When buying a property that is leasehold, the best place to start is the agreement. And when you are ‘buying a flat’ that agreement is the Lease. Unfortunately, Leases come in all shapes and sizes. There is no such thing as a ‘standard lease’. Partly this is because every solicitor thinks their lease is the best and everybody else’s is less than perfect … and partly this is because every property is different, every Landlord’s wishes are different, and every property deal is different from the next. Consequently property lawyers create bespoke documents designed to be the best answer for the specific circumstances of the moment. The result is a world filled with Leases which are all slightly different. But thankfully there are common themes and ‘headings’ in all of them. Let’s look at the important ones. The Date and The Parties The date of the Lease is the date upon which the original document was signed by the original Parties to the Lease … the original people who signed the agreement … will be named. They are: The Freeholder is the person who owns the land upon which the block of flats Leaseholder is the person who ‘rents the flat’ – subject to the rules and regulations, the rights and benefits, of the Lease. The Resident’s Management Company Not all Leases have a Residents’ Management Company [RMC]. Where they do, they are known as “Tri-Partite Leases”. In these situations the RMC undertakes the duties normally undertaken by the Freeholder in ‘ordinary leases”. This is often done where the Landlord wants no day to day involvement in (or liability for) the running of the building. As the name implies, the residents (the Leaseholders) take on the running of the Building via a company set up specifically for the purpose. The Demised Premises This section of the Lease details the property which is the subject of the agreement.
In the case of a flat, the building within which the flat is situated will be described; e.g. Magnificent Mansions, Posh Road, Toptown. The flat itself will be detailed; e.g. Flat 2, Magnificent Mansions. Usually the words describing the demised premises will provide detail such as “up to and including the ceiling plaster and down to and including the floor finishes … and one half (severed vertically) of the internal walls dividing the said flat from any other flat or common parts … including the doors door frames windows window frames glass and fastenings …” some more ancient leases the detail may not be as explicit as you might want to see. In such cases it is worth looking carefully at the physical property to see whether any ‘grey areas’ might exist, which may be the subject of dispute at a later date. The Term This will always be stated as a definite term from a specific date; e.g. Ninety nine years from 25th March 1985. It is worth working out how many years are left unexpired – as this affects the mortgage-ability of the property (see later). The Rent The rent payable under the terms of a long Lease is called “Ground Rent”. This is a fixed sum, payable on a specific date or dates each year; e.g. 100 per annum, half payable on 25th March and half payable on 29th September, in advance. In many leases the rent changes during the term. Such changes will be stated precisely; e.g. 50 per annum for the first thirty-three years, 100 per annum for the second thirty-three years, 150 per annum for the remainder of the term. Note: If the rent is stated as “a peppercorn” this generally means no money actually needs to be paid. In theory you’re required to pay the peppercorn each year – but I’ve never met a Landlord who actually wanted to collect peppercorns! (Not yet anyway.) The Landlord’s Covenants This section of the Lease describes what the Landlord is required to do throughout the term. This might include ‘maintaining the structure of the building’ … or … ‘to maintain repair redecorate and renew the external walls and structure and in particular the main load bearing walls and foundations and roof storage tanks gutters rainwater pipes of the Building and any party walls and the boundary fences (if any) and the balconies’. In short, this is the list of duties the Landlord must perform.
The Landlord’s Rights In order to perform the Landlord’s Covenants, the Landlord will need to retain a right of access over the premises – and other rights as appropriate. For these reasons the Lease will describe rights such as “The Landlord and his surveyors and agents, with or without workmen, are permitted at all reasonable times upon reasonable notice during the said term, to enter upon and examine the condition of the demised premises.” When you’re renting out the flat, be aware that you may have to provide access for your Landlord – even though you are not physically occupying the premises. The Landlord’s Obligations Often these are contained in the Landlord’s Covenants but in some cases they are listed separately. They detail the repairing obligations, like those mentioned above, and other duties which the Landlord is required to carry out (usually in return for a service charge). In the case of a flat you should always check the details surrounding the services your flat requires. For example, if your flat is on the 23rd floor … what are the Landlord’s obligations for repairing the lift if it stops working? When you’re intending to rent out your flat on a short term basis; e.g. with an Assured Shorthold Tenancy, think of the services your tenant will require – because if those services stop, your tenant will call you and you’ll need to put pressure on your Landlord to get the problem sorted out. The Leaseholder’s Covenants The Leaseholder’s Covenants are normally fairly extensively described in the Lease. This is because the lawyer drafting the Lease will have wanted to guard against every eventuality he could think of – and as all tenants are likely to trash the Landlord’s precious flat (in the lawyer’s opinion) the wording will be lengthy. The Leaseholder’s Rights These rights may seem fairly obvious, but you need to check them from the viewpoint of something having gone wrong. After all, nobody reads a Lease when everything is going great (except sad people like me!).
The Leaseholder’s Rights might include: The Leaseholder’s Obligations As the Landlord wants his flat looked after properly – and as he has obligations to other Leaseholders in the Building – the Lease details a multitude of things which you the Leaseholder must do … and must not do. These might include: Service Charge Details As mentioned above, the Landlord will have the responsibility for maintaining the Building and providing various services. In fulfilling his duties he will incur costs – but will recover the costs of doing so by way of a Service Charge levied upon each Leaseholder at the building. The Lease will detail: It is worth checking the service charge proportions for all the flats within the building – as they quite often do not add up to 100%. Obviously you will rarely be able to read all the leases for the Building, but the Landlord’s Managing Agent may have a schedule or spreadsheet detailing the relevant information. General Terms More modern leases may well have a section detailing things which do not fall into any other category, for example: Where the demised premises are demised to two or more persons all covenants expressed to be by the Lessee shall be joint and several and the masculine gender includes the female gender and neuter and the singular includes plural. These clauses are designed to minimise legal argument due to misunderstandings or misinterpretations. Lease Plans Every good Lease will have a plan detailing the Building, the demised Premises, and the grounds within which the Building is situated. It is important to check that the flat you’re proposing to buy has adequate access – and you have a right of access over the areas you expect. For example, if your flat is on the 23rd floor but you have no right of access over the 22nd floor … you have a problem! To avoid leasehold problems always READ THE LEASE! Behave yourself as you would want a perfect tenant to behave. Make sure you understand ‘the rules’ and make sure you follow those rules. Reading the Lease and knowing what’s expected of you will help you avoid problems and will save you money!
