs. This includes not only yourself but any visitors or workmen
coming to your flat.
The lease will contain covenants to ensure that you, the lessee,
keep your flat in good condition and are not violating any of the
clauses, such as putting in new windows or knocking down
internal walls without written permission. In most cases, you
cannot carry out major works without the express permission of
the landlord, as this may adversely interfere with other parts of
the building.
There will also be a clause allowing the landlord or freeholder

access to your flat to carry out works or inspections under other
clauses in the lease.
FURTHER COVENANTS
These will include the right of the lessee (that's you!) to have sight
of the accounts for the previous financial year - usually 1 April to
31 March - and the right of the landlord to charge you in advance
for services provided.
There will also be a clause saying that the landlord cannot take
automatic possession of your flat for non-payment of service
charges but can take court action against you.
Under the terms of the lease, you the lessee agree to pay all
utilities not included in the service charges, such as water rates,
gas and electricity consumed by you.
On the subject of costs, the lease will also stipulate that you, the
lessee, will also have to pay any costs incurred by the landlord for
action taken for non-payment of charges. This is always assuming
that the landlord is successful in the action.
You will also be required to carry out repairs to ensure your flat
is safe, otherwise the landlord can do the work and charge you for
it. You can be charged interest on late payments, although the
landlord cannot charge interest if there is a dispute, or if more
information is needed to determine whether the charges are in fact
payable.
You will not be able to put up a television aerial or satellite dish

without the landlord's permission, nor will you be allowed to run
a commercial business from your flat. You cannot advertise
anything from the property either, other than that it is for sale.
There may also be clauses determining what kind of floor covering

you are allowed to use, and whether pets are permitted. You will
be required, under the terms of the lease, to keep the windows
clean inside and out, and have to keep the flat decorated to a
'reasonable' standard. These clauses are very often flouted!
You will not be allowed to play loud music after a certain time, to
vacuum carpets before a predetermined time at weekends, or to
hang washing out at certain times or in certain places. Nor will
building work be allowed after five or at weekends.
LOOK FOR SUBLETTING CLAUSES

Most leases will contain clauses concerning subletting, and in
some cases there are restrictions on how you are allowed to sublet.
Some landlords require a small deposit if you sublet, and will in
any case need to have details of the subtenants, as they may have
to be directly contacted on occasion, such as when there is a leak.
There will be many more clauses and obligations than these in

most leases, some sounding very arcane, but this is the gist of the
typical lease. Most leases follow a standard format, but if there is
anything you do not understand, or that seems unclear, check
either with your solicitor or, if you baulk at the hourly fees,
contact Lease. They are the government's non-profit making
leasehold advisory service, who will read and interpret leases for
you.
LISTED BUILDINGS
Where the building is listed, buying a flat becomes even more
problematic, as in addition to satisfying the landlord or freeholder
that you are not infringing any clauses of the lease, you must also
abide by listed building regulations.
This can mean you are not allowed to make internal alterations,
let alone external alterations, without listed building consent, in
addition to any consents you may have to obtain from the
landlord or freeholder.
With listed buildings, the local council is concerned to preserve

the integrity of the building as much as possible and there will be
restrictions on the kind of windows you can have, and the type of
external decoration permitted. Very often, you will have to submit
architect's plans, which can take months to go through the
process.
fct MI "*JBI
Although retrospective planning permission can be obtained, this is a high-risk

strategy not to be recommended, as you can be ordered to take down the structure
and replace it with the original. It is always better to obtain listed building consent
before embarking on any works that might infringe the parameters.
WHERE YOU OWN A SHARE OF THE FREEHOLD

You are still bound by the terms of the lease as you enter into a
contract with the limited company, even when you form part of
that limited company.
LEASES OF EX-LOCAL AUTHORITY FLATS

These leases will be slightly different from others, in that you may
not be able to enfranchise or act as your own managing agents. It
may also not be possible to extend the lease of an ex-council flat,
particularly in a high-rise block. There will also be clauses relating
to how you can sell, at least if you have bought directly from the
council as a former tenant at a discount.
Again, make sure you understand all the terms of the lease, as
leaseowners in these blocks can often be stung for swingeing
charges they did not imagine they would have to meet. If you are
in any doubt about any of the clauses in a local authority lease,

you can call the relevant Home Ownership Unit for clarification.
TIP
Many councils now provide simplified versions of their leases, and you can obtain a
copy on request. It is worth asking for if you are buying an ex-local authority flat.
For instance, Hammersmith and Fulham Housing Management Services produce a
booklet entitled Leasehold Ownership: Understanding your lease. There is not
usually a charge for this booklet. Other councils may have similar booklets available
on request.
Local councils also provide a yearly rundown of service charges,

with a list of what each service costs. Not all private freeholders
do this, although accounts are sent to each leaseholder yearly. This
is a legal requirement.
EX-LOCAL AUTHORITY BLOCK SERVICE CHARGES

Here is a typical explanation of service charges and how they are
allocated, from the Home Ownership Unit of the London
Borough of Hammersmith and Fulham.
What am I being charged for?

Those who have bought leases of ex-local authority apartments
are charged for: administration, ground rent, insurance, electricity
used in the shared areas of the block, security entry systems, lifts
and any other equipment that uses electricity.
In addition, annual service charges cover day-to-day repairs and

maintenance of the shared areas, caretaking, concierge services,
horticulture, water meters, lift servicing and, in tower blocks,
booster pumps for ensuring each flat receives fresh water.
These charges are levied every single year and all leaseholders
have to pay their share, with five per cent interest over base rate
charged for late payments.
Where major works are indicated, these are billed separately once
the final account has been settled with the contractor. Beware:
these accounts can take years to arrive.
There is a time limit for billing on major works, but local

authorities get round this by sending a reminder telling you they
have not forgotten about this bill.
PAYMENT PLANS
If you have been charged more than £500 for major works, you
may qualify for a loan repayable over a period of years. Most
local authorities have a home loans manager who can be
contacted at the council offices.
Urn mi I »1||
Unlike many private blocks, ex-council flats are administered by the council's own
management team. The 'administration' fee included in yearly service charges is to
pay for this management.
Most private blocks do not provide such clear, informative booklets

on the whys and wherefores of charges as ex-local authority blocks.
The reason for this is that most council blocks contain a mixture of
leaseholders who have bought leases, and tenants paying weekly or
monthly rent, so it is essential to clarify what leaseholders, but not
tenants, must pay. Tenants are not liable for services charges,
whereas in a private block everybody is equally liable.
THE LEASE / 69
ARE LEASES LEGALLY BINDING?

The answer is 'yes', although in some cases, there may be unfair
contracts or unfair terms within them. Also, what is technically
legally binding is one thing and what is worth fighting over may
well be something else again. Everybody should think very
carefully about when and whether it is worth invoking the law, as
it is a long, drawn out process where the results may not be what
you wished to achieve.
The Leasehold Valuation Tribunal (LVT) publishes a regular

bulletin summarising its latest cases, and the reasons for the
decisions. In every case, where terms of the lease are disputed, the
LVT has ruled that 'the lease is all that matters'.
If a charge is not payable under the lease, it is not payable at all.

Similarly, if a charge is payable under the lease it must be paid.
And that is the end of the matter. The lease is totally binding on
both sides and if ever there is a disagreement, the terms of the
lease will be considered absolute and mandatory; as unalterable as
the laws of the Medes and Persians.
Who draws up the lease?

It is drawn up by solicitors who copy other leases which is why
they are all much the same.
WHAT IF YOU INFRINGE THE LEASE?

Sometimes, this may be done unwittingly but persistent flouting of
the clauses of the lease will result in the landlord seeking a court
order to repossess the flat. You, the leaseholder, can of course
challenge the ruling in an LVT but beware: there is a temptation
to imagine the tenant always wins when taking a case to the LVT.
This is by no means always the case. If your behaviour is deemed

unreasonable, your lease may be forfeited and you will lose
everything.
The ultimate penalty for infringement of the lease is forfeiture,

which means that your lease comes to an end and you are thrown
out onto the street. In reality, this hardly ever happens.
MAJOR WORKS
All blocks of flats will need major works eventually, and before
buying, you need to discover whether these are indicated in the
near future. If they have already been agreed, the price of your
flat will be reduced by the amount payable by the seller. Never,
ever buy a flat with service charges owing. Usually when you buy
a flat, there will be service charges paid to beyond the time when
you take possession. These will be calculated on a daily basis by
your solicitor so that when you obtain possession, you both start
with a clean slate.
In some countries, you, the buyer, can find yourself responsible

for charges and debts unpaid by the previous owner. In the UK,
there are many checks and balances to ensure this does not
happen, but whenever you are buying a property with service or
other charges unpaid, you need to ensure that you will not become
responsible for these. This is something a solicitor should always
check.
SERVICE CHARGES
This is one of the most contentious areas of leasehold property,
mainly because nobody wants to pay out money and will often try
to find any excuse not to pay.
It is usual for the lease to set out what the service charges are
and what they cover. Such charges normally cover cleaning of
common parts, lift maintenance, rubbish collection, insurance
(buildings insurance is a legal requirement) and the cost of the
managing agents, if there are any.
There are normally two elements to these charges: service and

maintenance. 'Service' typically covers insurance, caretaking,
gardening, rubbish collection. 'Maintenance' covers exterior
decoration, repointing, replacing pavements or painting the front
door or common parts, for example.
You will be billed by the landlord or managing agents for service

charges, usually in advance. Most leaseholders pay by standing
order, as this is the easiest and quickest method.
These charges may or may not include provision for a sinking or

reserve fund, to build up monies for future works. If service charges
do not include a sinking fund, they are known as 'interim' charges.
One-off levies may in such cases be raised for major works.
The landlord is under an obligation to provide the services set out

as charged for in the lease.
REASONABLE CHARGES
Leaseholders are fond of accusing outside landlords or freeholders
of profiteering from them. In fact, it is very difficult indeed to
profiteer from leaseholders in the modern world. Renske Mann,
who became the freeholder of a small block of eight flats in West
London, explains:
Many residents don't realise they are paying for services and
assume you are ripping them off because they are paying money
when it appears they are getting nothing for it. But as with
most freeholders, we were a limited company whereby all works
had to be supported by bills and you have to be able to produce
accounts for all expenditure.
Because you have to produce written proof of all works and
expenditure, there is no easy way of making anything out of the
building.
What are 'reasonable' charges?

It is said in countless documents that landlords can only collect
those charges which are 'reasonable'. The term 'reasonable' does
not relate to the amount, only to the fact that the charges can be
challenged. Owners can challenge these charges at the LVT, and
often do, although they do not always win by any means. It costs
a lot more than many people imagine to run a large block of flats.
INSURANCE
It is the freeholder's responsibility to insure the building, usually
with a block insurance that comes out of the service charges.
There will almost always be an excess to pay for any insurance
claim; the amount depends on how many claims the particular
block has had in the past. It is usually expected that the excess
will come out of the collected service charges; in reality, there may
not be enough in the kitty to pay this. The excess on a block
insurance policy can easily be £1,000.
ASK FOR EVIDENCE OF EXPENDITURE

The bigger, older or more complex the building, the higher the
service charges are likely to be - although this is not always the
case, as service charges on brand-new blocks can also be very
high, especially where there are such facilities as underground

parking, expensive carpets in common parts, landscaped gardens,
a swimming pool and gym. As all bills must be supported by
receipts, you can always ask to see the accounts, if you are not
satisfied as to how the money is being spent. In any case, all
residents must be sent a copy of the yearly accounts by the
managing agents or whoever is managing the property.
If you are buying a flat, one of the most important questions to

ask is whether the service charges are likely to go up in the near
future or whether major works are planned. Sometimes, in new
buildings, service charges are kept low for a few years and then
they rocket.
RECOVERING SERVICE CHARGES

It is very common indeed for disaffected leaseholders to threaten
or actually withhold service charges and this causes many
problems for all concerned. Some people imagine that paying
service charges is optional, and that they can be withheld at will.
If enough people do this, then the building goes to rack and ruin
and the value of the place plummets.
You are shooting yourself in the foot when you refuse to pay
service charges. It is a form of protest which is emphatically not
recommended as it means the value of your property goes down.
Few people will buy a property if they are told service charges are
owing. Also, interest can legally be charged on late payments.
APPLICATION TO THE LEASEHOLD VALUATION

TRIBUNAL
If you, either collectively or individually, believe the service
charges are too high or 'unreasonable' you can challenge them via
the LVT. This is a quasi-legal body whereby three people will sit
in judgment at the hearing. Then, your case is either thrown out,
or the judgment sent to the County Court for enforcement. If the
judgment goes against the landlord or freeholder, they can appeal,
and frequently do.
All information regarding the LVT including application forms

and scale of costs can be downloaded from the website of the
Residential Property Tribunal Service at www.rpts.gov.uk, of
which the LVT forms a part.
You as the leaseholder complaining have to complete application

form S27A, Landlord and Tenant Act 1985. You then send the
completed form with a copy of the lease and details of the service
charges under dispute. There is an application fee which varies
from £50 to £350 according to the amount in dispute.
The case may be considered either with or without a hearing but

even the 'fast track' route is pretty slow, and it will take at least
ten weeks for your application to come to the top of the pile.
If the landlord is a large company, they will usually be

represented by a Rottweiler-type solicitor who will forcefully argue
his client's case. And you should not imagine that the LVT
necessarily pronounces in favour of the complainant.
CASE STUDY
Jane and Michael bought a little house attached to a new

block of flats, and were billed by the managing agents for
their share of the service charges. As their house was
completely separate from, although attached to, the main
building, with its own front door, and they did not use the lift,
common parts or front door of the apartment block, they did
not see why they should pay service charges.
The house, they argued, was in the same position as a

terraced house in a row and did not share either a roof or
foundations with the main block.
Accordingly, they challenged the charges at an LVT hearing,

on presentation of all the paperwork demanded. The tribunal
took about three minutes to throw the case out and confirm
that Jane and Michael were bound by the terms of the lease
they had signed. The LVT decided the house was an integral
part of the building.
In their case, their percentage of the service charges did not

include paying for the lift or cleaning of the common parts,
but only for insurance, window cleaning and general
maintenance of the exterior.
They went away with their tails between their legs but the
cost of the very expensive barrister came out of service
charges paid by the other residents. This did not endear them
to the rest of the occupants.
76 / H O W T O B U Y A FLAT
The moral of the story is only take your case to the LVT if
you have serious grounds for believing your charges to be
unreasonable. You need to have direct evidence of this, and
not just get the hump because you don't want to pay.
THE LEASEHOLD ADVISORY SERVICE

Lease, the government-funded advisory service, will advise
individuals and Residents' Associations on their leases. If you are
considering buying a flat and want to check aspects of the lease,
this organisation can help. It can also advise on whether certain
charges are 'reasonable' and whether they can be legally
challenged. But Peter Haler, the founder and Chief Executive, says
that if all leaseholders read their lease properly, most of the calls
to their office would stop.
The lease is king and this must always be remembered when buying
a flat. A resident in my building wrote to the managing agents
complaining that she objected to some of the terms of the lease.
This is tough! She should have had a good look before buying.
Conclusions
There are many complex laws regarding service charges, recovery
of these charges and consultations for major works. In reality,
landlords - whether outside landlords or where leaseholders own
the freehold - will not embark on major works until and unless
all the money, or at least most of it, is in.
Local authorities do things the other way round from the private
sector: they bill leaseholders after the works have been done and
for service charges in arrears. But, then local authorities are a law
unto themselves.
Although the government-funded Leasehold Advisory Service

states that landlords may not be able to recover costs for major
works unless they followed the proper consultation procedure with
the leaseholders, most have no money to fall back on anyway and
so they cannot carry out the works unless leaseholders agree to
them and pay up.
GROUND RENT
This is an annual sum, usually very nominal, for the use of the
ground on which the building stands. The payment of ground rent
is specified in the lease and is usually included in the service
charges. In theory, the landlord or freeholder can instigate
forfeiture proceedings for non-payment of ground rent and this in
the past has led rogue freeholders to make sure ground rent is not
collected, and then start forfeiture proceedings for its non-
payment. Such abuses are becoming ever more difficult to sustain.
FORFEITURE AND POSSESSION

This is a stick often waved at recalcitrant leaseholders but it is a
last resort and, in reality, very difficult to repossess, as this has to
be done by court order. No landlord is allowed just to throw a
leaseholder out, however tempting this may be, and however bad
their behaviour. The 'innocent until proved guilty' idea is
enshrined in our law and applies to late-paying leaseholders just as
much as mass murderers. Most of these legal matters take
months, if not years, to come to court and by that time the
original leaseholder may have sold up and moved on anyway.
Because of the more stringent checks now made by buyers'

solicitors, it is becoming increasingly difficult, if not impossible, to
sell a flat with any outstanding or unpaid charges. It is also
difficult to sell an individual flat where there are service charge
disputes ongoing. Buyers will just run in the opposite direction;
after all, there are plenty of flats on the market which do not have
leaseholder disputes ongoing.
Peter Haler, Chief Executive of Lease advises:

I cannot say this strongly or often enough: read the lease! Many
people are not aware when they buy a flat that they have
entered into a contractual obligation. They don't know what
they have agreed to when they buy the flat, but half of our
queries could be solved in advance if buyers only read the lease
first.
Robert Levene, Chief Executive of the Federation of Private
Residents' Associations, a voluntary body, adds:
Most people who buy flats have no idea of the terms of the
lease, and in our view lawyers and estate agents have a lot to
answer for here.
When you see a flat and make an offer, the estate agents never
tell you what the covenants are, and when you get to the
solicitor stage, they never tell you either. We feel that sight of
the lease and explanation of its terms should come upfront, not
when you are about to complete.
Although the new Home Information Pack has many critics,
one thing it will do is include a copy of the lease, which all
prospective buyers should read very carefully beforehand.
Robert Levene says one of the biggest problems concerns pets.
Many, if not most, leases state: no pets, yet buyers keep

bringing cats and dogs into the building because they haven't
read the lease beforehand. Then they express surprise and say: I
didn't know pets weren't allowed. The 'no pets' rule is the one
most flagrantly ignored, but eventually the freeholder is likely
to seek legal redress for a breach of the lease.
Also, many flat buyers believe service charges are optional. They
take the view that they've bought the flat, so why should they
keep paying out? But again, service charges will all be on the
lease.
COMMONHOLD
Very occasionally, flats may be advertised for sale as
'commonhold'. This type of ownership is common in America,
Australia, Cyprus and many other countries, but as yet, rare (and
at the time of writing, unknown) in the UK.
It was brought into being by the Commonhold and Leasehold

Reform Act of 2002 and came into force in 2004, although
leaseholders have yet to take it up. Briefly, commonhold
properties are still governed by the lease, as with ordinary
leasehold properties, but there is no outside freeholder. Instead,
the property - which will usually be a new property - will have
been built and developed as a Commonhold property. The lease is
known as the Commonhold Community Statement (CCS).
A commonhold is divided into units and common parts in exactly

the same way as an ordinary leasehold property, but the difference
is that the common parts are owned by the Commonhold
Association which has its own title number at Land Registry.
The commonhold association combines the functions of a

landlord owning the common parts, a management company
providing services and a Residents' Association determining policy
and settling disputes.
If a flat you like the look of has commonhold tenure, the

Association will be registered at Companies House, and all details
will be available from Land Registry. Again, at the time of
writing, this is all in the future, mainly because the government
has made Commonhold an option, not a necessity.
In my own investigations into newbuilds, either begun or

completed in 2005 in the UK, not one was a commonhold. All
were standard leaseholds, with 99-year leases and an outside
freeholder.
But although commonhold seems stretched out into the future, it

will happen one day, and it is as well to be prepared.
How does a Commonhold Community Statement differ

from a lease?
It will, to all intents and purposes, be exactly the same, except
that there is no length of time on the Commonhold Community
Statement (CCS) and all units within one block will have an
identical document. The provisions of the CCS can be enforced
under the terms set out in the document. It is as legally binding as
a lease, and there will be dispute resolution procedures set out in
the document.
Also, as with a lease, if there are major disputes, the matter can
be taken to court. There will be clauses governing how service
charges are to be paid, and these are known as the commonhold

assessment. Again, as with an ordinary lease, levies can be
imposed to pay for unforeseen works and expenses, and
assessments can be increased.
A commonhold is a self-managing community but unlike

leasehold charges, there is no overriding legal requirement for
charges to be 'reasonable'. This means that the charges cannot be
challenged at the LVT, or in a court of law.
As a commonhold unit is considered a freehold property, it could

be more valuable than a leasehold equivalent. But because
commonhold is very new, it is a good idea to take legal advice
before proceeding with a purchase if you come across a
commonhold unit.
Because commonhold units are not subject to a number of years

on a lease, they are not wasting assets. But commonhold is new
and untried, whereas leaseholds and leases, with all their
problems, are at least well-known and familiar. Plus, they are
subject to a large amount of statutory regulation. At the time of
writing, commonhold units are unregulated by law.
THE MANAGEMENT OF A BLOCK OF FLATS

The following chapter deals with the management of a block of
flats, but not everybody understands how this works.
Briefly, if the building is owned by an outside freeholder, they will

be responsible for appointing the managing agents.
In some cases, freeholders act as their own managing agents, but

in other situations, outside managing agents are appointed to look
after the day-to-day running of the building. Where this happens,
the leaseholder will have no say in the management of the
building, but will just be billed for service and other charges.
Leaseholders can, however, challenge these charges at an LVT if

they consider them to be 'unreasonable'. They can also demand to
see evidence of expenditure. In any case, managing agents should
provide a yearly breakdown of costs to each leaseholder, rather
than just presenting them with a total bill.
Where the leaseholders have won the Right to Manage, or have

Collectively Enfranchised, they will be responsible for their own
management. Again, they can either decide to manage the
building themselves, or appoint outside managing agents. There
are now firms which specialise entirely in managing blocks of flats
and in most cases these will be members of ARMA (the
Association of Residential Managing Agents). ARMA was
founded in 1991 to put this unregulated business onto a
professional footing.
Chapter 4 explains what managing agents do, how to appoint

them, and what is involved when management is passed over to a
specialist company.
Chapter 5 explains how leaseholders can win the Right to

Manage, and wrest management control from outside freeholders
or landlords, and also gives information on how to go about
Collective Enfranchisement.
New to buying a flat?

If you are new to buying a flat, you need to know about the
management of the building. So before making an offer, ask the
estate agents:
+ Does the property have an outside freeholder? (This will

normally be the case unless the particulars specifically state
'share of the freehold'.)
* If so, who are the managing agents? Does the freeholder use
separate managing agents? If so, who are they? And are they
members of ARMA? The estate agent will be able to discover
these details by going back to the vendor, who must supply
answers to these questions.
4 If the flat you are interested in buying is being sold with a share
of the freehold, again ask about the management of the
building. Do the residents manage the place themselves, or are
there separate managing agents? Again, are they members of
ARMA?
This last question is important because ARMA has a grievance

procedure you can invoke if you are not satisfied.
TIP
Never buy a flat until you are satisfied you know exactly who owns it, how it is
managed, and by whom. Also try to discover, by contacting ARMA, whether the
managing agents responsible for looking after the block have a good reputation.
Some buyers who are new to flat living imagine that the managing agents own the
building. This is rarely the case, as almost all freeholders will appoint separate
managing agents. There is, however, no legal requirement to appoint these agents.
Usually, the managing agents are the hired hands, and act on instructions from the
freeholder, or from the Board of Directors where the building has enfranchised.
At the time of writing, around 50 per cent of blocks in Britain have enfranchised, or
are in the process of doing so. This percentage is growing all the time, but mainly
affects older blocks. Brand-new blocks will almost always not be sold with a share
of the freehold.
So if you are buying into a newbuild block, you need to know who is going to
manage the place.
4
Management
Another way in which blocks of flats differ from separate houses is

that apartment buildings have to be 'managed'.
This means there has to be somebody to collect service charges,

prepare accounts, chase up late or non-payers, organise major and
minor jobs and generally be responsible for the day-to-day and
future smooth running of the building. That same person or
company will also have to answer questionnaires when flats are
sold, as well as providing three years' worth of accounts and any
other information a new buyer might require.
It is a complex job and really needs to be done by somebody who

knows what they are doing. Management also has to be
undertaken by somebody who is totally trustworthy. If the
building has enfranchised, and has therefore become a limited
company, accounts have to be filed annually to Companies House,
and there must be a Company Secretary.
Where there is an outside freeholder, that person will be

responsible for the management of the block and will usually
appoint a firm of managing agents, but if the residents have
collectively enfranchised or won the Right to Manage, they will
either have to manage the building themselves, or appoint their
own managing agents.
85
If the building is owned by an outside freeholder, there may still

be a Residents' Association which will hold meetings and discuss
affairs to do with the block.
Where a block has not enfranchised or secured Right to Manage,

and is happy with the management provided by the freeholder, it
may not be sensible to rock the boat. If the residents, in the main,
are not happy with the current management, they can take the
steps outlined in the following chapter.
Make no mistake, residential block management is complex and

time-consuming and nobody should underestimate the work and
effort involved.
Many leaseholders do run buildings themselves and, indeed, for

several years I was a Director of a block of flats which did
undertake its own management. But ask yourself: do you really
want to spend every weekend in the office, filling in
questionnaires, answering queries, getting plumbers in to mend
leaks, collecting money from recalcitrant payers - all for nothing?
Plus if you are in dispute with a neighbour, you are always in

danger of meeting that neighbour on the stairs or in the lift. When
residents are also undertaking the management there is always the
risk of personalising the situation.
Resident management companies

Leaseholders should be aware that if they do have a resident
management company this does not mean they can do exactly as
they like. Au contraire, as Del Boy might say. A resident
M A N A G E M E N T / 87
management company, even when run by the leaseholders

themselves, is subject to exactly the same legal duties as an
absentee or commercial landlord.
Duties of managers involve inspecting the physical fabric of the

building, and maintaining and decorating it to the right standard.
Managers must also have an intimate acquaintance with every
aspect of the lease. In addition, those running the building will
have to cope with disagreements and personality clashes when
they arise. They must also have a thorough knowledge of every
aspect of current and future leasehold law.
Maybe the most difficult aspect for resident management

companies is dealing with arrears. Whereas a professional
managing agent will handle this as part of the job, residents can
feel distinctly uncomfortable taking a neighbour to court.
CASE STUDY
When I was helping to run a resident management company, one

resident was taken to court for non-payment a total of 47 times. And
still we couldn't get any satisfaction as he was too clever for us by
half. The stress of going to court and sitting opposite your assailant
cannot be underestimated. Indeed, some residents sold up and left
because the problems of non-payers, and in particular this non-
payer, were causing them sleepless nights.
But as soon as professional managing agents were appointed,

those debtors disappeared. Most sold up and left and the rest
paid their dues.
ADVANTAGES OF OUTSIDE MANAGEMENT

Where there are six or fewer units in a block, it may be cheaper
and easier to manage the building yourselves. When I lived in a
block of four flats where everybody owned a share of the freehold,
each owner took it in turns to manage the building, and it worked
perfectly well.
But with such a small building, there was no caretaker, no lift,

and very little day-to-day management required. When major
works were indicated, such as when the building developed a
severe dry rot problem, we had meetings in each other's flats and
raised the money between us. It was all perfectly amicable, but
this kind of ad-hoc management would not work in a larger
block.
Wherever there are eight or more separate flats, I would say it is

imperative to go for outside management, as then the workload
becomes too great for amateurs, however well-meaning they are.
Management of buildings containing a number of self-contained

units requires proper accounting procedures, an understanding of
buildings and how they work. People management skills are useful
in that there are often splinter groups within a block - almost
always to do with payment of charges and fees.
Where residents run the block themselves, they are usually unpaid
and part time. By contrast, a firm of managing agents deals with
all the issues that crop up on a full-time basis and employ full-
time staff for that sole purpose. Also, they have purpose-bought
IT for account handling and they have ready access to lawyers,
M A N A G E M E N T /89
professional bodies and fidelity insurance cover, none of which

individual lessees may be able to match.
Fidelity cover to protect client funds is something that the self-

managing lessees cannot probably obtain. Agents also have a
separate professional indemnity cover to protect them and again,
self-managers might find it difficult to obtain such cover.
The Landlord and Tenant Act 1985

Those managing the building must also be aware of the
requirements of the Landlord and Tenant Act 1985, as amended
by the Commonhold and Leasehold Reform Act 2002 - regarding
'reasonableness' of costs and formal consultation procedures. It
was on such technicalities that we were constantly tripped up by
our barrack-room lawyer. Legal documents constituted his
bedtime reading, and he constantly sent threatening letters to all
the Directors accusing them of malpractice.
Difficult owners
Troublesome residents are less likely to bombard a firm of
managing agents with this kind of correspondence, as they are too
remote and neutral. I would also say that wherever there are
difficult owners, outside management is essential, otherwise it
becomes a nightmare living in your own home.
For instance, the landlord must, at the lessee's request, provide

summaries of service charge costs, details of insurance
requirements and make available for inspection all relevant
invoices and documents. Our litigant obtained a court order to
photocopy several years' worth of accounts and paperwork, all at
the expense of the company, that is, us. No wonder there was
nothing left over for essential maintenance.
There are many problems you can land yourself with when you
attempt to save costs by self-managing. We were constantly being
tripped up by our ignorance and niceness. Our litigant kept
winning in court by his knowledge and nastiness. The fact that
nobody else in the building spoke to him, and most held their
noses when passing by him, saying there was suddenly a nasty
smell in the air, did not concern him in the least.
He was secure in the knowledge that he was living in the building

at everybody else's expense, and revelled in it.
APPOINTING A MANAGING AGENT

The next questions are, how do you appoint good managing
agents and how to find them?
In most towns of any size, there will be several firms of managing

agents. Sometimes they are dedicated firms or they can be an
offshoot of an established estate agency. If you are in the process
of appointing new managing agents, contact them and ask for
their brochure or prospectus and scale of charges.
Otherwise, log onto the ARMA (Association of Residential

Managing Agents) website, where you will find a list of members
in your region. Usually their individual websites do not give fees,
but they will outline the services they offer.
The next step would be to contact, say, three companies, and ask
for a scale of charges and list of services. You, the lessees or
representatives of the Company, have to consider which duties you
wish to be performed by the agents, and those that you prefer to
retain. For instance, you may prefer to go it alone when tendering

for major works.
Most managing agents offer a range of services, and you can

choose to leave everything to them, or instruct them to take on
specific tasks such as collection of service charges. You can
decide, for instance, whether the lessees will share cleaning and
gardening, or whether the agent should arrange this. Don't forget
that every extra service comes at a cost, and this may have to be
added on to the existing service charges.
The agents will be directly responsible to the Board of Directors

who have full powers of hire and fire, although frequent changes
of manager will inevitably disrupt continuity of service provision.
It is worth doing some thorough research in advance, rather than
chopping and changing agents. When our block was in the process
of appointing managing agents, we went through two companies
in a few months, before appointing a firm who suited our needs.
The paperwork involved

Never underestimate the sheer amount of paperwork generated
when running a block of flats. Any handover from one manager
to another takes time and it is quite a complicated procedure.
Lessees who have recently enfranchised and who may not know
much about management, can initially ask a surveyor to draw up
a formal specification for duties, for discussion with prospective
agents.
In any case, you should agree the basic list of tasks before
approaching agents. What do you want to offload and what do
you want to keep for yourself, either to save costs, or because
there are perfectly competent people in the block able and willing
to do certain jobs?
For instance, somebody might agree to take over the garden

because they like gardening. Somebody else might take on the job
of keeping the interior decorated.
What must be outsourced when appointing outside agents are the

following: collection of service charges and following up late
payers; responsibility for annual accounts; drawing up tenders for
major works; completing the managing agent's questionnaire
when flats change hands and paying bills to contractors and
suppliers. Usually cheques must be countersigned by an appointed
Director, and this represents a safeguard for the residents.
A typical list of what you might ask an agent

* What arrangements are there for general maintenance
inspections?
+ How are minor repairs attended to?
+ How are service charge monies collected?
* What are the banking arrangements?
+ Is there any provision for emergency out of hours call-outs?
+ What commissions would the agent receive from any contracts?
All such commissions should be declared in advance.
Standard contracts
The Royal Institution of Chartered Surveyors has produced two
standard contracts; one for purpose-built blocks of flats, and one
for other types of property. The Association of Retirement

Housing Managers has a contract especially for retirement
housing, as this differs in some important ways from ordinary
housing as regards management and service charge payments.
Meetings and qualifications

It is usual for the agent to attend meetings of the Board of
Directors, which must be clearly minuted. Most managing agents
will attend one or two meetings a year at no extra cost;
attendance at others will be billed accordingly. The agent cannot
take instructions from individual flat-owners and the position
when dealing with requests from individuals must be made clear at
the outset.
There are no specific qualifications for managing agents, but

membership of appropriate professional bodies is a good start.
TIP
Many professional managing agents will not consider blocks of flats where annual
service charges are £1,000 or less.
In blocks that have enfranchised, the usual thing is for the Board
of Directors to be responsible for appointing and liaising with
managing agents.
Typical charges and services

Below is a list of typical charges and the range of services offered
by an ARMA member in 2006:
Initial set-up fee: £500

Basic management fee: £150 per annum per unit
ARMA audit of client account: £250 per annum
Accountancy (outsourced): £800 per annum
Company secretary duties: £500 per annum
Commission on major works: 12.5 per cent
In addition, individual lessees would be charged for consent for

alterations, unpaid cheques, late payments and completing
managing agent's questionnaires when selling.
All of the above fees would be subject to VAT.
THE SET-UP
Where the building has enfranchised, this is the usual
arrangement: the Shareholders own the Management Company
which appoints the Board of Directors which appoint the
Managing Agents who run the management on behalf of the
lessees - who are also the Shareholders.
So, as you can see, it is a circular kind of affair where the lessees
are also the shareholders who own the management company.
The managing agents do not own the company, as some lessees

imagine. They are merely employees of the company. But they are
given powers by the Board of Directors to run the day-to-day
affairs of the building.
Where the building has not enfranchised, landlords or freeholders

may also act as managing agents.
The agents have no contract with individual lessees, and their

services are limited to those agreed with the Board of Directors
and to which a management fee is payable. They will not do any
additional work at no extra cost.
It is also the case that any complaints by lessees concerning

management must be addressed to the Board of Directors and not
to the managing agents.
It is usually the case that individual lessees will contact the

managing agents on all sorts of issues, but the agents have no
duty to respond unless the request is part of their agreed remit.
All of these are reasons why it pays to appoint managing agents

who are members of ARMA, because then any dispute over
management can be taken to a higher authority.
WHAT A GOOD MANAGING AGENT WILL DO

I told you it was complicated!
First, the agents must make their fee structure very clear at the
outset and also give the Board of Directors a list of other services
which may come at extra cost. They cannot just add on costs as
they see fit.
In any case, they will agree to manage the client's property in

compliance with all applicable legislation. This means they must be
aware of any current and future changes in the law. They must be
fully conversant with the leases, the Articles of Association (where
applicable) and Company Law relating to enfranchised blocks.
The ARMA Code of Practice states that managing agents must

provide as cost effective a service as possible. This is obviously a
difficult one to quantify, as what constitutes cost effectiveness? All
managing agents are plagued by difficult residents, who tend to
complain when their lengthy, time-wasting letters are not
answered. Ask what their policy is with this type of resident, and
whether they charge extra for every letter sent out, over and above
the usual correspondence required.
Agents are also responsible for getting quotes for insurance cover,
and fully understanding the insurance requirements of the block.
Accounts and funds

So far as money is concerned, agents must ensure that clients'
money is kept in a separate, dedicated account and that individual
client accounts can be separately identified. This is most important,
as funds in one client account must never be used to finance another
client's property. The funds must be held in a recognised bank or
building society and clearly designated 'Client A/C'.
Cheques must have the block name printed on them, for example
'Fairview Apartments Ltd'. This is so that you know your block
has its own separate account.
Any funds or levies raised for major works must be kept in a

separate interest-bearing deposit account, away from the day-to-
day service charges.
Detailed records must be kept of all transactions and expenditure

from the client account suitably authorised.
M A N A G E M E N T / 97
Agents must also ensure that annual accounting is carried out

promptly and be able to supply all paperwork relating to drawing
up those accounts which, in the case of a limited company, must
be submitted to Companies House by the required date.
Where there is a Residents' Association, managing agents must

consult regularly with members. They must also declare an
interest in any contractor or business employed to provide services
at the property. For instance, if a managing agent also has a
construction company, this must be known before the company is
invited to tender for works.
^EgjFf^H
Managing agents are, of course, commercial organisations which exist to make a

profit. They will not agree to take on your block unless they can see that it will be
cost effective for them. Therefore, it can be difficult to find good managing agents
where there are many debtors, if the building is in a terrible state of disrepair, or
where there are cliques and factions within the building preventing forward
movement.
CODE OF PRACTICE
All managing agents who are members of ARMA will have a
Code of Practice, which can be given to the Residents'
Association on request. It should be noted that the profession, if
you call it such, of managing agents is unregulated, and there is
no requirement for them to become members of ARMA. This
does not mean they are no good, but there may not be a
grievance procedure, or any higher authority to whom to appeal
if things go wrong.
As ever more blocks enfranchise or gain the Right to Manage, it

is important to appoint a thoroughly professional company to
manage the property, especially as the likelihood is that residents
themselves will not know much about running the block.
Please also note that any managing agent, however conscientious

or reliable, is just doing a job. The building is not their home and
as such, they are never going to take as much interest in it as you
do.
To me, the most important aspect of appointing managing agents

is that they take all the emotion out of running a block of flats.
They should be calm, detached and professional, whereas when
leaseholders run their own block, emotions tend to run very high.
FORMING A RESIDENTS'ASSOCIATION
Where the block has not enfranchised, it is always worth forming
a properly-constituted Residents' Association.
Where it has enfranchised, leaseholders will be members and

shareholders of the company, so there is probably not a lot of
point in adding another layer, as the whole purpose of the
Residents' Association is to form a collective voice when it comes
to spending money and keeping up the standard of the block.
A brief outline of Residents'Associations' purposes

Detailed information can be obtained from the Federation of
Private Residents' Associations, but here is a brief outline of the
function and purpose of such Associations.
+ They can make the landlord or agent carry out regular

inspections, and have a say in the expenditure of their own money.
+ They can meet the landlord or agent to discuss the needs of the
residents and negotiate with either residents or landlords and
assist in resolving disputes between residents.
+ They can apply for a determination of the reasonableness of

service charges (most important) and make sure they are
consulted on major works.
It is often useful to form a Residents' Association in advance of

trying to obtain collective enfranchisement. In any case, it makes
sense for any lessees who have an outside landlord to form an
Association. This can be exercised in both the private and public
housing sectors, but there is, as always, a right and wrong way to
form such an Association.
First, all residents have to be circulated, excluding the landlord

and any employees such as a caretaker, with a letter giving a brief
history of the block and a tear-off form to be sent back to the
organiser. It is a good idea to include a stamped addressed
envelope, as nowadays it seems it is too much trouble for many
people to buy an envelope and a stamp and find a letter box.
Ask some supporters to form an Acting Committee. One person

should also be designated an Acting Chairperson. Then call an
informal meeting of the residents, explaining what the proposed
new Association is all about.
The best way of setting up an Association

At an early stage, contact the FPRA (Federation of Private
Residents' Association), a non-profit making body, which will
100/ H O W TO BUY A FLAT
advise on the best ways of setting up such an Association. There

will have to be an annual subscription, and when the group is up
and running, an Honorary Secretary has to be appointed, who is
responsible for taking minutes and keeping records. There will
also be a subscription charge to the FPRA, and a charge for their
very useful booklets and instruction manuals.
After the initial meeting, the new Association should apply to the
landlord for recognition. Again, the FPRA can help out here, as
you will need a Constitution, which can be quite lengthy and
involved, but which is necessary if the Association is to be
properly run.
Once the Association is formed, with a Chairman, Secretary and

Committee, meetings must be held. These usually consist of an
AGM (Annual General Meeting) and possibly a number of EGMs
(Extraordinary General Meetings), to discuss more urgent issues
that cannot wait for the AGM. With EGMs, the same procedure
has to be followed as for an AGM.
ffij|lT*jBH
When I belonged to a Residents' Association, the only formal meeting was the
AGM. Otherwise, there were social meetings, Christmas parties and other such
events, which all helped to bind the residents together. There is not always
something to complain about, but even when everything runs smoothly, it is still a
good idea to have an Association.
Outside landlords and recognised Residents'Associations

It is always a good idea to have a Residents' Association in a
block of flats where there is an outside landlord. And such

Associations can have legal force, as they may seek statutory
recognition from the landlord. Again, the FPRA can help here
with its explanatory pack. Recognised Residents' Associations
have more power than informal ones and they are entitled to be
consulted about the appointment of managing agents; be notified
of works proposed by the landlord and receive a copy of
estimates; submit the names of alternative contractors; obtain
information about service charge accounts and appoint their own
surveyor.
Where it might be too difficult to enfranchise or go for Right to

Manage, a recognised Residents' Association may be the next best
thing. It is easier than the other options and, in many cases, can
work just as well.
Robert Levene, Chief Executive of the FPRA, explains further:

We advise our members on all issues relating to living in a flat
and also lobby governments and make representations on
legislation.
The biggest issue is always payment of service charges as many
flat owners believe these are optional. One reason for this is that
few solicitors or estate agents ever point out what the covenants
are and how they are enforced. Very many people buy flats
believing they don't have to pay Service Charges if they don't
want to. We are hopeful that the new Home Information Pack
will change this attitude.
Most managing agents, he adds, don't themselves live in flats -

because they know only too well what the problems are.
WHERE YOU HAVE ENFRANCHISED

All residents in possession of a membership certificate - given to
you when you buy the property - are members of the Company
and as such will be invited to attend the AGM. Although
attendance at AGMs is not required, it is compulsory to hold
such a meeting, which will be chaired by the Chairman and the
Company Secretary will take the minutes.
The AGM will consist of approval of accounts, the Chairperson's

report, updates on debtors, reports on major and minor works
and any other changes since the last year and, finally, Any Other
Business - which is usually where the fun starts. It is the
Chairperson's job to keep order - and a firm hand will often be
required.
There may be matters on which members may vote, such as the

appointment of new managing agents, a new Chairperson or new
Directors and the usual thing is, one vote per flat. This means that
if one person owns three flats, they get three votes, but if four
people live in one flat, they only get one vote between them.
Debtors or those in arrears may attend the meeting but will not be
allowed to vote. Friends or relatives of members may be allowed
to attend the AGM (should they wish to) but must remain silent.
They are not allowed to offer opinions and comments, or to vote.
There may also be one or two Extraordinary General Meetings

(EGMs) throughout the year, such as when emergency major
works are indicated, and cannot proceed without a majority vote
from members.
Bit iTi »1B
Democratic principles pertain at AGMs and EGMs and even if the vote is very
close, the majority opinion holds sway. Those who do not attend can cast a proxy
vote, but cannot complain about decisions taken in their absence when they were
given due notice of the meeting, which should be three weeks in advance.
AGMS and EGMs must be minuted, which does not mean that
everything has to be taken down verbatim. The gist of what was
said is good enough, although it must be accurate.
Occasionally, there may also be Directors' meetings and these

must also be minuted. The managing agents will usually attend
these meetings, but there may be an extra fee for such attendance.
These are the formal aspects of management. But the main aim in
a block of flats is to make sure everybody gets along - and this is
often more difficult to achieve than the formal aspects.
5
Increasing the Value of Your Flat
Most people hope that when they buy property its value will go up.
Unfortunately, when you buy a flat, or indeed any leasehold

property, its value can go down instead as the years go by and the
lease gets ever shorter. Indeed, if the length of the lease is edging
dangerously near to 80 years, the value of the flat will rapidly
decrease.
In the old days, this was a severe drawback to leasehold homes,

and meant that anybody who had a choice, bought freehold
properties instead.
Another serious drawback to buying leasehold flats was the often

difficult relationship with the freeholder. Although all leases state
that the freeholder has a duty to keep the property in good
condition, this clause was frequently broken by freeholders who
could no longer afford to maintain the building, who could not be
bothered, who simply disappeared and went away or waited for
leases to run down so that they would own the building again.
These factors are the main reasons why, eventually, even originally
valuable flats lost a lot of value. It is still quite common to find
leases of 54 years or less on older blocks, and the long-term
residents have no idea their property is worth virtually nothing
until they come to try to sell.
104
INCREASING THE VALUE OF YOUR F L A T /105
But where the lease is less than 80 years, you cannot sell your flat
- or at least, only for a knockdown price to a cash buyer.
But fear not! There are now three ways of increasing the value of
your property, even when the lease is getting short, the common
parts are run down and the freeholder has absconded or
completely lost interest in the building.
The options are:

1. You can extend your lease by 90 years.
2. You can exercise your right to manage.
3. You can buy the freehold by a process known as collective
enfranchisement (CE).
All these are options you can force your landlord or freeholder
into doing. There are exceptions for some kinds of property, but
in the main, anybody who lives in a leasehold property can
exercise one or all of these steps, which increase the amount of
control you have over your own property.
But although you can extend your own lease individually and
without reference to the other residents, in order to buy the
freehold or exercise the right to manage, you need to take
collective action, and get a majority of residents on your side. This
is not always easy, especially as collective enfranchisement can cost
each leaseholder a lot of money which, they feel, may not be
realised in extra value on the flat.
There is also a common attitude among older residents that the

lease, however short, will 'see them out' and they may not want to
spend their remaining savings on something that may only benefit

their heirs or, more likely these days, the taxman.
Where this is the case, it may not be possible to get enough

support to enfranchise, and extending your lease may be the only
answer.
WHAT YOU NEED TO KNOW BEFORE YOU BUY

Whenever considering buying a leasehold property, first look at
the length of the lease on the agent's particulars. If this
information is not there, as is often the case, ask before going any
further with the purchase. When the lease is 80 years or less, ask
whether this term can be extended, and about how much it would
cost. Very often estate agents fudge the length of the lease by
putting something like 'lease 125 years from 1986' or something,
which may lull you into a false sense of security.
Although buyers can now legally force the freeholder to grant

them a 90-year lease extension on most types of leasehold
properties, not all leases can be extended. Specialist properties
such as those held on crown leases, National Trust properties, and
those within cathedral precincts are exempt from this legislation.
But, in practice, few people are likely to live in these apartments.
In any case, freeholders of these properties have expressed a desire

to go with the prevailing legislation, which means that in practice,
crown leases, for instance, often can be extended. So, if you are
considering buying one of these 'exempt' properties, find out what
the leasehold/freehold/lease extension situation is before buying.
I N C R E A S I N G THE V A L U E OF YOUR FLAT /107
The procedure
For most other privately-owned buildings, all or any of the above
three options can be exercised, although there is a standard
procedure which must be followed in each case. For instance, even
if you want to extend the lease, you would normally have to wait
two years after buying before doing so. You would not be able to
extend the lease before buying, but if you know that it can be
extended, and what it is likely to cost, this knowledge can form
part of your negotiations on the asking price of the property.
If you have fallen in love with a particular flat, but the leasehold
arrangements leave much to be desired, what do the various
value-increasing options have to offer and what do they entail?
EXTENDING THE LEASE

This is in many ways the easiest option to exercise, as you can do
it on your own without involving any of the other residents; all
other options need the consent of at least 50 per cent of owners to
proceed.
A lease of less than 80 years is a fast-wasting asset, mainly

because few mortgage companies will advance loans. This makes
the property difficult to re-sell. So if you are interested in buying
an apparently bargain-price flat with a short lease, check first that
(a) the lease is theoretically extendable and (b) that it will not cost
you a punitively high sum. In general, the shorter the lease, the
more it costs to extend.
|fc ^ Im•§
In some instances, the lease extension process has started, but not been
completed, when a flat goes on the market. In this case, the seller can transfer the
right to the lease extension to the buyer.
Although you can legally extend a lease these days by 90 years,

freeholders can drive a ridiculously hard bargain, so do not
imagine it will always be a simple option.
The relevant legislation states that the lease extension must be

bought at the current market price - don't imagine you will get it
for nothing, or nearly nothing, because you are already living
there. Also, working out the numbers can be horrendously
complicated.
CASE STUDY
Eileen, a retired doctor in her 70s, had just 16 years left on

the lease of her home in London, W1. Although the lease
would probably see her out, she wanted to have something to
leave her children, and so applied to the freeholders, Howard
de Walden Estates, for a 90-year extension as was her legal
right.
They agreed, but valued it at a whacking £700,000. Eileen felt

the lease extension was worth about half of that, and took her
case to the LVT after getting the place professionally valued,
itemising all the improvements she had made over the years,
and getting all the other necessary paperwork in place.
I N C R E A S I N G THE VALUE OF YOUR F L A T /109
The freeholders vigorously contested this and would not back

down, arguing that this was what a 90 year lease on this
particular property was worth on the open market. A fierce
battle, not to say a stressfully long two-year wait, ensued and
the upshot was that Eileen lost her case as the LVT ruled that
the extension was, in fact, worth £700,000 on the open
market. The improvements she had carried out did not, they
decided, significantly add to the value as the property was
worth more or less the same whatever its condition, simply
because of its very central location. Legal fees came to over
£8,000.
TIP
Improvements made to a leasehold property by the leaseholder do not necessarily
increase its value; it is the length of the lease which is the determining factor.
The moral of the above story is: if you do not accept the price the
freeholder states for your lease extension, be prepared for an
almighty battle that you may lose.
In general though, if the case does go to the LVT, they will

usually rule that the lease extension is worth something between
the valuation put it on it by the freeholder (selling) and the
leaseholder (buying).
Here is the outcome of a more typical situation

Length of lease: 62 years
Lessee's valuation: £4,000
Landlord's valuation: £8,500
LVT valuation: £5,170
Existing value: £140,000

Extended value: £150,000
Ground rent: £12.60 pa
'Marriage value': £9,661
'Marriage' value
The term 'marriage value' describes the extra value created by
'marrying up' the leasehold and freehold elements or, in this case,
the difference between the value of the property with the short
lease and the extended lease. The term 'marriage value' is one you
have to constantly keep in mind when extending leases or buying
the freehold. The shorter the lease, the higher the marriage value.
For instance, a flat with 62 years left on the lease is valued at

£140,000 on the open market. With a 90-year lease extension, it is
valued at £150,000. Therefore, the 'marriage value' is £10,000.
The term 'marriage value' does not apply where the lease has 80
or more years to run. For the purposes of negotiation, an 85-year
lease is as valuable as a 999-year lease.
Lease extensions
Although you do not buy the freehold when extending a lease, you
will certainly increase the value of the flat when it comes to
selling, and sometimes going it alone is the easier option. It can
be difficult persuading the other leaseholders to join forces with
you.
The cost of a lease extension mainly depends on how tough a

bargain the freeholder wants to drive, although offers on both
sides must be supported by hard evidence, and not just be figures
I N C R E A S I N G THE V A L U E OF Y O U R FLAT / 111
plucked out of the air. If the freeholder is prepared to extend the

lease for nothing, or nearly nothing (which sometimes happens)
there will be no need to take the case to the LVT. Likewise, if you
can agree a figure between you, there will be no need to take the
case to the LVT.
Nowadays, though, there are few ways the freeholder can make
money out of the lessees, and selling lease extensions can be highly
profitable, so don't be surprised if your freeholder rubs his hands
together and demands a large amount when you apply to extend
the lease.
A typical example
A one-bedroom flat was on the market for £155,000, with a 63-
year lease. In this case, the lease could be extended by 90 years, at
a cost of £10,000. The price is non-negotiable, according to the
freeholder.
In my view, it would be well worth paying the extra £10,000, as

the lease had become too short for the value of the property to be
maintained.
With the 90-year extension, making a total lease length of 153

years, the flat would rise in value in accordance with the market.
THE PROCESS
The relevant legislation here is Chapter 11 of the Leasehold
Reform Housing and Urban Development Act. Assuming you
qualify for a lease extension, the first thing is to get the property
professionally valued. This valuation does not just assess the resale
value of the property but also the loss to the freeholder, as he will
not get the flat back as quickly as he had hoped. Thus, it would
cost considerably more to extend a lease with 16 years remaining,
than one with 80 years remaining.
The valuer will do all the necessary sums, which can be quite
complicated, as the valuation of the freeholder's interest has to be
calculated as well.
This valuation is based on the rental income, i.e. ground rent for
however many years, the reversion (the eventual vacant possession
of the property) and any other parts that may be included, such as
a garage, outbuilding, garden or roof terrace.
Expert leasehold valuer Stewart Gray, of the firm Austin Gray

says:
It is very important to obtain expert guidance on valuation, as
any missed information will automatically invalidate the notice.
Because the implications for short leases are now very serious,
anybody contemplating selling their flat should get the lease
extended before they sell.
But if you are desperate to buy a flat which has a worryingly short
lease, the fact that you are legally allowed to extend the lease
(apart from those properties excluded from the legislation) may
give some comfort.
Another example of a typical set of figures for a lease

extension
A flat where the leaseholder sought to extend the lease had 48
years remaining. The value put on this flat with its short lease was
I N C R E A S I N G THE V A L U E OF Y O U R FLAT /113
£116,000. The value after lease extension was calculated at

£145,000, making an uplift in value of 24.5 per cent. The premium
paid by the leaseholder for the extension was £16,800, and the
case did not go to the LVT as there was no dispute over the
figures.
If there is no dispute and the matter proceeds smoothly, a lease

extension should take seven or eight months to complete. Where
the amounts are disputed, it could take more than a year, with
fees building up all the time.
Before embarking on a lease extension, check what the

professional fees are likely to be as, of course, these will be in
addition to the cost of the lease extension itself.
TIP
There are some companies nowadays which specialise in project managing lease
extensions and collective enfranchisement. These companies will oversee every
aspect including valuation and legal work, for a flat fee. See Resources (page 208)
for a list. Also, lease extensions are by definition individual affairs, and will not
extend to the entire block. If your block is in the process of enfranchising, the
landlord is not allowed to sell you a lease extension as well. Anyway, there would
be no point, as once you have enfranchised, leases can be extended for nominal
sums.
GETTING STARTED
The first thing is to get the flat valued, at both its present value
and at its new value with the lease extension. For this you will
need an estate agent or a chartered surveyor; it is not enough to
114/HOW TO BUY A F L A T
just guess the old and new values, although valuations are not an
exact science and there will always be some degree of guesswork.
These papers should be presented to your solicitor, who will serve
the requisite Section 41 notice on the landlord.
If you do not know who the freeholder is, and these days it is not
always easy as freeholds can change hands very quickly, you must
find out before the notices can be served. This information is now
available at www.landregisteronline.gov.uk. If your building has
managing agents, they will more than likely have details of the
freeholder or overall owner. Your solicitor will also need a copy of
your original lease.
Your solicitor then has to convey your offer price to the

freeholder, who will probably come back with a counter (higher)
offer price. The landlord has to reply to the notice within two
months, and he can also inspect the flat in this time, to carry out
his own valuation of the place.
If the landlord does not come back within the statutory time, the
lessee can buy the lease extension at the original offer price by
applying to the County Court for a 'vesting order'.
However, don't bank on the landlord forgetting all about it and

missing the deadline! In reality this hardly ever happens, as selling
lease extensions is a lucrative business.
The landlord's response

The next step is that the landlord, or his representative on earth,
will respond, usually with a (higher) counter offer. There will very
I N C R E A S I N G THE VALUE OF YOUR F L A T /115
likely also be a demand for a deposit of, typically, £250, from you
to show that you are serious.
Unless the landlord and lessee can reach agreement on the

amounts, one or other party will have to apply to the LVT. This
will normally be done by the leaseholder's solicitor and is another
reason why it is important to instruct a solicitor fully conversant
with the process.
If agreement cannot be reached

The LVT hearing is held, usually three to four months after
receiving the application. There will be three people on the LVT
panel, such as a lawyer, surveyor and layperson. The leaseholder
can be present at the hearing, and I would advise it, but this is not
a legal requirement and you can be represented by your solicitor.
If your landlord is a large corporation, it will almost always be

represented by a fierce solicitor used to this kind of thing. The
LVT panel will listen carefully to both sides, then go away to
assess all the evidence and pronounce, sending details of its
decision to each side.
If the lessee finds the eventual price too high, he can walk away
from the deal and not pursue the request for a lease extension.
The landlord can also appeal if he considers the price too low. In
either case, the appeal must be lodged within 28 days of the
original decision and it will now be heard by the Lands Tribunal.
If the landlord believes the lessee's offer is ridiculously low, he can

apply to the County Court to have the notice declared invalid.
This will have the effect of stopping the lease extension process for
at least another year.
So, you can see how the business can drag on and on when
parties cannot reach agreement. And every extra letter, phone
call, email or fax means a fatter fee for the lawyers.
It's done!
Assuming agreement is reached, either privately or at the LVT, the
term of the extension is entered on the lease and the money paid
by the lessee.
How long does it all take?

If the valuation put on the lease extension is challenged by the
landlord at the LVT, you are looking at a timeframe of at least a
year, by which time values could have changed.
How much does it cost?

This is where it pays to do your sums very carefully indeed, before
proceeding with an extension. There are several cost elements,
such as the cost of the lease extension itself; the solicitor's and
surveyor's costs - payable whether or not the application succeeds
- and the landlord's solicitor and surveyor fees. In general, it costs
about the same to extend the lease as to enfranchise collectively.
Legal and other fees alone could easily come to £3-4,000.
There is no application fee to the LVT, and if the case proceeds to

an LVT hearing, each side pays its own costs. Because many
landlords hate paying out, most lease extensions are concluded
before getting to the LVT stage. As ever, it depends on how much
money is involved. In Eileen's case on page 108, the sum was so
I N C R E A S I N G THE V A L U E OF Y O U R FLAT / 117
large that it was worth the landlord's while to pay legal costs for
an LYT hearing.
WHICH IS BETTER, A LEASE EXTENSION OR

COLLECTIVE ENFRANCHISEMENT?
Collective enfranchisement is definitely the better option. Most
experts advise that, wherever you can, it is better to enfranchise
collectively than just extend your own lease. Flats which come
with a share of the freehold are always more valuable than even
the longest lease.
Why is this?
Because it means that there is no outside freeholder to impose

control. Not only that, but there is a uniformity about the
building. If you have extended your lease to, say, 138 years, yet all
the other flats in the building have leases of 48 years, you will be a
high-value flat surrounded by low-value flats in the same building.
Also, once the building has collectively enfranchised, there is

nobody making any money out of the leaseholders, and leases can
be extended very cheaply.
CASE STUDY
Jim and Carol bought a very cheap flat with a 70-year lease,
which was worrying, but the building, containing 33 flats, had
just enfranchised and formed a limited company. The couple
paid £33,000 in 1999 for the flat.
After a couple of years, they applied to extend their lease to

999 years, and this cost just £750, plus costs to the Land
Registry to alter the title deeds and solicitors' fees, in total
another £100.
Jim and Carol had paid cash for their flat, but wanted the
extension because it would be difficult to resell except to a
cash buyer, with such a short lease.
After extending the lease, the flat's value increased to

£115,000 overnight.
VERY SHORT LEASES

Where the leases on all the flats in a building have become very
short, say 30 years or less, check whether it is actually worth
trying to extend or enfranchise. I once received particulars on a
property with only a 35-year lease left. The reason the leases were
running down was that the building was not expected to last much
longer, and was scheduled to be pulled down when the leases
finally ran out.
Because the building was right on the seafront, with a fabulous

view, I would have secured a wonderful location at a very cheap
price - but only for a certain length of time. I decided not to buy,
but in some instances it could still be worth it if you regard the
lease as a cheap and never-increasing rent for the remaining life of
the building.
I N C R E A S I N G THE VALUE OF Y O U R FLAT /119
It is possible, in this case, that the land on which the building

stands will eventually be more valuable than the actual units. But
35 years is a long time to wait to find out.
RIGHT TO MANAGE
All blocks of flats have to be managed by somebody, and it is very
common for individual lessees to moan continuously about the
inferior way the building is managed, and how everybody is being
overcharged for very poor services.
The Commonhold and Leasehold Reform Act of 2002 allows

leaseholders to take over the management of their building, even
when it is owned by an outside freeholder, and without having to
prove any dereliction on the part of the landlord.
In fact, lessees have not been overwhelmingly keen to take over

the management themselves where there is an outside freeholder,
maybe because managing a block of flats is quite hard work, and
requires a level of expertise that residents may not possess. It is
quite a big responsibility, especially when residents are managing
the building voluntarily.
Also, setting up a Right to Manage (RTM) company is

complicated in itself, and you have to get at least half the owners
agreeing before it can be taken any further. It is not always easy
to overcome apathy. Reluctant residents have to be persuaded that
services will become both better and cheaper when the flat owners
are in charge - and they may not be convinced that this will
necessarily happen.
In some cases though, gaining RTM may be a first step towards

collective enfranchisement, especially if the landlord is trying to
charge a huge amount to let go of the freehold to the residents.
But before ever deciding on this step, it is essential for interested
residents to read the lease very carefully, and ensure they can fulfil
all its provisions themselves.
Once the residents gain an RTM, there is really no way the

landlord can continue to make money out of them, except by
selling them the freehold.
HOW TO GO ABOUT SETTING UP AN RTM

So long as the building itself qualifies - and again, local authority
and many housing association properties are not included - an
RTM company may be set up and registered with Companies
House. This is a company limited by guarantee, and means that
the RTM must keep proper accounts which are submitted to
Companies House every year, and anybody is entitled to look up
the company. The RTM must also have a Memorandum and
Articles of Association - you can get copies of the MemArts, as it
is called, from the Stationery Office.
In fact, it is relatively easy to set up a limited company, as all the

rules and regulations are in place, and the Companies House
website will guide you through it. But once the company has been
set up, you have to abide by Company law. The fact that the
RTM is non-profit making, and just run by residents, does not
mean it escapes the strictures. For instance, the company must
hold an AGM, appoint directors and submit proper accounts
every year. Otherwise, the company can be struck off, even though
it is not trading in any way.
I N C R E A S I N G THE V A L U E OF Y O U R FLAT /1 2 1
You cannot just make it all up as you go along!
When trying to set up an RTM, all residents must be invited to

become members, and sent the right forms, even if you may not
want some occupants to be included. You are not allowed to
exclude any of them, even known troublemakers. Then, once at
least 50 per cent of the flats become members, the RTM company
is deemed to be set up, and can apply for RTM.
After this, the landlord is sent an RTM claim notice and has a
minimum of one month to reply. He may decide to serve a
counter-notice on the RTM company, either admitting their right
to manage, or disputing such. If he does not send a counter-
notice, the RTM company can begin managing without further
ado.
Otherwise, the LVT is involved - again. If the RTM claim is

disputed, the company applies to the LVT, which makes a decision
as to whether the RTM notice is valid and whether the RTM
company actually has the right to take over the management.
Assuming the LVT upholds the RTM decision, the landlord can
then become a member, if desired. In any case, he must provide
the RTM company with a list of all contractors and any other
matters concerning the management of the building such as lift
operators, maintenance people, fire safety regulations and
insurance.
The RTM is not bound to continue using the same contractors or

service providers.
How long does setting up the RTM take?

Even if everything proceeds smoothly, it will still take about a year
from start to finish. The shortest timescale is probably eight or
nine months, so it cannot just be a decision by a few disgruntled
residents objecting to what they have to pay.
It also costs something to set up an RTM, to register with

Companies House and comply with the strictures of the
Companies Act. The new company must also bear the costs of the
landlord in handing over or disputing the claim although should
the case proceed to the LVT, each side will pay its own costs,
unless the LVT decides the RTM is not eligible, when it will have
to pay the costs of the other side as well.
Setting up an RTM is not something to be entered into lightly,

then!
Also, establishing an RTM does not mean that the residents now
own the block. Unless they have also collectively enfranchised, the
landlord can sell on the freehold to somebody else, although
where an RTM exists, he must offer the residents the right of first
refusal.
What the RTM has to do

Once set up, the RTM is responsible for carrying out all the
provisions of the lease such as insurance, cleaning, renovations,
day-to-day repairs and major works.
Is it better for residents, having gained RTM, to manage the

building themselves, or go for outside management?
I N C R E A S I N G THE V A L U E OF Y O U R F L A T /1 2 3
On balance, it is probably better to go for professional

management in a building of any size. However, specific
management issues are discussed in the following chapter.
Be aware of the problems associated with RTMs

RTMs may sound a good idea but be warned. They do not always
work smoothly by any means. This is because an overwhelming
problem with a block of flats is that it is rare for all to think
alike, and it is common for residents to squabble among
themselves after gaining RTM. I would emphatically not
recommend going for RTM where there are already disputes and
disagreements among residents. You need a sense of community,
for all to think as one, for RTM to work. If there are warring
factions, as there frequently are, it may be better to stick with the
existing management structure.
Because residents can demand to see accounts, it is becoming

increasingly difficult for freeholders to rip off residents through
service charges, levies and other fees. Also, residents often do not
realise just how much it costs to run a building satisfactorily;
insurance alone can take up half the annual charges.
In fact, RTM is not proving as popular as expected, possibly

because the whole thing involves quite a lot of work and you
don't even own your building at the end of it.
Peter Haler, chief executive of LEASE, the government's leasehold

advisory service, has this to say about RTMs:
Over the past few years, there has been a drastic decline in
enquiries about RTM and it's hard to understand why. Only six
1 2 4/ H O W TO BUY A FLAT
per cent of enquiries to LEASE are about RTM, yet to us at

LEASE it is often the answer. It does not cost anything, unlike
extending your lease or collective enfranchisement, and given
that concern about quality of management and level of service
charges is the commonest reason for wanting to buy the
freehold, one would expect us to be deluged with enquiries.
As it gives the leaseholders the management, it would seem the
obvious way to improve your building.
LEASE provides free legal advice to leaseholders, landlords,

managers and anybody else connected with issues affecting
residential leasehold properties.
Many firms of managing agents also now handle RTMs. A list

can be obtained by logging onto the ARMA website
www.arma.org.uk. Individual entries by members will indicate
whether or not they handle setting up an RTM.
BUYING THE FREEHOLD, OR, COLLECTIVE

ENFRANCHISEMENT
There is no doubt that this is by far the best option, if you can get
enough residents to agree and if you qualify. Most importantly,
ensure you can all afford it, as buying the freehold can be
expensive in itself, not to mention the legal and professional costs
involved, even when the whole thing goes smoothly - which it
rarely does.
In practice, most residential blocks of flats where occupants have

leases in excess of 21 years remaining will qualify for CE
(collective enfranchisement). But there must be at least 50 per cent
of the leaseholders (not subtenants, but long leaseholders) who
INCREASING THE V A L U E OF Y O U R F L A T /1 2 5
agree in principal to the enfranchisement.
Why enfranchise?
The reasons are obvious: you, the residents, gain control and
ownership of the building, which then belongs to a company you
have created and in which you all have a share. This means you
can decide on policy, appoint managing agents or manage the
building yourselves, decide on service charge rates, major and
minor works, appoint your own contractors and generally, not be
beholden to the freeholder any more.
The trouble is, many residents talk about enfranchising when they
are dissatisfied with the existing structure, or service charge
payments. Kat Callo, whose company Rosetta Consulting,
specialises in collective enfranchisement, advises:
It is very important for residents to move forward rather than
fight yesterday's battles.
They are over. When enfranchising, you have to put your
emotions, and any feelings of revenge or anger, to one side and
proceed in a positive direction. Collective enfranchisement is a
complicated procedure with many ways of being tripped up. To
make it work, you need all your focus and resources in one place.
MAKING IT WORK
Each participant must at an early stage sign a Participation
Agreement. This is not required by law but binds you all together
at the beginning of negotiations, and also ensures some
commitment from those interested. Unless this is done, you find
that people start changing their minds and you get nowhere.
After agreement is reached, and enfranchisement is theoretically

possible - and this will usually depend on the hard work of the
one or two people pushing the agreement forward - a Right to
Enfranchise Company has to be set up. This is, like the Right to
Manage company, a Company Limited by Guarantee, which must
be registered at Companies House.
After the Company has been set up, each participant will be a
shareholder in the new company. Non-participants are not
shareholders. Obviously, each participant has to advance some
money, which should be put in a separate, dedicated, account, as
there will be costs at the outset, and ongoing costs as the matter
proceeds. It is not cheap to enfranchise.
Gaining a formal valuation

The next step is to get a formal valuation of each flat within the
building. The building itself minus the flats is worth nothing, but
that does not mean there is no value to the freeholder. Depending
on the length of the lease, the main value may be in the reversion,
which is when the property reverts to the landlord. And the
shorter the lease, the higher the reversion value.
Ground rent
There is also value in the ground rents, and to arrive at this, the
surveyor will have to add up the total price paid in ground rents
over the years the leases still have left to run. A simple example
would be: in a block of 100 flats, each leaseholder pays £100 a
year in ground rent, and the leases have 70 years to run.
Assuming no increase, the total ground rent comes to £700,000
over that 70 years. Now you can start to see how small sums add
up, and why collective enfranchisement is rarely simple.
I N C R E A S I N G THE V A L U E O F Y O U R F L A T /1 2 7
Valuation of the enfranchisement

Where there is a marriage value, which there will be when leases
are less than 80 years, the freeholder's share is set at 50 per cent
of this. Where the leases all have more than 80 years to run, the
marriage value does not apply.
A lease of 80 years is considered as valuable as one of 125 years;

there is no difference in purchase price when flats are sold on after
enfranchisement. The 'share of the freehold' is the magic term
which automatically increases the value of the flat.
The valuation is made up of each leaseholder's interest (the value

of each flat on the open market, now and after enfranchisement)
and the freeholder's interest. In other words, by buying the
freehold, how are you depriving the freeholder?
Appreciation
There is also the expected appreciation in value once the freehold
is bought, to take into account.
Some buildings may have garages, outbuildings, communal

gardens. There may be some flats over shops, and also the
freeholder may own some flats which are rented out on a monthly
basis. There may be a caretaker's flat or there may be a head
leaseholder, who comes halfway between the landlord and the
leaseholders. This happens in many blocks of flats in prime
Central London, such as Belgravia and Knightsbridge. In all,
there are many variables, and all have to be taken into account
when totting up the value of the building as no two blocks of flats
are exactly alike.
1 2 8/ H O W T O B U Y A FLAT
The right of first refusal

There may also be the 'right of first refusal' to consider. Many
freeholders sell on their interest to other freeholders, and there is
much exchange of this kind in the property market. When this
happens, they must now by law offer the freehold to the
leaseholders first, at the same price. This happens mainly with new
blocks, where developers own the freehold for a few years, then
move on.
'Hope' value
In addition, there may be 'hope' value, where the freeholder
hopes to build a couple of storeys on top, for instance, or
development value, where there is spare land owned by the
freeholder on which he intends to build. When Marion Mathews
and Renske Mann sold the freehold of their building in London,
Wll, they retained 'air rights' which means they can, if they
should ever want to, build another storey on top of the existing
building.
Solicitors conversant with CE should know all about possible

future development value.
Summary
To sum up, there are three main elements to the valuation: the
landlord's interest, such as income stream from future ground
rents; the landlord's interest - the value of the reversion, when he
gets the properties back and the MV of participating flats, where
this is payable.
As with lease extensions, MV does not apply where the leases

have 80 plus years to run. Where leases have less than this time to
I N C R E A S I N G THE V A L U E OF Y O U R F L A T /1 2 9
run, the leaseholders pay 50 per cent of the marriage value to the
freeholder.
Example: each flat is currently worth £500,000, with a 70-year

lease left. After enfranchisement, each flat would be worth
£600,000. The marriage value is therefore £100,000, of which
participating enfranchisers would pay £50,000 each.
How it stacks up (sample)

Here is a sample valuation for each flat valued at £580,000 with a
60-year lease and ground rent payable at £200 pa. The estimated
freehold value of this same flat is £700,000.
Ground rent: total value £5,470

Reversion £28,140
MV £43,195
Cost of freehold per flflat:
This means that each participant pays £77,000 to get £700,000

value.
But there is more to it than that, because a flat sold with a share
of the freehold is always more valuable than the same flat sold
without this advantage. Also, such a property would rise in value
according to the market, whereas with a 60-year lease remaining,
it would only lose value.
(Figures courtesy of Rosetta Consulting.)

CASE STUDY
In 1999, Colin bought a newbuild property in a block of 13

flats on the Sussex coast. By the time the development was
finished, the developer had gone bust. He offered the freehold
to the residents who could not reach agreement to
enfranchise. In the end, the freehold went to a company in
the north of England who also acted as managing agents -
and the leaseholders have been complaining ever since.
GET MOVING!
If you ever get a chance like this, do your utmost to persuade the
other residents to take it, as next time you want to enfranchise,
prices will have gone up. It is common for developers to go bust
and a very good time to buy the freehold.
It is also said that the longer the residents sit round a table and
deliberate, the less the likelihood there is that they will ever get
together to buy the freehold.
Hi ri r^^l
You will definitely need a specialist enfranchisement lawyer for this job. It is too
complex, too user-unfriendly and too full of possible snags for it to be feasible for
leaseholders to try to do it themselves. Since 2002, when the Commonhold and
Leasehold Reform Act came in, many firms have been set up with the sole purpose
of enabling leaseholders to enfranchise, and it may make sense to use one. It is
important to try to get quotes, as some firms charge a flat fee, whereas others
charge by the hour.
INCREASING THE VALUE OF YOUR FLAT /131
The CE process works like this:
1. After getting agreement from at least 50 per cent of long

leaseholders in the building, setting up the company and getting
the requisite valuations, you serve the enfranchisement notice on
the freeholder.
2. The landlord then serves a counter notice.
3. If agreement cannot be reached, there is an application to the
LVT. Note: the great majority of enfranchisements happen without
recourse to the LVT. Why? Because it can involve the landlord in
a lot of legal costs - costs he is usually most anxious to avoid.
4. The LVT hearing and decision takes place.
5. Completion of the freehold purchase.
The most cost-intensive and complicated of these steps is the first

one, which is serving the notice. This notice is served by the
Nominee Purchaser (the company set up by you, the leaseholders
wishing to enfranchise) and includes the offer for the freehold,
based on a professional valuation. This is in itself a specialised
endeavour.
The notice must be signed by all the participants, and the

landlord has two months to reply. In that time, the landlord has
the right to inspect each participating flat and can demand access.
The second phase, where the landlord serves the counter notice,
states whether the landlord accepts in principal that the
leaseholders qualify to purchase and, if so, states his counter offer.
If the landlord does not reply, the leaseholders can buy the
freehold at the offer price.
If agreement cannot be reached, phase three - application to the

LVT - comes into force. This means that the enfranchisers ask the
LVT to set a reasonable price at which the landlord must sell.
The LVT is a quasi-judicial body, growing in size and importance

all the time as ever more blocks of flats decide to enfranchise. At
the hearing, it will give the price it deems 'reasonable' and this
leads into phase five, which is completion of the freehold purchase.
At this stage, the landlord must prepare a contract and give it to

the nominee purchaser within 21 days of the LVT hearing, or
within 21 days of agreement with the purchaser.
Then the place is yours, forever.
TIPS ON DECIDING WHETHER OR NOT TO PROCEED WITH CE

Kat Callo offers these tips before deciding whether to proceed with CE:
CE is not suitable for every block, so analyse whether this is the best option
for your building. If so, circulate a business plan and time frame. Collect
deposit payments from each participating resident. Project-manage stage by
stage and be clear about latecomers. They had their chance - and now
cannot be allowed to hold up proceedings.
Kat admits this can be difficult in the modern world, when some potential
participants may be in Australia, climbing a mountain or otherwise uncontactable.
Some residents may have died, and the flat now belongs to their estate. It is
essential that all qualifying residents are contacted beforehand, and given a chance
to participate. Therefore, you cannot proceed until everybody has been unearthed
and contacted.
She adds:
I N C R E A S I N G THE VALUE OF Y O U R FLAT /133
Send regular update notes to all participants as CE proceeds. It is most

important to keep all information confidential and away from the landlord.
Talk is cheap - so don't talk about your CE to anybody except the
participants. You have no need to keep the non-participants informed and
you should not do so, as they may be spies for the landlord.
Just let the lawyers and experts handle it. Once a core group of you has
decided to try and enfranchise, give people six weeks or so to respond, and
then start the process.
j^jjeii^Lw
What about the non-participants?

Once CE has been achieved, leases can be extended - for a
nominal sum - to participants. This does not mean that non-
participants, of whom there are always a few, will be allowed to
extend their leases for nothing. What happens is that the
Company set up by the Enfranchisers now owns the building, not
the previous freeholder, and non-participants will retain their
short leases. They have become, in effect, tenants of the company
and they will not be allowed to own a share. This could make life
difficult when they want to sell. Also, of course, they do not have
a vote on management issues.
A more serious problem could be that when a building buys the

freehold, this includes the non-participating flats, as the purchase
price is for the whole block. In some cases, this may represent an
insuperable financial stumbling block to purchase.
What usually happens is that the participants buy the freehold

between them, and the non-participants are excluded. They are
not part of the new company, or the new freehold.
Clearly, it is in everybody's interests to get as high a proportion

of participants as possible. A common attitude, according to Alex
Greenslade, of Leasehold Solutions, is for people to say, Til do it
if everybody else does.'
This is a common, if unhelpful, attitude, and often, reluctant

participants need persuading of the advantages of enfranchising.
This is where clear and regular communication comes in.
RUN THE COMPANY PROPERLY

Once you have enfranchised, it pays to appoint a professional
company secretary, rather than try to do it yourself, as company
law can be bewildering for the volunteer amateur. Remember, the
company can be struck off and the properties revert to the Crown
unless company law is obeyed to the letter, and the commonest
companies to be struck off these days are recent enfranchisements.
Company secretary work is often undertaken by firms of
managing agents, at a cost of a few hundred pounds a year.
And unless there is only a very small number of individual flats in

the block, it pays to appoint professional managing agents. The
expert advice is: do not attempt to do it yourselves, even on a
voluntary basis.
Do you now own the building between you?

Technically, no. The leaseholders own shares in the company
which owns the block, and the company has an independent
existence of its own.
The company formed to purchase the freehold is limited by

guarantee, which means the members are guarantors of the
INCREASING THE V A L U E OF Y O U R F L A T /1 3 5
company's debts, to a nominal sum. The directors of the company

must carry out all the duties set out in the lease and raise money
to pay for ongoing costs and future works.
Who are the directors?

As the new company is non-profit making, the directors will
usually be volunteers who are in effect serving their neighbours. It
can be difficult to persuade enough people to become directors,
although, as Robert Levene of the Federation of Private
Residents' Associations points out, this does not prevent non-
directors from criticising those who do volunteer.
And finally...
Whether you are embarking on RTM or CE, it is most important
to establish a sense of community before, during and afterwards.
Otherwise, the situation could develop into a Mrs Merton-style
'heated debate' on every little issue. The best ways of establishing
this feeling of togetherness is to have a regular newsletter or
website whereby everybody is kept up to date. There must also be
total transparency about costs, charges and company decisions.
This means that those appointed as directors or overseers must be

people in whom the others have total trust.
6
Ex-local Authority Blocks
These are a law unto themselves and, accordingly, I have devoted

a chapter to them.
The main difference between buying a flat in the private sector

and ex-local authority stock is that in the former you are buying
into a block which is predominately or entirely leasehold.
With local authority buildings by contrast, you are buying into a

building with a mixture of leaseholders, private tenants and social
tenants, and this intimately affects the way the building is run.
COLLECTIVE ENFRANCHISEMENT
It is widely believed that you cannot collectively enfranchise with
an ex-local authority block. In fact, this is not entirely true,
although it can be very difficult. But CE would be possible with,
say, a block containing 18 flats, of which 14 are on a long
leasehold. The bigger the block, the greater the problem.
But Richard Towes, Head of Home Ownership at the London

Borough of Hammersmith and Fulham, says:
We're more than happy to lose control of the building. In our
borough, several blocks have already enfranchised, and the
building has passed entirely into private ownership, meaning we
have nothing more to do with it.
136
EX-LOCAL AUTHORITY B L O C K S /1 3 7
Where a block has enfranchised, but there remain council tenants,

the council becomes a leaseholder, and pays service charges to the
new freeholder. In other words, the role is reversed, and the
council would have to buy the new lease from the enfranchisers
instead of the other way round.
LEASES SHORTER THAN 80 YEARS

This is a common problem within this sector. When a former
council tenant buys a lease from the council, this is for 125 years.
In normal cases, this can be extended for 90 years as it starts to

run down - in the same way as in the private sector for a
suitable fee. This means that most leaseholders in these blocks
have nothing to worry about.
But when it comes to high-rise blocks built in the 1960s, and the
council may be the head leaseholder, rather than the outright
owner, problems can occur. For one thing, the original leases
granted to the council may have been shorter than 125 years, so
by the time the council tenant comes to exercise right to buy, they
could have become very short indeed.
Example
There are three high-rise blocks opposite Shepherd's Bush station,
in West London. These were originally built by a private company
which wanted to develop commercial property in the area. The
council on this occasion insisted that at the same time they built
residential accommodation for social tenants. The property
developer remained the freeholder.
In time, a proportion of these social tenants exercised their right

to buy. But because the council was the head leaseholder, rather
than the freeholder, they had less control over length or extension
of the leases. This has resulted in some leases becoming very short
indeed, under 70 years. In addition, it is difficult, if not
impossible, to get a mortgage for higher than the seventh floor in
blocks of this type.
Again, Richard Towes explains:

Where we are not the freeholders, as in these blocks, we cannot
grant a longer lease. But as the law allows a leaseholder to
extend the lease, we have to refer potential buyers to the
freeholder. Potential buyers have to be very aware of the sell-on
possibilities in blocks of this type.
All over the country, there are high-rise ex-council blocks where
the council is not the owner. This is something to find out before
buying, as very often these blocks are in wonderful locations and
have stupendous views.
Also, contrary to popular belief, many are extremely well kept,

with concierge services 24 hours a day, 365 days a year.
A NOTE ON MORTGAGES
Council tenants living in high-rise blocks who want to exercise
their right to buy at a discount normally have no difficulty in
obtaining an ex-local authority mortgage.
Problems arise when that leaseholder comes to sell and the

property goes onto the open market. Many property investors buy
these flats to rent out, knowing that they have a wasting asset, but
E X - L O C A L A U T H O R I T Y B L O C K S /139
calculating that the rent payable for the life of the lease still gives
them a considerable profit on the investment.
Increasingly, local authorities supply an information pack for new

owners which sets out all the terms under which they have bought
the lease.
SOCIAL TEN ANTS

Most local authority blocks will contain a proportion of social
tenants. These are people who, for one reason or another, do not
have the means to go into the private sector. This is what social
housing is all about, and anybody buying into a local authority
block must be aware of this. Some of these blocks may never pass
into predominately private ownership. On a small estate where I
have an ex-council flat, there are just 12 leaseholders among 80
flats, and this percentage has not changed for years.
SERVICE CHARGES
These are levied according to a different principle from the private
sector in that local authorities are not allowed to amass a sinking
fund. This means that service charges can seem extremely cheap.
When you buy from a local authority, the information pack

should state this, saying that you the leaseholder will be liable for
your share of any major works.
Richard Towes says: 'Local authorities are not allowed to hold

money in trust, as in the private sector. This means that whenever
there are major works, leaseholders can suddenly be clobbered for
large bills.'
The reason for this is the presence of the council tenants. If you
have 10 leaseholders and 40 council tenants in a block of 50 flats,
the local authority is not in a position to put money into the
sinking fund on behalf of the rent payers.
Richard Towes continues:

When former council tenants buy a lease, they have to start
paying service charges, which did not happen before. We point
out that their share could be a lot of money. Nowadays, this is
made abundantly clear, although it was not always spelt out in
the past, which is why there have been so many stories of ex-
council leaseholders suddenly having to find four- and five-
figure sums.
It has to be said that local authorities are now getting much better
at keeping leaseholders informed about service charges and how
they are apportioned. In most cases, leaseholders receive a booklet
each year with their service charge bill, setting out each element of
the cost.
Another way in which service charges in this sector differ is that

they are levied in arrears, not in advance. You pay for services
already supplied. It is the same with major works. The council
borrows money to carry out major works, such as installing new
windows in the whole block, and you are billed maybe two or
three years later.
But all leaseholders have to be circulated with the estimates and

quotations in advance, with an accurate estimate of their share of
the cost.
EX-LOCAL AUTHORITY BLOCKS /1 4 1
For instance, I was billed just over £2,000 for my share of new
windows in my ex-local authority block, years after their
installation. But I was informed of the quotations in advance.
There was nothing I could do about it, although as a leaseholder I

do have the legal right to take any charge I feel to be
'unreasonable' to the LVT. Not all local authority leaseholders
realise they have this right, but the law does try to be even-handed
on this matter.
A bone of contention is that whereas leaseholders pay service

charges and for major works, council tenants pay nothing on top
of their subsidised rent. But councils argue that council tenants do
pay, and that their rent goes towards all these costs.
Summary
To sum up: the main difference regarding service charges is that in
the private sector, leaseholders put money in before the works are
carried out, whereas with council blocks, the local authority does
the works, then bills the leaseholder.
For those who cannot pay a single large sum, most councils have
schemes in place whereby leaseholders can pay over five years -
with interest added, of course. Or they can pay over one year,
without interest added.
Any leaseholder having difficulty with paying a one-off sum for

major works should contact the relevant authority and work out a
payment plan together.
There is also the fact that in the private sector, the aim is to make
a profit, but local authorities are not allowed to make a profit. So
when major works are indicated, the council do not take an extra
ten per cent commission.
Richard Towes says:

The private sector landlord often has another building and
maintenance company, and gets a kickback from this. We are
not allowed to do this. It is also not always realised that
leaseholders are entitled to nominate their own contractor if
they do not like our estimate for works.
RESIDENTS'ASSOCIATIONS
Many local authority blocks and estates have thriving Residents'
Associations. These have to register with the local authority and
be open to all residents, tenants or leaseholders to join.
The Association must also have a proper constitution. Nowadays,

many local boroughs have Federations of Residents' Associations
and run regular forums for these Associations in their area.
There is also likely to be a leaseholders' panel which all

leaseholders are invited to join. These Associations are important
as many issues that arise concern tenants and leaseholders alike,
such as security, gardening, state of common areas or caretaking.
BREACH OF LEASE
Local authorities can take exactly the same action for breaches of
lease as the private sector. Where there is a dispute, a leaseholder
can be taken to court, to the LVT or expect a visit from a debt
collection agency.
E X - L O C A L A U T H O R I T Y B L O C K S /143
INVESTMENT VALUE
It is still the case that an ex-local authority flat will tend to be
cheaper than an identical flat in an equivalent area which is not
local authority. There is a slight remaining stigma regarding these
flats, although it is lessening all the time.
But the presence of the social tenants means that the value is
always likely to be lower.
IS THERE A BEST BUY?

The best bargains, in my view, are to be found in so-called 'gap
sites', where the council has built a small block of less than 20
properties in the gap between other housing. Although these
buildings are not as pretty as the surrounding houses - for
example, you often see a 'gap site' in a row of pretty Victorian
cottages - they are often in brilliant locations and once you are
inside, you can forget about it being ex-council.
Ex-council flats are often very well designed and spacious. But they
do need a lot of help to obtain a designer feel and make them chic.
The most difficult buys are those on huge estates, where the
difference in price is astonishing, compared to a non-council
property in the same area. For instance, a large four-bedroom ex-
council flat on the White City estate, near to the BBC, costs (at
the time of writing) £220,000, whereas the same size property in
the private sector only two streets away costs at least £500,000.
Yes, you get a bargain - but will it increase significantly in value
and how long will you have to wait for this to happen? In the
meantime, you are living in the middle of a vast council estate,
which is not everybody's idea of an ideal location.
Property investors are snapping up ex-council flats fast, believing

that if the location is good, they will one day be extremely
valuable. But you need a strong head and a long time frame.
From a buy-to-let perspective, snapping up one of these large flats
can make a lot of sense, as you get exactly the same rent for a
bargain four-bedroom council flat as for an expensive four-
bedroom Victorian terrace house in the next street.
7
Letting a Flat
Buy-to-let has become so popular that many people imagine it's

easy enough to buy a flat and rent it out.
In fact, the vast majority of residential leases impose restrictions

on renting out, or subletting as it is known, and you would be
wise to consult the lease before ever making an offer on a buy-to-
let apartment.
THE LEASE
Whenever considering buying a flat to rent out to others, make
sure you look carefully at the lease first, as there may well be
restrictions.
Some leases insist of rentals on no less than a year, very many

leases forbid short lets and whatever the lease may say, it is
against the law in the UK to rent out a flat as a home for less
than 90 days at a stretch. Holiday lets are another matter, as they
are considered leisure activities and not homes.
Even where you have bought a flat with a share of the freehold,
these same restrictions will apply. And with newbuilds, where
most buy-to-let investments are made, the property is rarely sold
with a share of the freehold.
Even if the flat is commonhold, similar strictures will apply on

subletting. It is important to bear in mind that you the landlord,
145
or leaseholder, are ultimately responsible for what goes on inside

your property not your tenant.
When it comes to renting out an apartment abroad, the situation

can get even more complicated, as some apartment buildings do
not allow any form of subletting, whereas in other apartment
buildings you are not allowed to rent out to holidaymakers, in
case it takes away from local trade.
RESTRICTIVE SUBLETTING
What does it all mean in practice, especially as around 30 per cent
of all new flats in the UK are now being bought specifically by
investors with renting out in mind?
And why do so many leases impose subletting restrictions?
A major issue here is that of security, which is always of the

utmost importance in any apartment building. The more unknown
people there are going in and out, the greater the security risk.
Another factor is that of keeping a check on the behaviour of

occupants, as when there are many subtenants in a place, it
becomes difficult to track perpetrators of the kind of bad
behaviour which is so intolerable in a block of flats, such as loud
music, rubbish left in corridors, washing hanging out of windows
and front doors being left wide open.
There is also the question of value, as some freeholders believe

that an apartment building loses value when it contains more sub-
tenants than owner-occupiers and becomes in effect a rooming-
L E T T I N G A FLAT / 147
house. The greatest fear is that transient tenants will not look
after the place, as they have no great interest in the common parts
or the fabric of the building.
Relevant clauses
So, first check the relevant clauses to establish the following:
+ Is any kind of subletting actually allowed on the lease? Some

leases do not allow subletting at all.
+ If subletting is permitted, are there any restrictions on length of
tenure and type of tenant?
4 Do you have to give details of the tenant to the freeholder or
managing agent?
* Are holiday lets allowed?
+ Are short lets allowed?
+ Are you expected to be responsible for your tenants' behaviour?
+ Are pets allowed?
+ Is smoking allowed?
Also bear in mind that in residential accommodation, tenants are

not allowed to carry on a business from their home. Obviously
this is in many ways a grey area but the usual interpretation is
that you are allowed to be a writer or illustrator, say, from home,
but you are not allowed to run a business where people may be
coming to your home. Therefore tenants would not be allowed to
offer a holistic massage service or run a reflexology or
acupuncture clinic from their home.
In general, 'running a business' means you are not allowed to

carry on any commercial activity which involves either clients
coming to your home, or where business equipment would have to
be installed.
The effect of ignoring restrictive subletting

Remember that any persistent flouting of these clauses will result
in a breach of the lease and could, in extreme cases, lead to
forfeiture, meaning that you, the investor, end up with nothing,
regardless of how long the lease is and however much you paid for
it. After all, if the matter comes to court, it will be argued that
you agreed to the terms of a legally-binding agreement when you
signed the lease.
The lease is paramount when you are renting properties out, in

just the same way as when you are living there yourself.
WHAT KIND OF SUBLETTING IS ALLOWED?
The Assured Shorthold Tenancy

In most apartment blocks, only Assured Shorthold Tenancies
(AST), of six months or more, are allowed. Many blocks will only
allow subtenancies of one year or more.
The AST is the commonest type of tenancy in existence today and

means that the property is rented out for one year minimum, with
a break clause after six months.
Terms of the tenancy are set out in the tenancy agreement, which
both you and the tenant must sign. These are standard
agreements, obtainable from most stationers and also drawn up
by professional letting agents if you take that route of finding a
tenant. It is usually best to use a letting agent that is a member of
the Association of Residential Letting Agents (ARLA), which has
much useful advice you can download from their website
(www.arla.com).
Holiday lets, defined as lettings of one month or less, are not

usually allowed anyway as most residential leases state that no
commercial business is to be carried on within the building.
Holiday lets, as opposed to ASTs, count as running a business.
Other types of letting are considered unearned income, as with
investments and savings, and taxed accordingly.
In some cases, regardless of what the lease may permit, the local
borough will not allow lets of less than a certain length of time, in
case this takes away from the hotel trade. In the London
boroughs of Westminster and Kensington and Chelsea, for
instance, lets of less than three months are not permitted.
CASE STUDY
Campden Hill Towers, a large 1960s block in Netting Hill,

West London, had become home to a large amount of
extremely transient tenants, many only staying for a weekend.
Eventually the Residents' Association mounted a tough
campaign, with the result that only lettings of 12 months or
more were to be permitted.
In addition, all tenant references had to be lodged with the

managing agents, and a photograph of each occupant given to
the resident porter. A photo of each subtenant had also to be
given to the managing agents.
Sub-subletting
Remember always that whatever else may be allowed or otherwise
on the lease, in law a subtenant is never allowed to sub-sublet, or
to allow people to live in the flat who are not specifically named
on the tenancy agreement.
Nowadays, most managing agents or freeholders insist on having

the names of tenants, contact numbers and a key to the property
so they can be contacted at any time. It is very common for
absentee landlords to be out of the country most of the time, and
not to take much interest in the day-to-day affairs of the tenants
in their investment property.
Such negligence has got absentee landlords a bad name which is

quite often justified.
BUYING A FLAT TO LET

Ever more people are buying flats simply in order to let them,
with no intention of ever living in the place themselves. It is not
unusual these days to hear of quite ordinary people owning
literally hundreds of properties which they sublet to tenants
paying rent.
But even when you are an absentee landlord, you remain

responsible for the property, for paying the service charges,
ground rent and any building levies or other costs imposed by the
freeholder or managing agents.
If there is bad behaviour by your tenants, the freeholder or

Residents' Association will come on to you, not your tenant, to
sort it out.
Financing the purchase

Unless paying cash, you will have to set up a special buy-to-let
mortgage as, strictly speaking, you are not allowed to sublet on an
ordinary mortgage. Most investors take out interest-only
mortgages and hope that the rental income will more than cover
costs such as mortgage repayments, letting fees and any other
costs.
There are currently more than 50 lenders offering buy-to-let

mortgages and the business is becoming very competitive indeed,
so it pays to shop around. There will also be setting-up fees and
survey fees to pay.
In general, the mortgage is granted on the amount of rent the

property is expected to fetch, rather than your income levels. The
usual ratio is that the rent must cover 130 per cent of the
mortgage repayment costs. Usually you would have to put down a
20 per cent deposit in cash.
It is vital, before buying an investment flat, to work out all the

figures, and see whether they give you an operating profit, bearing
in mind - as we have already seen - that buying into an
apartment building can have ongoing costs so far as service
charges, ground rent, building levies and other maintenance costs
are concerned. There will also be insurance, fees to letting agents,
cost of upgrading or updating, phone calls to tenants, petrol, as
well as the possibility of unpaid rent.
So, make sure you know precisely what you are getting into, and
work out the figures as exactly as you can. Wishful thinking is to
be discouraged, especially as tenants now have many properties to

choose from, and there is great competition in the marketplace.
Very few of today's highly-geared landlords can afford a void,
whereby the property will not rent out at all. And if you have to
keep reducing the rent, you may find you can no longer cover
costs.
Proceed on all the certainties you can - rather than just hoping it
will all work out.
Your responsibilities as a landlord

Many amateur investors buy flats and rent them out without ever
considering that by doing so they are involving themselves in
highly complicated tenure matters.
Very many property clubs and expensive buy-to-let seminars never

ever mention this aspect of buy-to-let, as they concentrate only on
the possible profit to be made from tenants. But when you house
somebody, you have assumed a certain amount of responsibility
for that person.
Buying a flat to let is emphatically not the same as setting up a

car hire business, for instance, as when you provide a roof over
somebody's head, that somebody has rights as well as you - rights
that in some cases go back to ancient times.
All the rules and regulations affecting both sides to the contract -
that is, the landlord and the tenant - will be set out in the legally-
binding tenancy agreement. Make sure you understand and agree
to all the terms before signing such a document.
L E T T I N G A F L A T / 153
You will, for instance, need to ensure that all furnishings and
fittings meet current health and safety requirements and that gas
and electrical fittings and appliances also conform to present day
standards. It is mandatory to have an annual gas check, and also
to have any new electrical installations fitted by an Approved
Contractor who will issue the relevant certificate.
In addition, you will have to compile an inventory this is not as

difficult as some people make it seem but essential none the less -
and deal with matters such as the dilapidations deposit and
receiving the rent on time.
You may also need extra insurance when renting out a property in
an apartment block.
CARRYING OUT BUILDING WORK
Planning permission
If your flat needs a lot of renovation before being ready to rent
out, you must obtain the relevant permissions before work starts.
Here, you should obtain quotes, then send these to the freeholder,
managing agents or Residents' Association, giving details of the
work and length of time they are likely to take.
You must also contact the local council to see whether any
planning permission or building consents are required, or whether
building regulations apply to the kind of work you are
considering. A reputable firm of builders should be able to do this
for you, but first of all you would need to know from the
freeholder that you are allowed to carry out these works in
principle. If so, write a standard letter to the freeholder,
managing agents and other occupants giving details of the works,

name and contact details of the contractors, and length of time
the work is likely to take.
If the building is listed, you will have to obtain listed building

consent in addition to all the other consents.
If other residents believe you have not obtained the relevant

permissions and consents, they could well cause work to be
stopped.
There are now extremely strict rules regarding soundproofing in

blocks of flats, given that the most common complaint is of noise
nuisance coming from flats above and below. The fact that you
will not be there yourself to hear the noise or even live in the
place is beside the point.
Being responsible
You should also reassure residents that the site will be left clean
and tidy each evening and that works will not be carried out at
night or on Sundays. Check with your freeholder or managing
agents as to whether planning permission is required, as there may
be strict rules about alteration, knocking two flats into one, or
turning one flat into two, for instance.
CASE STUDY
Tina, an amateur property investor, bought two studio flats

next to each other in a Knightsbridge mansion block, with the
intention of turning them into one bigger flat. Some residents
L E T T I N G A FLAT /155
saw what was going on and reported her to the managing

agents, who took her to court. At the hearing, she was
ordered to turn her property back into two flats, as this type
of alteration was not allowed in the lease. It had simply not
occurred to Tina either to check her lease or ask permission
for the alterations and the experience cost her very dear
indeed.
Unless you obtain proper consents, the return on your

investment could suffer very badly indeed. Whatever happens,
do not buy a derelict or unmodernised flat and barge in,
knocking walls down and piling up sacks of rubble outside in
corridors before getting all the relevant permissions and
consents.
BEING A GOOD (ABSENTEE) LANDLORD

The most hated owners of all in apartment blocks are the absentee
landlords who, next to the subtenants, tend to be blamed for
everything bad that happens to the building. Many owner-
occupiers believe that their building will soon become derelict if
infested by enough absentee landlords and investors who couldn't
care less. Don't confirm their prejudices.
Make sure that the managing agents of the block have your
address and details and how you can be contacted in an
emergency. And do, if possible, attend AGMS and EGMs as this
will enable owner-occupiers to put a name to the face and it will
also show them that you care.
If possible, agree to become a voluntary director, or a committee

member. Nothing endears you more to the other owners. They are
so grateful that somebody other than themselves will agree to
take responsibility for the smooth running of the block that they
will forgive you for being one of those nasty get-rich-quick
investors.
FINDING TENANTS
There are many categories of tenant, and you will have to decide
which type best suits your property or location. Tenants can be
singles, couples, sharers or families and each property will attract
a particular type of tenant. In general, flats are not usually
suitable for families and, indeed, leases in some very upmarket
blocks may not permit children, let alone pets.
Letting agents will advise on which areas and types of property

attract particular tenants. The student market is growing all the
time, and there are now purpose-built blocks aimed entirely at
student occupation, where you can buy a flat - or maybe several -
as an investor.
The student market, though, is very different from other markets

and the best advice here would be to contact your local university
lodgings department and ask for a copy of their landlords'
booklet. You are not usually allowed to set your own rents, for
instance, but have to abide by the amounts set down in the
booklet.
Using a letting agency

If you are buying on a mortgage, you will be required to use a
reputable letting agent who will advertise the property, find and
vet tenants, take the dilapidations deposit under the Tenancy

Deposit Scheme, carry out reference checks, draw up the tenancy
agreement, set up the standing order and check that the flat
complies with the current health and safety regulations.
Going it alone
If you own the property outright you can, if you like, advertise it
yourself. Around 50 per cent of landlords decide to go it alone
and save themselves the expense of a letting agent. As always,
there are pros and cons. However many layers you like to put
between yourself and your tenant, you have to remember that the
contract is between you and the tenant, and not between the
tenant and the agency.
If you are finding tenants privately, you will have to show them
round the flat and check and vet them yourself. Yes you can save
yourself the ten per cent (plus VAT) commission, but it is a lot of
hard work, especially if you have a full-time job as well.
Full management or not?

Letting agents can handle every aspect of finding tenants such as
drawing up tenancy agreements, taking the deposit, setting up the
standing order, compiling the inventory, checking tenants in and
checking out. They can also arrange for repairs, for eviction of
bad tenants, collection of rent and redecoration.
But all these services come at extra cost. Most agents have a scale
of fees ranging from ten per cent for finding and checking out a
tenant, to 15-20 per cent for full management or even more for
organising holiday lets.
I would say that for ordinary tenancies you do not need to go for
the full management option as in the scheme of things, the vast
majority of tenancies are trouble free. With the ten per cent
service, the agent withdraws once the tenancy arrangements have
been completed and plays no further part in the operation.
For all levels of service, the letting agent will do a reference and
credit check, make sure there is enough income to pay the rent,
take and hold the deposit and show prospective tenants round.
They will insist that all health and safety measures are kept and
that all furniture and fittings comply with current regulations.
Otherwise they will refuse to act for you as by so doing they may
be breaking the law.
Full management means that the property will be checked once a

month, and any repairs carried out immediately - in theory at
least. For this, the agency will ask for a float to cover these costs.
Typically you will be charged the cost of the repair or other work,
plus ten per cent agency fee on top. VAT comes on top of all
quoted prices.
Full management is probably necessary if you are abroad or

unobtainable, but bear in mind that even the fullest management
service does not operate at night or at weekends.
YOUR TENANTS RESPONSIBILITIES

The tenant is responsible for paying the rent, all utilities, the
council tax and also telephone and other connection charges plus
the television licence. You the owner remain responsible for the
service charges.
Keeping your tenant informed

It is a very good idea to give your tenant a simplified form of the
lease, as there can then be no excuse for infringing any of its
clauses. Some firms of managing agents now provide these
simplified leases, especially for tenants.
In flats, it is also essential to provide a fire extinguisher and

blanket, and supply your tenant with information on the fire drill.
The tenant should have details of the managing agents, caretaker,

cleaners and anybody else responsible for running the block.
TIP
Some freeholders charge you the leaseholder a small sum to register each tenant.
Local councils are fond of doing this. You must inform the freeholder or managing
agents of all changes of tenancy.
TYPES OF TENANCY
The AST (Assured Shorthold Tenancy), is governed by the
Housing Act of 1989 and has proved very successful ever since. On
an AST you can have corporate tenants, sharers, young
professionals, students, couples, families or singles. The only
proviso for setting up an AST is that the flat must be self-
contained and have its own front door.
Many agents will not consider flats in attics or basements, for

instance, where you would have to go through the main flat to get
to the secondary flat.
SHORT LETS
Are they allowed?

Short lets, of less than six months, can be very profitable, as the
rents are much higher. But, before ever embarking on a short let,
check that these are allowed by both the freeholder and the local
council. Some boroughs stipulate that all lets must be at least six
months in length.
If allowed, they are useful when:
* you are going away yourself on an extended holiday or short job

contract and need to somehow pay the mortgage in the
meantime;
+ you cannot let out your flat on the usual AST;
+ you have the property up for sale and want to sell with vacant
possession.
Your responsibilities as a short let landlord

Short lets come into a special category of their own, and not all
agents handle them. Agents specialising in short let provide short
let information packs, which you should obtain and read carefully
beforehand.
With short lets, you the landlord are expected to provide

everything in the property; including towels, linen, cutlery and all
furniture and fittings. As with ASTs, all furniture should be
compliant and all fittings must meet current safety requirements.
The short let agency will take the entire rent plus deposit upfront
and also deduct tax at source before passing any money on to you.
L E T T I N G A F L A T / 161
This is a legal requirement.
You as the landlord will also retain responsibility for utility bills,
and reputable agencies make stringent checks to ensure the short-
let tenant does not suddenly double the use of gas and electricity.
There will also be strict rules governing telephone, internet and
cable or satellite use.
You are also required to inform your mortgage lender of any

subletting, including a short let.
Short lets operate at all levels of the market and even quite
ordinary flats can be popular. But remember that even if the lease
permits these lets, some local boroughs do not allow them as they
are seen to be taking away hotel trade.
HOLIDAY LETS
Are they allowed?

Most residential leases emphatically do not allow holiday lets,
denned as lets of one month or less. This is because they are
considered a business and, as such, come under different tax rules
than ASTs or short lets, where the profit is considered to be
unearned income. Holiday lets, again, are not allowed on many
leases for the same reason as short lets, plus the fact that in some
buildings you are not allowed to be carrying on a business.
Holiday lets are not covered by the various Housing Acts as these
lets are supposed to be for a genuine holiday rather than
providing somebody with a home.
If allowed, make no mistake, holiday lets are hard work! Most

visitors will stay for no longer than two weeks, and if the let is for
more than four weeks it cannot count as a holiday let. You have
to provide everything down to the last teaspoon, and have the
place thoroughly and professionally cleaned after each let. These
days, it is not unknown for holidaymakers to book a flat just for a
weekend which increases wear and tear on the property.
Although holiday lets command maybe three times the rental of

ASTs, they are easily six times the work. Also, it is unlikely the
flat will be let year-round. With holiday lets, you have to take all
the rental money upfront, plus a large deposit which is returned at
the end of the holiday.
Do not ever try holiday lets without confirming that this is

allowed under the lease. Most Residents' Associations frown on
holiday lets and short lets and, under extreme circumstances,
persistent offenders could have their leases forfeited.
The main reason for this is the issue of security and of not
knowing who is coming in and out of the building, and who has a
key.
CASE STUDY
One investor in my building applied for permission to rent out

his flat as a holiday let rather than on an AST. Because he
had previously proved himself an excellent landlord, we the
directors gave him personal written permission to do this, with
the proviso that the concession could be withdrawn at any
time. We also made it clear that this concession did not go

with the property, but was personal to him only.
When he put the flat on the market, he applied for permission

for the property to continue to be used for holiday lets. But
because we did not know anything about the new buyer, this
permission was withheld. In the end, he sold it to an owner-
occupier and we all breathed a hearty sigh of relief.
LEASING TO A HOUSING ASSOCIATION OR LOCAL

COUNCIL
Many letting agents do not handle this sector, but social tenants
exist and are getting more numerous. Also, to be realistic, in some
areas this is the only tenant pool there is.
Here again, you must first obtain permission from the freeholder
or Residents' Association as in this case you would be leasing your
flat to the social landlord for maybe three to five years, and they
will be housing people who are 'in need' rather than those who
might be wonderful tenants.
Accordingly, the checks that are made before ordinary tenants

move in, are not made, as the only criterion is that of 'need'. And
once you have leased your property to the social landlord, you
absolve all responsibility for it for the duration of the agreement.
But beware because again, you could be served with a forfeiture

notice if your social tenants are persistently badly behaved.
TIP
It should not be assumed that social tenants are necessarily worse behaved than
other tenants, but because the stringent checks carried out on other tenants are
not made, there is always a greater risk.
Many landlords like leasing to social landlords because they get a

good deal, which may include a golden hello and cleaning and
decorating of the property. There is no commission to pay, there
are no agents' fees, and the rent is guaranteed - whether or not
the social landlord or tenant receives it.
LETTING OUT YOUR OWN HOME

Strictly speaking, you are not allowed to rent out your own home
on a homebuyer's mortgage, but must have a proper buy-to-let
mortgage in place. However, if you are going on an extended
holiday or work project for three months or so, it is not feasible
to keep chopping and changing mortgage types.
However, you should always let your mortgage provider know, as

you may not be insured if anything happens while you are not
living there yourself.
Also, all the usual rules apply when renting out your own home
such as, does the lease allow short lets or holiday lets?
If letting your own home through an agency, you will have to

ensure that all furniture, fittings, appliances and certificates are in
place, just as you would with specific buy-to-let.
It is very common these days for flat owners - especially young

flat owners - to want to rent out their flats while on work
assignments abroad. This enables them to keep their home and
pay the mortgage.
But you would have to ensure that the property meets current
regulations and requirements.
Never let to friends

And please, please do not ever be tempted to do things cheaply
and let in an ad-hoc fashion to friends. Although this advice also
applies when renting out a freehold house, it becomes ever more
urgent when it comes to leasehold flats. You may be reluctant to
set up a formal type of tenancy with a friend and not bother with
an inventory, or you may consider it a breach of friendship and
trust to give them a version of the lease. And if they then breach
any terms, you may find it difficult to tell them about it.
If you are tempted to let out your flat to a friend, make sure you
treat them exactly as you would a stranger, otherwise, don't take
the risk.
TAX MATTERS
If you earn any rental income at all from your flat, you will have
to declare this to the Inland Revenue and pay tax accordingly.
When renting out a flat on an AST or short let, you can claim
letting fees, inventory fees, ten per cent wear and tear, repairs and
refurbishment and also service charges and ground rent.
You may in addition be able to claim travel and telephone costs,

plus the costs of recovering unpaid rent.
As holiday lets are counted as a business, they are taxed as such,

therefore you can claim many more things, but the flat has to be
available to let for 140 days a year and actually let for 70 of those
days to count as a genuine business.
When you sell a flat that is not your main home you will be liable
for Capital Gains Tax of up to 40 per cent on the profit made.
This is the capital profit, not on income from rentals. But there
are many things you can set against this tax such as cost of
renovation, building levies and installing central heating or new
windows, for instance.
It is always a good idea to take professional advice about tax

matters, as you also incur tax liability if you are letting property
abroad or if you live in another country but remain a UK citizen.
8
When Things Go Wrong
Whenever you drive or walk past a block of flats, it all looks calm
and serene. How nice, you might imagine, to have a flat in this
lovely block by the river, or in that gorgeous trendy building with
its underground carpark and residents' swimming pool.
Yet the chances are that if you were to buy a flat in one of those
appealing-looking blocks, you would very likely discover you had
bought into an ongoing soap opera or dark sitcom, with deadly
feuds, splinter groups, and endless lawsuits raging therein.
Problems are endemic to blocks of flats, for two reasons: the first
is that because everybody is interdependent, anything going wrong
in one flat, such as a leaking tap or pipe, is eventually likely to
affect many other flats. The second reason is that blocks of flats
contain many disparate people who may have nothing whatsoever
in common with each other and, as a result, there may be many
personality clashes. Blocks of flats contain people who may not
normally choose to live together, actually having to live on top of
one another.
And not all the rules and regulations in the world will prevent
leaking pipes and personality clashes. Although leases draw up a
kind of two-way contract between the leaseholder and the
freeholder, with the aim of benefitting both, there is no
documentation which determines how the inhabitants should treat
each other.
167
Problems in blocks of flats are mainly caused by:
+ Non-payers.
4 Absentee leaseholders not caring.
+ Lots of subtenants in a block.
+ Lack of professional managing agents.
+ Freeholders who can't be bothered.
+ Lack of money for essential maintenance.
+ Large numbers of elderly residents who can't afford or don't
want to enfranchise or pay for repairs.
* Leaseholders falling out among themselves.
THESE ARE THE BEST SOLUTIONS
1. Appoint professional managing agents

Disputes between residents in blocks of flats have escalated
mightily since it became possible to collectively enfranchise and
secure the RTM. Once they have secured either or both of these
rights, residents often imagine it will save money and make life
easier if they managed the place themselves. This is almost always
a mistake and a false economy. Residents are much less likely to
make a fuss and refuse to pay if they receive official-looking
demands from a professional company, and can contact the
managing agents direct.
The other problem is that self-managers are usually voluntary and,

as such, are only prepared to give a certain amount of time to
administration. In addition, there may not be anybody in the
block who is fully conversant with the ramifications and
complexities of leasehold law, who can keep tabs on accounts, and
also appease any complainers.
WHEN T H I N G S GO W R O N G /1G9
The Citizens Advice Bureau - who are often the first port of call
for aggrieved residents - confirms that disputes between
leaseholders have increased mightily since more blocks
enfranchised.
2. Communicate!
Residents need explanations and to be kept informed of what is
going on. Directors and committee members have not signed the
official secrets act, and must make all their doings and
deliberations public. It is a good idea either to have a regular
newsletter or a website whereby residents can be kept informed of
work in progress, make suggestions or air their grievances.
A regular newsletter will establish a sense of community and make

everybody feel they have a voice. A website is also an excellent
idea, provided that somebody takes responsibility for keeping it
up to date - there is nothing more annoying than an out-of-date
website. Also make sure your newsletter or website is interactive
and does not give the impression of commandments being handed
down on tablets of stone from on high.
It is also a good idea to have a big noticeboard in the hall

whereby residents can be kept informed. Residents can also pin
items of interest up on the board, such as notices of local
concerts, talks, services or cuttings from newspapers. This all gives
a sense of community to the building.
Be careful, though, that the noticeboard does not just become a

place for free advertisements and cards from contractors, IT
consultants and builders.
3. Attend to small jobs instantly

All buildings often develop small problems which, if unattended,
can easily turn into major tasks. Whenever you notice a small
problem, such as rubbish or builder's rubble being left out in
corridors, or washing hanging out, point it out to the managing
agents or caretaker or attend to it yourself, before it gets any
worse.
4. Put up pictures in the common parts

If you have leftover pictures, put them up in the halls and
corridors. This immediately makes the place seem much more
friendly, and less daunting and forbidding. The best kind of
picture for this are local landscapes and scenes (prints rather than
the real thing) that are intended to be glimpsed at in passing,
rather than studied intently. Acres of bare wall are offputting and
can give a prison-like atmosphere to a large block.
5. Hold regular meetings

Residents are all paying out what they consider to be large sums
of money, and often feel that their money is being spent - or
squandered - around them and without due consultation. It is
good practice to hold an EGM whenever there are large jobs in
the offing.
But do not, as sometimes happens, get into cliques or huddles, and

invite some residents, but not others, to 'informal meetings'. It
creates a bad atmosphere and encourages splinter groups which
are the last thing you want. Everything should be democratic.
Where there is a Board of voluntary Directors, as there will be
after enfranchisement, these directors should also meet regularly.
WHEN T H I N G S G O W R O N G /1 7 1
All meetings should be property minuted. The idea is that

everything and everybody should be accountable.
Wherever possible, hold meetings in a neutral venue, such as a

church or school hall, or nearby hotel if funds will run to it.
Those who do not attend meetings cannot expect to have a voice.

If you want your views to be heard, attend the meeting. AGMs
and EGMs are notorious for poor attendance; then people moan
and complain when their views are not recognised.
6. Hold social events regularly

Parties and events, such as a firework party, carol singing or a
summer barbecue can all help to establish a sense of community
and friendship. One large block of flats has established a library
in the hall, whereby residents exchange books. It is just a simple
idea but immediately gives the place a kind of village atmosphere.
It is also a good idea to 'deck the hall' at Christmas - put up a

Christmas tree and decorations to give a festive feel. But make
sure they are always taken down by Twelfth Night at the latest.
I have seen blocks of flats where brown Christmas trees - still

with bits of tinsel clinging to them - have lain around in
basements until August.
7. Lift a finger to help

Many residents keep complaining that 'they' - ie, the managing
agents or Residents' Committee - do nothing. But ask yourself:
what can I do? Some people may be interested in gardening,
hanging pictures in common parts, doing some interior painting,
1 7 2/ H O W T O B U Y A FLAT
or polishing up the brass. Instead of waiting for 'them' to do the

small jobs, do them yourself! Although managing agents will
oversee the management of the building, there will always be small
day-to-day jobs that need doing, as with any property.
So, why wait for somebody else to do the work?
8. Do not contravene the terms of the lease

Before buying any flat, look carefully at the terms of the lease and
once you've moved in, make sure you abide by them. For instance,
do not hang washing over the balcony if this is expressly
forbidden, do not lay laminate flooring where it says carpet, or
leave windows dirty for years on end.
If you want the block of flats to be run efficiently, ensure you do

your part by obeying the terms of the lease - never mind what
others might do. Human beings are notorious copiers, and copy
others' behaviour, whether this is good or bad.
When I first moved to my block, there were no pictures at all in

the common parts. I decided to hang some that were surplus to
my requirements, and they immediately pulled the place together
and made it look at if somebody cared. Now, the common parts
are a veritable art gallery - and the presence of the pictures
somehow prevents people from leaving bags of rubbish out in the
corridors as before.
The motto is: whatever you want doing, set a precedent by doing
it yourself.
WHEN T H I N G S G O W R O N G /1 7 3
Somebody else put potted plants outside on the porch. Before

long, others had followed suit, so that now we have a welcoming
flower display by the entrances. This also has the happy result that
people no longer dump rubbish in the porches.
9. Keep some money by

As with any property, there will always be unexpected costs when
buying a flat. It is madness to stretch yourself so far when buying
that you have nothing left over for repairs, your share of major or
minor works to the building or an unexpected hike in service
charges.
Almost all the long-term problems that arise in blocks of flats

occur because some of the residents cannot pay their share, as
they are already mortgaged or indebted up to the hilt. If you
really will have nothing left after buying, look for something
cheaper, or wait until you have managed to save up for, if not
exactly a rainy day, at least the occasional shower. When a
building falls into disrepair or loses value, this is almost always
because a number of residents have been unable or unwilling to
pay their share, and for this reason, essential works have never
been carried out. This, as much as leases running down, makes
the flats lose value.
Before ever buying a flat, work out all the figures, such as council
tax, mortgage repayments and service charges. Then add
something on for unexpected costs so that there will always be a
reserve fund.
And whereas with a freehold house you have a choice as to

whether to carry out works, with a flat you have no such choice
because of the intimate interconnection between all the occupants.

As a houseowner, you might choose to let your roof fall in; you
cannot allow the roof to fall in on other people.
10. If you are an absentee landlord, play your part

Many buy-to-let landlords, wanting to maximise their profits, are
unwilling to put their hands in their pockets to pay for repairs
and renovations. Be careful that you are not seen to be using the
building as a cash cow, or relying on the other residents'
contributions to further your property development. This will not
only make you wildly unpopular but could mean your investment
goes down in value. Badly-managed blocks soon get a negative
reputation with local estate agents, who may be unwilling to take
a flat in such a block onto their books.
Also make sure that the managing agents have details of all your
tenants; their names, contact numbers and details.
Plus, give your tenant a simplified form of the lease. Subtenants

are almost always blamed for problems in blocks of flats; make
sure your tenants are not among them.
11. Make sure somebody, either the caretaker or a

neighbour, has a spare key
There are always times when it might be necessary to get into
your flat; to investigate a leak, check wiring, cables or pipework.
Problems can develop when you are on holiday or otherwise away,
so ensure that access can be gained at all times.
12. Establish a policy of zero tolerance

If you have a policy that bikes and pushchairs are not to be left in
WHEN T H I N G S GO W R O N G /1 7 5
the hall, put up a notice warning occupants that these objects will,
if found, be taken outside. Then carry out the threat. Otherwise,
there will soon be ten bikes left in the hall.
But, whenever punitive action is to be taken for misdemeanours,

you should first give not only warnings, but reasons for the ban.
For instance, you should say that bikes and pushchairs left in the
hall constitute a fire hazard and invalidate the block insurance
policy. Then you have a valid reason for taking direct action if
somebody contravenes the order.
13. Get permission before renovating or altering your flat

Most leases state that permission should be obtained from the
freeholder or managing agents before renovations or alterations
are carried out to individual units. This is in addition to any
permissions you must obtain from the local council.
The best thing is to write to the managing agents, or Residents'

Committee if there are no outside managers, detailing the works
you hope to be able to do. You should add that you are at the
same time in the process of obtaining permission from Building
Control at the council, if relevant.
Then, assuming there is no objection in theory, it is recommended

that you circulate a letter to all residents, giving them details of
the builder and building works, and stating how long you expect
the works to continue. Reassure the residents that there will be no
work after 4.30pm, or at weekends, and that you will make sure
the site is left clear and clean every night.
All of the above will endear you to your fellow residents and mean
they welcome you into the block. Every block of flats welcomes
responsible, community-minded occupants.
WHAT IF PROBLEMS PERSIST?

Suppose you have an owner who does not pay service charges - in
spite of many reminders. Or an occupant who continues to play
loud music, leaves rubbish and rubble in common parts or
undertakes renovations without getting relevant permissions.
What action should you take then?
Unpaid service charges

This is one of the commonest problems of all, and just about all
blocks of flats will have at least one persistent non-payer in their
midst. Most managing agents have a policy of dealing with this
which is: they write two letters, then if there is no response, contact
the mortgage provider. Otherwise, the next step is court procedure.
This is another very good reason why it makes sense to have the
block properly managed by outside agents. Interest is also added
onto late payments, at, typically, five per cent over base.
Otherwise, if there are no managing agents, first of all try to

discover why these charges are unpaid. Sometimes residents
withhold charges as a 'protest'. Most often the reason is that they
are short of money and can't pay. But it is human nature to
bluster and protest and make out it is somebody else's fault.
Sometimes there is a genuine cashflow problem and very often, the

best solution here is to work out a method of payment with the
leaseholder which will be satisfactory to both parties.
If the charges are challenged, as they often are, and result in

much paperwork flying back and forth, the judge may well order
the case to be heard by a LVT, who will adjudicate on whether the
charges are 'reasonable' and must be paid.
Then you will have to go back to court to get the charges actually
paid, and the judge could order that they are paid in small
instalments of, say, £5 a month, depending on the debtor's
circumstances. You cannot get blood out of a stone, as debtors
will often allege.
Persisting with non-payers can be a long, drawn-out process

requiring much stamina and energy, but residents must not
imagine they will be allowed to get away with unpaid charges. It is
extremely difficult to win forfeiture of the lease, but in extreme
cases, this is the last resort.
In most cases, the debtor will realise he or she is living above their
means, and sell the flat. Any unpaid charges must be settled
before completion of the deal, though.
More worrying is the situation whereby some residents refuse to

pay an extra levy for building works, or maintain that they cannot
afford to pay. This frequently adversely affects the building, as
major works are only carried out when necessary.
No builder or contractor will agree to start the work unless they

know they will be paid for it. Sometimes it can take up to a year
to collect all the money due from levies, by which time the works
may have to be re-quoted for, and costs will have risen.
If the non-payers persist, the best thing is to take advice from the
non-profit making Leasehold Advisory Service, or to get a
solicitor to serve an injunction. If the charges are disputed the
case may have to be taken to the LVT anyway.
Persistent loud music

This is one of the very worst problems but, in a way, it is the
easiest to address, as there are now laws preventing the playing of
loud music to the annoyance of others.
The best approach here, after writing directly to the offender, is to

contact the local council who will also write, warning the recipient
that action can be taken. In any case, whatever the lease might
say, you are not allowed by law to play loud music after llpm.
The local council, which has a duty to prevent noise, will not
reveal who has complained, but has powers to remove the musical
equipment causing the noise.
Sometimes residents do not realise just how much noise carries in

a block of flats, and will make sure the music is turned down,
when this is politely requested. The thing is, nobody likes
listening to other people's music and this must be respected in a
block of flats.
Anybody who wants to hold an occasional party, where music

may be played later than llpm, should write to residents and offer
to turn down the music if it is too loud. Another tactic is to invite
all residents to the party who may be within hearing.
WHEN THINGS G O W R O N G /179
Flooring
Most leases state what kind of flooring is to be used in individual
units. Some leases say that floors have to be carpeted - with the
exception of bathrooms and kitchens - others that there must be
adequate sound proofing.
The trouble is that although many leases state that flats should be
carpeted, wooden floors are more desirable. You can now get
thick sound-proofing when fitting wooden floors and this should
always be done. Otherwise, to those living below, it sounds as
though you are clomping across the ceiling in hobnail boots.
In Victorian days, noise was less of a problem because floors were

carpeted, windows had thick velvet curtains, and surfaces were
sound-absorbing. With contemporary design, everything is noisy -
hard floors, granite worksurfaces and limestone floors are all
noisy. Also, most people put blinds rather than curtains up at
windows. All of these enable noise to richochet round the flat,
even without loud music playing.
Before ever embarking on a redesign, check that your choice of

flooring or worksurfaces does not make the place noisier than
before.
Pets
Most, if not all, modern leases state categorically that pets and
animals are not allowed. According to the Federation of Private
Residents' Associations, this is the clause that is most often
ignored. But pets are banned for very good reasons: dogs may
bark, and cause immense nuisance to other residents; cats can
smell and it can be difficult to organise cat flaps, litter trays and
so on in blocks of flats.
In my block, the lease stated that residents could have 'small

domestic pets' only. This prompted one new owner to bring in a
couple of Great Danes. Of course, as soon as this owner appeared
to be getting away with it, other people brought in dogs - a couple
of yappy Yorkshire Terriers, a Rottweiler and others of less
certain pedigree. Another owner brought in a parakeet, which got
stuck in the lift, occasioning not only huge panic, but enormous
expense and inconvenience.
The problem is, pets are anti-social in blocks of flats. If a resident

has brought in a pet in contravention of the lease, the managing
agents must write, confirming that pets are emphatically not
allowed and that the animal must be rehomed. This policy must
be strictly adhered to. In fact, if anybody brings in a pet, all
residents must be circulated with the information that pets are not
allowed, and that the offender either has to sell their property or
get rid of the pets.
Humans are very attached to their pets, but rehoming must be

insisted on, otherwise the place will become overrun with animals.
And your beloved pets are other people's nightmares.
Forfeiture of lease
This is often held out as a terrible threat, but in reality forfeiture
is extremely difficult to do. You have to serve a Section 146 notice
on the offender but because of abuses in the past, where landlords
served these notices for non-payment of trivial sums, or to evict
people for not paying ground rent when this had not been
demanded, the law has been amended since February 2005. It now
states that you can only serve a Section 146 notice if the
leaseholder has admitted a breach, or this has been admitted at a
WHEN T H I N G S GO W R O N G /181
LVT hearing. Or, they have owed a sum exceeding £350 for more
than three years.
Otherwise, you have to take them to court. Leases can be forfeited

for a number of reasons, such as persistently unpaid service
charges and wilful flouting of the terms of the lease (e.g. playing
loud music and leaving rubble and rubbish in the common parts).
Although it has become difficult to serve a forfeiture notice, it is
not impossible, and can be reserved as the ultimate threat, bearing
in mind that if the lease is forfeited, the leaseholder loses
everything.
Some experts believe that forfeiture of the lease is medieval and

unjust. They recommend that, instead of this extreme action, the
offender should be forced to sell their property and be allowed to
keep the proceeds after all debts and outstanding charges have
been settled. This seems fairer than forfeiture, and could be a
much more workable solution.
What could happen here, if such a law were brought in, is that the
offender would receive a letter from a solicitor saying that because
of persistent breaches of the lease - of which they will have been
previously warned - the freeholder has no option but to force a
sale, and will be putting the property up for sale after a market
valuation.
This would have the effect of removing the offender, but leave
them with enough money to buy somewhere else. It is a law that
could easily be enforced, but so far, no such law exists.
CASE STUDIES
Margaret lived in a medium-sized Victorian block in Central

London where the roof had been leaking for several years,
adversely affecting both the common parts and individual flats.
A firm of quantity surveyors drew up a specification and put
the job out to tender. Average quotes came in at around
£100,000, which would cost every owner around £3,000.
A firm of builders was appointed but were naturally reluctant

to start work until all the money was in. A year later, less
than half of the residents had paid up. In the meantime, the
leaks were getting worse and the block was losing value.
As Chairman of the Residents' Committee, Margaret appealed

to the non-payers to 'do the decent thing'. They argued they
could not afford it, that the quote was wildly over-quoted and
that they didn't live there anyway.
By the time the majority had paid up the original amount, two
and a half years had gone by, and the quote had doubled,
meaning that everybody had to pay much more on top of the
original quote.
Another, similar story

Things most often go wrong when there are large bills to pay.
Another block of 33 flats needed serious roof work. A firm of
surveyors drew up a specification which was put out to tender.
The work came in at an average price of £130,000 and an
EGM was held after the quotations had been circulated.
At the EGM, the majority agreed for the works to go ahead,

and to pay their share of the work. The sums payable came
in at between £1,000 and £8,000, depending on the size of
the flat. One of the contractors was duly appointed and bills
were sent out to each owner.
After the meeting, however, several owners got into a huddle

and held meetings of their own, of which the upshot was that
they wanted to declare no confidence in the managing agents,
the Chairperson and the contractor. Nor would they pay their
share, they decided, claiming that the quotation was 'too
high'. About half the owners did pay their share, but not
enough money was collected for the work to start.
So far, this is an almost identical story to the one above, but

it has a different ending. It was time for the AGM, and time
to vote that the agents remained for another year. Several of
the 'dissenters' stood up to ask awkward questions about the
agents, and to demand breakdowns of expenditure for years
gone by. The meeting turned very ugly and in the event, the
voting went 11-9 in favour of retaining the agents. The agents
felt this was too close, that their integrity was put in question
and promptly resigned.
This left the block, which had collectively enfranchised more

than 15 years earlier, with no managing agents, no company
secretary and no accountants, at a crucial time when works
were impending, several owners were selling their flats, and a
couple of long-term debtors were being chased up through the
legal route.
Many residents now began to panic, especially as the agents

were no longer taking calls.
What to do next? In this instance, the five directors got

together and sent out a detailed explanatory letter to every
resident, adding that the agents might reconsider their decision
if there was overwhelming support from residents. The letter
also included much more expensive price quotations from other
managing agents.
The communication included a tear-off slip and a stamped

addressed envelope to be returned to the Chairperson.
The letter worked. Not only did the agents agree to stay on
until the works were completed, but the majority of the
'dissenters' who had not paid the levy, now promised to find
the money. The letter was calm and reasoned but also tough,
pointing out that all the flats would soon lose value if the roof
work was not carried out. It was, as had already been pointed
out, not an option.
The moral here? Whenever something serious threatens the

integrity, structure or management of the building, communicate
instantly, outlining the problems and their possible solutions.
IN SOME CASES, MEDIATION MAY BE THE ANSWER

A case like Margaret's can now be taken to the Lease Mediation
Service. In fact, all types of dispute that may arise between
WHEN T H I N G S G O W R O N G /185
leaseholder and freeholder, with the managing agents, or between

leaseholders in the same building can now be talked through with
an experienced Lease mediator, with the aim of working out a
solution satisfactory to both parties.
The mediators are qualified lawyers specialising in leasehold law

who are also trained in mediation techniques.
This is how it works: first, both parties concerned must agree to

go for mediation. Then the Lease mediator will meet individually
with each party to identify the problem and discuss possible
solutions.
Second, both parties will meet together with two Lease mediators,
when each party will be asked to confirm a willingness to mediate
and to agree ground rules.
Third, each party will be invited to present their views of the

dispute uninterrupted by the other. Then the mediator will
summarise the issues and try to agree some common ground.
There has to be a willingness on both sides to reach agreement.
How long does mediation take?

Once the parties have met with the mediator, it usually takes
about three hours.
What happens next?

Suppose agreement is reached on the disputed issues, the Lease
mediator will draw up a formal agreement and produce papers for
signature by each party. If agreement cannot be reached, the case
must proceed to the LVT or court action.
What does it cost?

In 2006, there is an application fee of £100 payable by each party,
and the actual session will be carried out at the Lease offices (see
Resources, page 208).
Advantages of mediation
This is a new idea for settling disputes which commonly arise in
blocks of flats. It is low cost and without the horrendous stress
and expense of going to court, where the outcome is never certain.
It prevents emotions from running too high, and enables each
party to see the other's point of view. The presence of a trained,
impartial observer helps to calm the situation down and, often,
stop a potentially fraught dispute from escalating into a full-scale
legal battle where, usually, there are no real winners.
LISTED BUILDINGS
Many blocks of flats have become listed buildings - and they are
not all elderly, by any means. If you buy a flat in a listed building,
you have bought yourself even more problems, because you cannot
undertake internal alterations, let alone external ones, without
listed building consent.
For this, you need architect's plans which have to be submitted to

the local council, and the planning committee will then deliberate.
Do not ever alter windows or the external appearance of the place
without being granted listed building consent as you could be
ordered to take the entire structure down.
CASE STUDY
Claude bought a beautifully renovated flat in a listed building.

After a time, he was astonished to receive a letter from the
listed building department of the local council, ordering him to
replace the UPVC window at the back - which had been put
in by the renovator - with a wooden sash, as the plastic
window ruined the integrity of the building, according to the
planners.
Claude argued that he had bought the property when the

window was already in and contacted the seller, who did not
want to know. An intense legal battle ensued, and the upshot
was that the seller, not Claude, had to replace the window at
his own expense.
The moral of the story is, with listed buildings, you never know
when a council official may come snooping round. You could also
be ordered to take down a satellite dish or other TV aerial,
replace plasterwork or original mosaics. In my block, which is a
listed building, it took two years to source some mosaics for the
front step which were near enough to the original to satisfy the
council, at a cost of £450 for one row of mosaics.
Listed buildings can be a nightmare, so be prepared if you fancy a

flat inside a beautiful building with a preservation order slapped
on it.
CASE STUDY - WHEN THINGS GO VERY WRONG
Nellie, 79, lives in a block of six flats near Kew Gardens,

Surrey. Most of the owners in this block are elderly, and
problems started when the leaseholders were informed that the
freeholder had sold on to another company. One flat was
owned by the freeholder and rented out.
Almost immediately, bills for service charges began to escalate,

and included an amount of £4,000 for gardening, divided by
five. Initially, the owners got together and wrote to the
managing agents querying the bills and asking for evidence of
the increased charges. There was no reply.
Bills kept coming, and for very exact amounts, such as

£236.48 for 'interim charges' and £441.22 'on account'.
In the previous year, the residents had been billed £319 each
for service charges. Now they were being billed sums such as
£421 each, for 'expenditure over the past three years' with,
again, no explanation of how these figures were arrived at.
The new freeholder informed the managing agents that these
were for 'arrears'.
By this time Gordon, Nellie's son-in-law, intervened, as Nellie

was starting to panic and shake whenever she received a new
demand for money. He said:
We have never been able to get any satisfaction from

either the freeholder or the managing agents, who we
suspect are part of the same company, and we now have

no choice but to go to the LVT, and we have to pay £300
to do this.
By now, the managing agents had changed and the residents

were being billed £1,000 each, with legal action threatened if
they did not pay.
This threat was enough to make the leaseholders of the other

four flats cave in and pay.
The problem is, none of the residents has the strength or

energy to go for RTM or CE. There is no possibility that either
of these can happen. Also, as all the lessees are in their late
seventies, or older, they feel they have not enough time left to
go to all this trouble.
Gordon has amassed a huge file of paperwork, and the case is

taking up all his spare time. He has embarked on it, he says,
out of 'principle' and because he feels strongly that elderly,
vulnerable people should not be harassed in this way.
This case illustrates what can still happen with leasehold

properties, even where laws and regulations are in place
supposedly to protect just these people. In spite of his work on
the problem, Gordon - a former television executive until he took
early retirement - has found it impossible to untangle the layers of
ownership and management.
What can he do? Nellie is too frightened to do anything.
These are the possible steps

+ The managing agents proudly proclaim they are members of
ARM A. Gordon should contact Head Office and ask for details
of their grievance procedure. He has kept all documentation
since 2003, when the freehold was sold on. This step would not
cost anything.
+ Gordon can contact Lease, the Leasehold Advisory Service, and

ask for their advice. This step is also free.
4 He can contact a solicitor specialising in leasehold issues. This

step would be extremely expensive, and there is no guarantee of
success.
+ He can go straight to the LVT. This would cost, initially, around

£300, and would involve a long, drawn-out fight.
All these steps, whether or not they involve a monetary cost, take
up a great deal of time and effort. Although this case may be
extreme, it illustrates how very unsatisfactory the leasehold
situation still is. It also shows how wily freeholders or managing
agents can bamboozle the poor leaseholder with frightening bills,
threats of legal action and general obfuscation as to who actually
owns the freehold.
Many blocks where this sort of thing has happened in the past
have got together and enfranchised, thus putting an end to this
kind of thing. But you still have to be prepared for an almighty
fight.
9
Buying Abroad
Such is the popularity of buying second homes in other countries

that in order to meet demand, new developments are going up at
an amazing rate all over the world in popular locations, many of
which are specifically designed for second-home owners.
And by far the greatest proportion of these new buildings are

apartments, rather than houses or villas. In Marbella, for instance,
intense activity has been focused on the apartment sector since
2004, as houses and villas have become too expensive for the
average market, according to estate agents Knight Frank.
In America, too, the demand from investors for apartments is at

an all-time high - and the most popular apartments are high ones,
too, with mid- and high-rise flats being overwhelmingly the most
sought after.
But, buying a flat or apartment in another country is emphatically

not the same kind of transaction as buying in England and Wales.
For one thing, in most other countries the idea of leasehold is
unknown.
You may say this is because their country did not have the
misfortune to be invaded by William the Conqueror in 1066, and
have all land annexed by the new ruler.
191
Whatever the reason, most other countries have made a success of

apartment living which the British should envy - and maybe copy.
When you buy an apartment in most countries, you buy it in

perpetuity, and you become a co-owner of the building. The way
you buy apartments in other countries is much like the new
commonhold idea outlined in earlier chapters, in that you buy into
a self-governing community.
But this does not mean you can do as you like once you own the
apartment. Far from it. All apartment buildings in other
countries, in common with those in England and Wales, are
governed by their version of the lease or the community statement.
This is a long, legally-binding document which you have to sign

and agree to on purchase, and which restricts you to certain kinds
of behaviour and also to pay service charges as demanded.
So if you are interested in buying an apartment in another

country, you first need to get hold of the lease, or equivalent, and
read it carefully, or get a bilingual lawyer to read and interpret it
for you, if you are not fluent in the language.
This is most important, as many apartment blocks have very strict

rules governing conduct once you are inside. In fact, most blocks
in other countries have even stricter rules than those pertaining in
the UK, so you must be aware of this in advance.
For instance, in some buildings you are not allowed to choose

your own curtains or blinds, but must put up exactly the type as
B U Y I N G A B R O A D /193
defined in the lease, so that the entire building looks the same
from the outside.
In the UK, we are still not quite sure how we want to treat
apartment owners. Should they be regarded as houseowners and
allowed free rein over their individuality, or have their every
movement strictly controlled by the Residents' Committee?
In most other countries, there is no such dilemma: your behaviour

is strictly controlled and policed by the Residents' Committee.
APARTMENTS IN AMERICA
The USA is probably the strictest country in the world as regards
what you are allowed to do in an apartment building.
One major difference between the USA and the UK is that with
the former, you will almost always have to appear before a
selection panel made up of other residents who will ask you some
tough questions before they decide whether you are a fit person to
buy into the block.
Most of these questions will take the form of a searching

interrogation about your finances, as the Residents' Committee do
not want to admit new owners who cannot pay their way and thus
put the rest of the building at risk.
They will want to know, not just whether you can afford to
purchase the apartment, but whether you can renovate it to the
required standard, if you are able to pay the present and future
service charges, if you have enough income or reserves to pay your
share of major works and whether you can afford to pay the local
taxes.
You will also find that there are extremely strict rules on whether
pets or children are allowed. It is unlikely that anybody would
ever be allowed to ban children from a flat in the UK, but they
have no such qualms in the USA.
In one block where I stayed in Miami, Florida, children were

emphatically not allowed, under any circumstances, except for
brief visits. And no pets of any kind were permitted, not even
caged birds. There were also many rules about sunbathing, use of
the pool, outside barbecues, car parking, taking drinks into the
pool area (only plastic cups allowed) and hanging out washing -
no way is that allowed!
RENTING OUT
Very many people hope to make money, or at least cover costs, by
renting out their foreign apartments. Again, you must discover
whether this is allowed. In America, some apartment buildings
permit rentals of not less than one year; others do not permit any
kind of renting, while others are designated rental only.
Certain areas of Florida, for instance, are 'zoned' for renting,

whereas in other areas you are emphatically not allowed to rent
out your property.
Some areas of France have tight restrictions on rentals, as well.
Even where rentals are freely allowed, you have to work out,
practically, how long the holiday rental season lasts, how much
realistically, you can expect to get for your apartment, bearing in

mind there is likely to be a lot of competition. You should also
find out how much local agencies charge for finding tenants,
cleaning and preparing and advertising the property. Unless you
are nearby and very hands-on, you will have to use an agency and
this could eat up at least 50 per cent of your rental income.
There will also be income tax to pay on the rental income, either
in the home country or the foreign country. You really need the
services of a good lawyer specialising in buying abroad - and who
is not at the same time selling properties - to advise you on all
these aspects.
Penalties for infringing the rules

These can be severe, as you can be sure that the Residents'
Committee watch everything very carefully, and they will not
hesitate to take action for any breaches of the mutual agreement
or Deed of Covenant. First, you will probably get a letter from the
Chairperson, or President informing you that you are breaching
the terms of your tenure; the next step will be legal action to
remove you from the building.
Because there are no leases, there is obviously no such thing as

forfeiture, but there is such a thing as an enforced sale for
persistent breaches which could leave you very out of pocket.
PROPERTY CLUBS
Property clubs are springing up all over the place, whereby you,
the potential buyer, are flown out to a new development in Spain,
Cyprus or Florida, for instance, and offered an offplan property at
a supposed discount, usually as an investor.
By far the great majority of these properties are apartment blocks,

and they are often, although not always, at the low end of the
market.
The deals always sound very seductive, but investigations are now
going on into these property clubs, as very many investors have
lost large sums of money they have paid upfront to the club
organiser. Be aware that these clubs use extremely high-pressure
selling techniques and they may be better at selling than you are
at resisting. If you doubt your ability to say no, leave these clubs
alone and do your own research.
Very many developers, estate agents and others are pushing

foreign homes as good investments. But with investment, there is
always risk, and you need to ask yourself before buying what your
main purpose is in the purchase.
* Is it to have a home in the sun?

+ Is it primarily for investment?
+ Do you hope to make money?
+ Or are you just interested in covering costs?
But most of all, how do the figures stack up? How much deposit
do you have to put down, when will the development be ready,
what are the stage payments, what are the service charges, what
can you expect from rental income or from 'buying to flip' (I
nearly wrote 'buying to flop' - Freudian slip there!).
Also you have to ask yourself whether you really want to buy into
a very cheap development designed purely for holiday lets. Some
of those apartments are very quickly built indeed, and will not
last long, or rise significantly in value. Nor are they always
'winterised' which means they are not suitable for year-round
occupation.
THE COSTS STACK UP

Before buying an apartment in another country, whether for
investment or as a holiday home, do all the figures, including the
nastiest ones, before ever making an offer. Bearing in mind that,
as in the UK, the cost of an apartment does not begin and end
with the purchase price.
As with a flat bought in the UK, the costs will always go up with
foreign property, even if the initial purchase price seems low,
compared to a UK flat. In fact, there will always be more costs
with a foreign property, as you also have to factor in the costs of
getting there. Cheap flights are not always available.
Here are just some of the costs to consider:
There will be the mortgage to service, unless you have bought the
place outright; there will be service charges, as ever, plus local
taxes to pay, the equivalent of council tax, and utilities. In some
countries, such as France, council tax is set at a much higher level
than in the UK. Local taxes are proportionately higher in many
parts of America, as well.
The thing is, these costs still have to be paid when you are not
there. Most apartment buildings in other countries, as with those
in the UK, are run by management companies on behalf of the
owners, and they take their cut. In some upmarket developments,

management costs can be very high indeed. There could also be
costs for valet parking, landscaping the garden and decoration of
the exterior - all of which have to be paid for by you, even if you
are only there for six weeks of the year.
There will also be building and contents insurance to pay.

Buildings insurance is of course compulsory, and contents
insurance is certainly recommended when you are not there
yourself. If you are intending to rent out the apartment, indemnity
insurance will also be payable.
Apart from statutory costs, there will also be your own

maintenance programme. Many homes in the sun need far more
yearly maintenance than in the UK. And in common with service
charges in the UK, you could suddenly be landed with a bill for
your share of a new swimming pool, new landscaping, new
security measures or a new lift.
These are all possible costs you have to take into account when
buying an apartment abroad. And the more suspiciously cheap
the apartment is to buy, the higher these costs could be.
Outstanding debts
In the UK, you cannot buy an apartment on which there are
outstanding debts, as these have to be paid before the purchase
can be completed. In some countries, particularly those known as
'emerging markets', the professions of estate agent and
conveyancing lawyer have not really got going, so you need to
make very certain you are not inheriting any debts for which you
then become responsible.
This has happened in the past in Spain, although Spain has now
become a sophisticated market, with less likelihood of this
problem.
TIMESHARE APARTMENTS
The best advice here is: don't! When you buy a timeshare in an
apartment, say for one or two weeks a year, you will still have to
pay your proportion of service and maintenance charges, and
these can be extremely high.
And if a lease is considered a wasting asset, well a timeshare is

even more so. Many owners have discovered that they cannot even
give their timeshare weeks away, let alone sell them, and that they
have bought into a wasting asset which they cannot offload, but
on which they have to pay service charges for the length of time
they have bought the timeshare.
Timeshare is still being advertised, in spite of bad press over the

years and comes in many guises. It is still sold extremely hard.
For instance, whenever you are offered free tickets in a foreign
hotel to some seductive attraction such as Disneyworld, suspect a
hard-sell timeshare and avoid the offer.
Whenever you are cold-called and hear a recorded voice to the

effect that you have won a holiday, yet again this will be a
timeshare sales pitch.
You will discover, if you waste time listening to the message, that
you have to attend a 'presentation' to claim your holiday. Once at
this 'presentation' you will be given the hardest possible sell to
buy a share in a brand-new apartment. Before you have come to

your senses, you have got your credit card out.
Never fall for it! Never forget that when you are buying abroad
you are buying, at least to some extent, into a dream and that is
when your usual hard-headed common sense may leave you.
INHERITANCE AND SIPPS

It is not possible to put your foreign property into a SIPP (Self-
Invested Pension Plan) as this tax-efficient plan was capped in
December 2005, four months before it was due to come into
operation. Properties abroad (or at home, come to that) cannot
now be 'sheltered' from tax, and as tax matters can be
complicated with foreign policies, it is essential to take expert
advice on this before buying.
The same with inheritance matters. Whenever buying abroad, it is

essential to make a new will, as many countries have their own
rules and regulations about inheritance matters, and it may be
that if you have bought property in that country, you have to
abide by their very different inheritance laws.
Again, you always have to ask yourself: is this purchase primarily

an investment, or mainly to have a second home in a wonderful
sunny location?
The answer could dramatically affect when and where you buy,
but no property in the sun will fulfil every aspect of the dream.
This does not mean it is not a good idea to buy an apartment

abroad. In many ways, it makes more sense than to buy a
separate villa or house, especially if you are not always there
yourself, as a lock-up-and-leave flat is more secure and less worry
generally than a house abandoned for months on end. Mostly,
nobody knows whether you are there or not in a flat, whereas an
unoccupied house is easy to spot.
But you will always have to pay your share of the upkeep of the
block - and that must be borne in mind when considering such a
purchase.
10
Conclusions
As we have seen, it is no simple matter to buy a flat.
Although there are now many checks and balances in place to try
to ensure that the leaseholder paying a lot of money for a lease
and then annual service charges on top, is not cheated and ripped
off at every turn, the fact is that lessees still often have a mightily
expensive and long, drawn-out fight on their hands when they
want to increase the value and security of tenure of their home.
Over the past few years, very many firms of lawyers and advisers
specialising in untangling leasehold law, have sprung up, not to
mention the government's LVT and Leasehold Advisory Service.
The Citizens Advice Bureau and local authority Homeowner

Panels also exist to fight injustices in the leasehold system.
The fact that leaseholders can now legally extend their lease to 90
years, secure the RTM and also collectively enfranchise, means
that things are much better for flat owners than before.
But they are by no means perfect. In very many cases, freeholders

cannot be found. In my building, we have been trying to trace the
freeholder of an adjoining block for several years, without success.
It has cost thousands, and we are nowhere. In other cases,
freeholders may be large corporate companies who own very
202
C O N C L U S I O N S /203
many blocks of flats. Again, it can be very difficult to discover

who actually owns the place. Obfuscation in this area runs rife.
In other situations there is a complicated layer of ownership, with

a freeholder and a head leaseholder to tussle with, before the
residents can get any satisfaction.
Then the landlord or freeholder may own many flats within the
building, which makes Collective Enfranchisement extremely
difficult.
With some leasehold properties, leases have become extremely

short and the cost of extending them is way beyond the pocket of
the owners. This is especially the case when the owners are elderly
and have only a pension to live on. Make no mistake, tough
freeholders do not feel sorry for frail octogenarians who have
only ten or so years left on their lease - and had no idea when
they bought that the value of their homes would eventually
dwindle down to nothing.
The matter of selling lease extensions and freeholds is part of the

tough commercial world of property investment, and has become
lucrative for freeholders and lawyers alike. It is no accident that
over 50 per cent of the world's richest people have got that way
through property dealing.
The continuing anomaly of leasehold tenures has also allowed

freeholders and managing agents to be intimidating and
threatening - and there have been very many cases of frightened
leaseholders caving into the bullying demands of their freeholder.
Flatowners are themselves often to blame for their own

predicament, it has to be said. Very many highly intelligent people
who live in flats have no idea of the length of their lease, no idea
who the managing agents are, and no idea whether or not they
own a share of the freehold. Most have never heard of RTM, CE
or lease extensions.
It all sounds boring and convuluted, so they don't bother to find

out where they stand. Yet most lessees have paid well into six
figures for a lease, the terms of which are quite unknown to them.
When I asked one friend, a journalist colleague, about the tenure

of her flat, she admitted she had no idea. A few days later, she
came back to me with the information that she had found out it
was leasehold - and she has not only been living in the block for
11 years, but paying £600 a quarter to an unknown management
company all that time.
'Do you own a share of the freehold?' I asked her. She looked
mystified. 'Well, there is a management company...' she said
vaguely. She is not alone, by any means.
I hope that this book will go some way towards explaining just
how complicated flat ownership can be - even once the building
has enfranchised.
So, is there any way of making the whole thing simpler, fairer and
easier to understand?
These are my suggestions.

C O N C L U S I O N S /205
All new developments should as a matter of course be

commonhold
At the moment it is far more profitable for developers to retain
the freehold so that they can receive service charges and ground
rents, and also sell on the freehold if they wish. Developers can
also make a lot of money by selling the freehold to the
leaseholders.
The government is dragging its heels over commonhold, maybe

because it fears that if developers do not retain ultimate control
over their buildings, they will not be so ready to construct new
housing.
At the time of writing, commonhold remains a choice, and a

choice which nobody has yet taken up. But if it were made
compulsory, this would be a start at doing away completely with
outdated leasehold tenure.
Of course, there must be stringent laws on the payment of service

charges, occasional levies and any other charges which may be
necessary from time to time to protect the building.
If all flatowners know for a fact that nobody is making a profit

out of them, there would be more willingness to pay these
charges.
At the moment, the requirement for service charges to be

'reasonable' means that a lot of time, money and effort is being
taken up with LVT hearings.
It seems to me self-evident that the old lease system should

disappear, and be replaced by a new type of tenure whereby flat
dwellers own their unit in perpetuity, such as happens in most

other countries.
What about non-payers?

My other suggestion is that the old idea of forfeiture should
vanish completely, and be replaced by a system of enforced sale
when service charges are not paid, or when flatowners exhibit
other forms of anti-social behaviour.
What would happen here is that non-payers would initially receive

a letter warning them that they will be forced to sell their flat if
the charges are not met or if the bad behaviour continues. They
will then be given a certain length of time to mend their ways and
when this time is up, the Commonhold Association (or similar)
puts their flat on the market, above their heads with no messing
about. This clause would be firmly embedded in the Commonhold
Community Statement, or similar, that all new owners sign on
purchase.
Once the flat is sold, the former owner receives all the money due
from the sale, minus the outstanding charges and costs of selling,
redecorating or repairing. When the sale is completed, they are
sent a breakdown of their charges. These cannot be challenged in
a court of law.
There would be no deviation from this, and it would ensure (a)

that anti-social people or those who cannot afford to live in the
building do not ruin it for others and (b) that the former owner
has some money to start again.
C O N C L U S I O N S / 207
No requirement for reasonableness

If everybody owned their own unit in perpetuity, and the
Residents' Committee was the only arbiter, there would be no
requirement for 'reasonableness', as service charges and other
costs would be decided democratically by all the flatowners.
As there would be no outside freeholder to pay, the only costs and

charges would be those agreed by the majority of the owners.
Detailed breakdowns of all expenditure would be sent to all
owners annually, with the proviso that anybody can have a look at
the original bills.
There would be a Board of Directors, as now, chosen from the

flatowners and these Directors could be voted on and off the
Board, as with any other directors. They would, of course, be
voluntary.
There would be no opportunity for anybody to cook the books,

or line their own pockets, as all sums paid in service charges
would be for the common good.
Leasehold tenure would disappear

If Commonhold came in, eventually the old leasehold system,
which no longer works, would disappear and along with it, all the
anomalies we have discussed throughout this book.
When that day dawns, then flat dwelling would become simple,
enjoyable and neighbourly, rather than fraught with
disagreements, lawsuits and court cases, as now.
Resources
BOOKS
Callo, Kat, Making Sense of Leasehold Property, Lawpack,
London, 2005
Gumming, John and Hickie, Richard, A Flat-owner's Guide to
Taking and Maintaining Control, The College of Estate
Management, London, 2005. To order Tel: 0118 986 1101.
www.com.ac.uk
MAGAZINES AND JOURNALS

News on the Block (a magazine all about apartment dwelling). 1
Great Cumberland Street, London W1H 7AI. Tel: 08700 600
663. Email: enquiries@NewsOnTheBlock.com
www.newsontheblock.com
ORGANISATIONS AND ASSOCIATIONS

ARMA, Association of Residential Management Agents, 178
Battersea Park Road, London SW11 4ND. Tel: (020) 7622 6126.
Email: info@arma.org.uk www.arma.org.uk
The only professional body for managing agents. Holds
conferences, seminars and training events for managing agents.
A list of members can be downloaded from their website; also
many of their publications can be downloaded.
ARLA, Association of Residential Letting Agents, www.arla.com
A list of accredited members can be downloaded from their
website. All members are fidelity bonded and obey a Code of
Practice.
208
R E S O U R C E S / 209
LEASE, The Leasehold Advisory Service, 31 Worship Street,

London EC2A 2DX. Tel: 0845 345 1993. Email: info@lease-
advice.org www.lease-advice.org
The government's non-profit making service for the leasehold
sector. Will advise on aspects of leases, disputes with freeholders
and managing agents, and also offers a mediation service.
LVT, Leasehold Valuation Tribunal, 19 Alfred Place, London
WCIE 7LR. Tel: 020 7446 7700.
A quasi-judicial body which pronounces on the 'reasonableness'
of service charges, lease extensions, collective enfranchisement,
Right to Manage and other matters concerning leasehold
properties. LVT decisions can be appealled to the Lands
Tribunal. Information from ODPM, see below.
ARHM, Association of Retirement Housing Managers, Southbank
House, Black Prince Road, London SE1 7SJ. Tel: 020 7463
0660. Email: enquiries@arhm.com
RICS, Royal Institution of Chartered Surveyors, www.rics.org
FPRA, Federation of Private Residents' Associations Ltd., 59 Mile
End Road, Colchester, Essex CO4 5BU. Tel: 0871 200 616.
Email: info@fpra.org.uk www.fpra.org.uk
A non-profit making association which will advise on all aspects
of forming Residents' Associations. Offers an advisory service
to members, publishes a regular newsletter and a number of
useful publications.
ODPM, Office of the Deputy Prime Minister, www.odpm.gov.uk
Publishes many leaflets and booklets about the leasehold sector,
and Home Information Packs. Some are free, but there is a
charge for the bigger publications. Downloadable information
about applying to an LVT.
Publication: Residential long leaseholders: a guide to your rights.
A PDF document; some pages are printable.
Department for Constitutional Affairs, www.dca.gov.uk
Information on commonhold
Housing Corporation, www.housingcorp.gov.uk

Information on shared ownership
Live/work units. Information from: Hurford Salvi Carr.
www.hurford-salvi-carr.co.uk
ORGANISATIONS SPECIALISING IN LEASEHOLD

MATTERS
Rosetta Consulting Ltd., 31 St Petersburgh Place, London W2 4LA.
Tel: 020 7853 2282. Email: info@rosettaconsulting.com
www.enfranchise.com www.rosettaconsulting.com
Will project-manage every aspect of CE or RTM, for a flat fee.
Enfranchisement and Leasehold Solutions Ltd. Tel: 0870 1123 357.
Email: anls@els-els.com
Leasehold Solutions, www.leaseholdsolutions.com
Brighton, Hove and District Leaseholders' Association, Cornerstone
Community Centre, Church Road, Hove BN3 2FL. Tel: 01273
705432. www.leaseadvice.org
(A non-profit making company which advises on CE and other
leasehold issues.) A DVD or video (Escaping the Leasehold
Trap) is available for £10 from: Shula Rich, 52-53 Kingsway
Court, Hove BN31 21Q.
SOLICITORS SPECIALISING IN CE
Dean Wilson Laing, 99 Church Street, Brighton BN1 1UJ. Tel:
01273 327241. www.dwl.uk.com
Alan Edwards & Co, Campden Hill House, 192-196 Campden Hill
Road, London W8 7TH. Tel: 020 7221 7644.
www.aedwardssolicitors.co.uk
Roiter Zucker, Regent House, 5-7 Broadhurst Gardens, London
NW6 3RZ. Tel: 020 7328 9111. www.roiterzucker.com
BUYING APARTMENTS ABROAD

FOPDAC, The Federation of Overseas Property Developer's Agents
R E S O U R C E S / 211
and Consultants. Tel: 0870 350 1223.

Email: enquiries@fopdac.com www.fopdac.com
(Make sure when buying an apartment abroad you use a member

company.)
Index
accounting, 87 Commonhold, 7, 31, 79-81,
Annual General Meeting 145, 192, 205-6, 207
(AGM), 13, 100, 102, 103, Commonhold and Leasehold
120, 155, 171, 183 Reform Act, 89, 119, 130
Age-exclusive apartments: see communal heating, 36, 38, 54,
Retirement Apartments 59
'air rights', 128 Companies House, 28, 80, 97,
Archer, Jeffrey, 8 120, 122, 126
architects, 2 Conquest, Norman, 26
ARLA (Association of conversion 33, 34-6
Residential Letting Agents),
148 debtors, 45, 87, 102, 177
ARMA (Association of 'demised property', 61, 62
Residential Managing demographics, altering, 3
Agents), 82, 83, 90, 95, 124, developers preference for flats,
190 1
charges, 93^ discounts 40
Articles of Association, 95, 120
Association of Retirement Eaton Square, 5
Housing Managers, 93 enfranchisement, 6, 29, 59, 98,
Assured Shorthold Tenancy, 101, 102-3
29, 148-9, 159-60, 165 collective, 29, 82, 105, 117-
8, 120, 124-35, 136-7, 168,
Buy-to-Flip, 40, 196 183, 189, 203, 204
Buy-to-Let, 24, 145-66, 174 Extraordinary General Meeting
mortgages, 151, 156, 164 (EGM), 100, 102, 155, 170,
buying abroad, 191-201 171, 182-3
Callo, Kat, 125, 132-3 Federation of Private Residents

Christie, John, 23 Associations, 78, 79, 98-
Citizens Advice Bureau, 169, 100, 101, 179-80
202 flats, advantages of, 3^4
212
INDEX / 213
best buy, 52-6, 143 Land Registry, 61, 80

council (local authority), 22- Landlord and Tenant Act, 89
4, 26, 33, 42-4, 66-7, Lands Tribunal, 115
136-44 lease, the, 5, 57-79
disadvantages of, 4-5 buy-to-let, 146 et seq
the first flats, 18-19 contravention, 172
freehold, 29, 31 extension, 29, 31, 105, 106-
increasing value, 104-35 17, 133, 204
over shops, 34, 46 forfeiture, 70, 77
pets in, 78-9 questions to ask, 58-9
pros and cons, 11-12 short, 112, 118-9, 137, 203
problems, 167-90 Leasehold Advisory Service
forfeiture of lease, 77, 148, 163, (Lease), 76, 123-4, 178, 190,
180-1, 195, 206 202
freehold, concept of, 28 Lease Mediation Service, 184-6
freehold, share of, 66, 83 leasehold law, understanding,
freeholders 5, 57, 104 et seq 5-6, 12, 26, 28, 60, 87
Leasehold Solutions, 134
Gray, Stewart, 112 Leasehold Valuation Tribunal
Greenslade, Alex, 134 (LVR), 69, 74-6, 81, 108-9,
ground rent, 77, 112, 126, 129, 111, 115, 116, 117, 121, 131,
151 132, 141, 142, 177, 178, 181,
Guinness Buildings, 21 190, 202, 205
leaseholder, obligations, 29
Haler, Peter, 78, 123-4 Levene, Robert, 78-9, 101, 135
Hammersmith and Fulham, levies, 11, 96, 177
London Borough of, 136 listed buildings, 65-6, 154, 186-
holiday lets, 146, 147, 161-3, 7
164, 166 live/work units, 34, 49-50
Home Information Pack (HIP),
78, 101 managing agents, 10, 31, 46,
Home Ownership Unit, 67, 136 57, 81-2, 97, 114, 134, 149,
'hope' value, 128 150, 154, 168-9, 171, 175
appointing, 90-1
inheritance, 200-1 mansion block, 33, 36-7
'marriage value', 110, 127, 128-
Law of Property Act, 28 9
neighbours, disputes, 16 64, 70-1, 72-3, 89, 91, 101,

newbuild, 1, 33, 39-41, 80, 84, 150, 151, 193, 197
145 on ex-local authority
blocks, 67-9, 139-41, 173
Old Brewery, The, 2 'reasonableness', 71-2
Old Candle Factory, The, 2 unpaid, 176-8
Old Fire Station, The, 2 shared ownership, 34, 47-9
Old Vicarage, Grantchester, 8 shell apartments, 34, 47
shareholders, 94, 126
Participation Agreement, 125-6 SIPPS (Self-Invested Pension
Payment Plans, 68, 141 Plans), 200
Peabody Buildings, 21 sinking fund, 31, 59
cost, 21 6000 Years of Housing, 20
Peabody Trust, 25 short lets, 147, 160-1, 164
Perriam, Wendy, 14-15 social (council) tenants, 136,
pets, 147, 179-80, 194 138, 139, 143, 163-4
Planning Permission, obtaining, subletting, 65, 146-50, 168
153, 155 surveyor, 91, 113
Property Clubs, 40, 152, 195-6 Surveyors, Royal Institute of
purpose-built block, 33, 37-9 Chartered, 92-3
repossession, 69, 77 tax, 165, 166, 195, 197

Residents' Associations, 31, 41, capital gains, 50, 166
45, 59, 86, 97, 98-9, 142, Tenancy Deposit Scheme, 157
149, 150, 153, 162, 163 Timeshare, 199-200
Committee, 193, 195, 207 Towes, Richard, 136, 138, 139,
retirement apartments, 34, 51-2 140, 142
Right to Manage (RTM), 29,
45, 82, 83, 85, 86, 98, 101, Upstairs, Downstairs, 17
119-24, 126, 135, 168, 189,
202, 204 Vesting order, 114
Rosetta Consulting, 126, 129
Warehouse conversions, 33, 34
Schrenauer, Norbert, 20 William the Conqueror, 191
service charges, 10-11, 29-30, Wilson, Jacqueline, 23
36, 38, 43, 44, 52, 59, 62,

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HOW TO

How to Be Your Own Estate Agent

How to be a Property Millionaire

The Beginner's Guide to Property Investment

Send for a free copy of the latest catalogue to:

Published by How To Content,

© Copyright 2006 Liz Hodgkinson

First published in paperback 2006

ISBN: 978 1 84803 040 4

Cover design by Baseline Arts Ltd, Oxford, UK

1 The History of Apartment Buildings 17

2 What Type of Flat is it Best to Buy? 33

The main elements of a standard lease 61

5 Increasing the Value of Your Flat 104

Very short leases 118

6 Ex-local Authority Blocks 136

7 Letting a Flat 145

8 When Things Go Wrong 167

Listed buildings 186

9 Buying Abroad 191

Before long, there will be more people living in flats or

This means that in future, large numbers of people are going to

Not only that, but buying a flat is a completely different process

Flats, though, are usually sold leasehold, which means in effect

Your flat may be sold with a specific length of lease remaining.

The vast majority of property investors buy flats, rather than

In April 2000, just 16.5 per cent of properties bought in Britain

Worldwide, the vast majority of newbuild properties are

But the ever-increasing popularity of flat living is not only to do

CHEAPER FOR DEVELOPERS

Where land is scarce but demand is high, as in waterfront locations

It is most common for apartment blocks to be built on brownfield

Apartments can be squeezed in where it would be impossible to

It is also easier and cheaper to lay on services such as electricity,

ADVANTAGES OF FLAT LIVING

You can go for a .characterful Victorian conversion or an ultra-

Because so much of the building is shared, it is usually cheaper to

DISDAVANTAGES TO FLAT LIVING

Apart from the extremely complex laws concerning the tenure of

UNDERSTANDING LEASEHOLD LAW

The lease itself is a lengthy, legally-binding document written in

Strictly speaking, a leaseholder is known as a tenant, and

Leasehold law comes somewhere between owning and renting and

trying to simplify for decades, even now without complete success.

Leases can also in extreme cases be forfeited, for persistent and

LEASEHOLD WITH A SHARE OF THE FREEHOLD

But even if there is an outside freeholder, all is not lost as it is

Leaseholders subject to an outside freeholder can also exercise

A NATURAL WAY OF LIVING?

THE NATURE OF INTERCONNECTION

Because of this close interconnection, there are strict rules on

You may not be allowed a satellite dish, and in some very

So, a level of conformity is essential if flat living is to work.

RUNNING THE BUILDING

Where there is an outside freeholder, there will usually be

COSTS CAN GO ON...

There are now ways that excessive charges to leaseholders can be

So it is very much up to every occupant to pull their weight, to