Understanding Your Lease

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2 Understanding Your Lease A Guide to the Service Charge for Leasehold Flats in Neath Port Talbot County Borough February 2007 This leaflet is also available in large print, in Braille and on tape or computer disk. Phone for copies. Document Reference Number: SSHH0477 Neath Port Talbot County Borough Council Social Services, Health and Housing 1

3 Introduction The following guide is intended to clarify the terms of the Lease signed on the purchase of a council owned flat. The contents of this guide are an interpretation of the lease and do not represent a definitive statement of either parties' legal obligations. This guide will concentrate mainly on the terms of the lease relating to cost, and should provide answers to the most frequently asked questions. If you require any further information relating to your lease, please contact the relevant Officer. A contact list of Officers has been included at the back of this guide for your convenience. What is leasehold? Leasehold flats can be in purpose built blocks, in converted houses or above commercial or retail premises. Leasehold ownership of a flat is simply a long tenancy i.e. the right to use and occupation of the flat for the term of the lease (125 years). The ownership of the flat relates to everything within the four walls of the flat but does not include the external or structural walls. The structure of the building and the land it stands on is owned by the landlord, Neath Port Talbot County Borough Council, who are responsible for the maintenance and repair of the building. 2 Neath Port Talbot County Borough Council Social Services, Health and Housing

4 What is a lease? A lease is a private contract between you, the leaseholder and Neath Port Talbot CBC, the landlord. When a flat changes hands, the seller assigns all the rights and responsibilities of the lease to the purchaser. The lease sets out the contractual obligations of the two parties, what the leaseholder has contracted to do and what the landlord is bound to do. The leaseholder's obligations include payment of the ground rent and contribution to the costs of maintaining and managing the building. The lease also places certain conditions on the use and occupation of the flat. The landlord is obliged to manage and maintain the property, to collect contributions from all leaseholders and keep the accounts. What is ground rent? Because leasehold is a tenancy, it is subject to the payment of a nominal rent of 10 per annum to the landlord. Ground rent is a specific requirement of the lease and must be paid on the due date, providing the leaseholder has received a written notice from the landlord in the prescribed format. The prescribed format dictates that the written notice must specify the amount due, give days notice of payment and specify the date by which payment must be made. Neath Port Talbot County Borough Council Social Services, Health and Housing 3

5 What are the leaseholders rights? The leaseholder has the right of peaceable occupation of the flat for the term of the lease. In addition, the leaseholder has the right to expect the landlord to maintain and repair the building and manage the 'common parts' i.e. the parts of the building or grounds not specifically granted to the leaseholder in the lease, but to which there are rights of access (e.g. the entrance hall, staircases, communal yard etc). Groups of leaseholders who satisfy certain conditions can get together and enforce the purchase of the freehold, the price of which is set by the Leasehold Valuation tribunal if the landlord and leaseholders cannot agree a price. Leaseholders have the right to inspect documentation relevant to their accounting statements within 21 days of their request. Leaseholders will also be able to request copies of that information on payment of a reasonable fee (currently 5 inc. vat). What are the leaseholders responsibilities? Principally, these are the requirements to keep the flat in good order, to pay the contribution of costs punctually, to behave in a neighbourly manner and to obtain the landlords consent before making alterations or sub letting. 4 Neath Port Talbot County Borough Council Social Services, Health and Housing

6 What maintenance does my lease cover? The Leaseholder is to pay a proportion (i.e. apportioned on floor space) of the following costs : 1. Repairs or improvements to the structure and exterior of the Flat and the Building including drains, gutters, external stairways, balconies windows, exterior doors, boundary walls and the roof. This applies to the whole block that the flat is situated in. 2. The cost of cleaning and/or redecorating the exterior of the Building including guttering, external pipes, windows, exterior doors and balconies. 3. The cost of maintaining, repairing, renewing, improving or replacing any pathway, forecourt, communal yard or steps. 4. The cost of maintaining (or replacing) suitable floor coverings, cleaning, decorating and lighting in the main entrance, passages, landing and staircases. The Leaseholder must also pay the following : 1. The cost and expenses of the council (i.e. the Management Fee ) which shall not exceed 10% of the total annual Service Charge nor be less than 25. Neath Port Talbot County Borough Council Social Services, Health and Housing 5

7 2. Mandatory buildings insurance with the Authorities block policy. If you would like to inspect this policy, please contact the Insurance Section (see Contact list). Please note that contents insurance is the responsibility of the Leaseholder. How is my service charge calculated? The annual Service Charge is estimated at the time of purchase, and is invoiced monthly. The service charge year is April 1st to March 31st and is comprised of the following costs : 1. Day to Day Maintenance At the time of purchase, an estimate of the annual expenditure on general maintenance is made. This depends on the age and condition of the block. Naturally, it is not always possible to accurately predict the maintenance costs for the year to come so, occasionally, the amount charged in a year may exceed the amount of costs incurred. When this occurs, an adjustment is made to reduce the monthly charge for the next service charge year. The opposite could also be the case and an increase in monthly charge could occur. All Leaseholders receive a quarterly report containing details of any maintenance works carried out, the Job number and the total cost to the leaseholder. 6 Neath Port Talbot County Borough Council Social Services, Health and Housing

8 2. Reserve Fund Contribution In some cases, at the time of sale, there are specific works already planned for a block. These works are not general maintenance, and are more significant in both size and cost. An example of such works would be a repainting programme. If such works are planned, a fund known as the Reserve Fund is set up to pay for the work. The leaseholder's contribution to this cost is charged in the first two years of the lease. The Authority pays interest to leaseholders (less income tax at the basic rate) on balances held on their behalf. N.B. the former Neath B C lease does not have a reserve fund. The former Lliw Valley B C lease has a fund that is limited to 850. When this amount is reached, any excess payments are refunded and monthly payments reduced. 3. Capital Fund Contribution Similarly to the above, there may be major works planned on a block of flats. This could mean a new roof, re rendering, replacement windows etc. If major works are planned, a fund known as a Capital Fund is set up. The leaseholder's contribution to this cost is charged over the first five years of the lease. If a flat has already been sold, there is a legal requirement to consult leaseholders before any major works. Leaseholders are entitled to the following information: A first notice describing in general terms the proposed works, why the landlord considers the works necessary, contact details to discuss the Neath Port Talbot County Borough Council Social Services, Health and Housing 7

9 works and inviting the leaseholders to nominate a person from whom the landlord should try and obtain an estimate. The leaseholder has a period of 30 days in which to send views to the landlord. Following the above and when costs have been obtained for the works, the landlord must serve a second notice setting out details of the proposed works and likely costs, again inviting observations and allowing 30 days for leaseholders to respond. If the consultation procedure is followed correctly, the total cost of work is apportioned to the block of flats. As this is likely to amount to thousands of pounds the Authority offers leaseholders the option of paying over 5 years interest free. In some cases (e.g. replacement windows) it may be possible to 'opt out' but this will depend on the nature of the major works and will require the agreement of the Authority. 4. Buildings Insurance When purchasing a flat, the leaseholder is automatically covered by the Authority's block insurance policy. The premium is charged via the annual service charge and is mandatory. Leaseholders have the right to inspect this policy and can obtain a copy from the Insurance Section (see contact details list). NB. It is the Leaseholders responsibility to make an insurance claim for any maintenance charges they believe are covered by the policy. Please contact the Insurance Section if you require a claim form or any assistance in making a claim. Any contents insurance remains the responsibility of the Leaseholder. 8 Neath Port Talbot County Borough Council Social Services, Health and Housing

10 5. Management Fee The management fee is an administration charge. This is calculated as 10% of total estimated service charge (not including Insurance) or 25, whichever is greater, per annum. In the case of the properties sold under the former Lliw B C lease, the fee is 10% of estimated annual charges, and for the former Neath B C lease, the fee is 15 if there has been day to day maintenance or capital repayment in that year. All Service Charge details are provided to purchasers when applying to buy their flat, and to each individual leaseholder via the 'Annual Certificate of Service Charge' issued on August 1st each year. Leaseholders also receive a quarterly report, detailing day to day repairs carried out on the block and the costs of their contribution. What if a leaseholder doesn't pay? It is the leaseholders obligation to pay the charges promptly under the terms of the lease. As long as the landlord is able to show that the charges are reasonable, then he will be able to take forfeiture proceedings. If approved by a court, this can lead to the landlord repossessing the property. If a leaseholder feels that service charges are not reasonable they can apply to the Leasehold Valuation tribunal to seek a determination of the fairness of the charges. Neath Port Talbot County Borough Council Social Services, Health and Housing 9

11 Contact Details Nature of Query: For queries relating to the lease, service charge calculation, or any other enquires not covered by the other contacts listed. Contact: Housing Accounts, Neath Port Talbot CBC, Civic Centre, Port Talbot. SA13 1PJ Telephone: (01639) Nature of Query: For queries relating to the payment of, or payment method for, invoices you have received. Contact: Miscellaneous Income Section, Neath Port Talbot CBC, Civic Centre, Neath. SA11 3QZ Telephone: (01639) Neath Port Talbot County Borough Council Social Services, Health and Housing

12 Nature of Query: For queries relating to maintenance carried out, the cost of repairs, or to request a repair Contact: Building Repairs Call Centre, Neath Port Talbot CBC, Civic Centre, Neath. SA1l 3QZ Telephone: (01639) customer.services@npt.gov. uk Nature of Query: For queries relating to buildings insurance claims or to request a claim form Contact: Insurance Section, Neath Port Talbot CBC, Aberafan House, Port Talbot. SA13 1PJ Telephone: (01639) insurance@npt.gov. uk Neath Port Talbot County Borough Council Social Services, Health and Housing 11

13 Nature of Query: If you wish to make a formal complaint Contact: Complaints Officer, Neath Port Talbot CBC, Civic Centre, Port Talbot. SA13 1PJ Telephone: (01639) complaints@npt.gov.uk Produced by Performance and Business Management, Social Services, Health and Housing, Neath Port Talbot County Borough Council, Civic Centre, Port Talbot SA13 1PJ. 12 Neath Port Talbot County Borough Council Social Services, Health and Housing