What Are The Freeholder Responsibilities?
Exploring all things leasehold and freehold, including what the freeholder responsibilities are...
Owning a residential freehold may seem a fairly straight forward investment – you can sell the properties as leaseholds, allowing you to make money off the sale whilst also collecting ground rent and service charges.
But do you know what the freeholder responsibilities are? Do you know what repairs you will need to do as the owner of the freehold?
Or maybe you’re looking for freeholder responsibilities because you feel your freeholder isn’t doing as they should?
Whatever it is, we have the answers!
We’re going to talk you through what a freeholder is, what the freeholder responsibilities are, as well as letting you know what your options are when the freeholder is not maintaining property correctly.
We’re also going to talk through what the leaseholder’s responsibilities are – yes, it’s not just freeholders who have to take care of things!
What is a freeholder?
A freeholder is a person or company who, as the name suggests, owns the freehold of a building, including the land the property is built on.
Owning the freehold will mean you have ‘freeholder responsibilities’ which you must take out, for example tending to communal areas and repairs to the external parts of the building.
A freeholder can also be referred to as a landlord, unless the lease is an intermediate lease and then the landlord and freeholder may be different.
Difference between freehold and leasehold
A freehold property means you own the property and the land the property is built on whereas with a leasehold you only own the property and not the land, meaning you will have to pay ground rent (don’t worry, more on this later…)
A leasehold property will normally be in the form of flats but can sometimes be terraced houses. There are generally very few detached properties which are leaseholds, but it has been seen to happen, especially more recently with new build houses.
A leasehold will mean you have the lease to the property for a certain number of years – most leases are quite long, some even up to 999 years.
If you’re still wanting to know more about the difference between leasehold and freehold, this will answer your questions.
What are the freeholder responsibilities?
Freeholder responsibilities normally refer to a combination, or all, of the following:
Repairs to the building’s structure (including the gutters)
Repairs and upkeep of the communal parts of the building, e.g. stairways, lifts, etc
Arranging pest control
Preparation and management of budgets
Managing the utility supplies, including the plumbing and heating, of communal areas
Collecting ground rent and service charges off the leaseholders
It’s not part of the freeholder responsibilities to regularly inspect the buildings for repairs. If there are repairs that need doing, the leaseholder should write to the freeholder telling them about the repairs and explain in detail exactly what needs to be done.
If you’re the leaseholder, make sure you keep a copy of your letter to the freeholder and also be sure to date it, so you can ensure the repairs are done in an appropriate time frame.
It’s also one of the freeholder responsibilities to take out building insurance, to cover the costs of the repairs they must carry out. If the insurance can’t cover the full costs, the service charge paid by the leaseholders will also be used to go towards the repairs.
In case your eyebrows raised at the words ‘service charge’, let us explain – a service charge is paid by each leaseholder, whether it be on a development or a block of flats, to cover the costs of the maintenance and repairs of the communal areas.
Your service charge may be different to that of your neighbours, as the costs are worked out by looking at the value of your property.
If repairs are going to cost the freeholder more than £250 per property, it’s part of the freeholder responsibilities to consult all the leaseholders before the repairs are carried out.
Is the freeholder responsible for damp?
More often than not, it’s part of the ‘freeholder responsibilities’ to sort out any damp, as it’s up to the freeholder to deal with external issues.
As we said previously, freeholders don’t regularly come and inspect for any issues, so you will need to know the signs of damp to look out for. Luckily for you, we have them listed here:
Damp patches on the walls
A mouldy/musty smell
Walls, ceilings and floors feeling cold or damp
Condensation on the windows
If you notice any of these signs, you should get in contact with the freeholder and they should sort out the problem, if the lease states that dealing with damp is part of the freeholder responsibilities.
If the damp is being caused by an internal issue, for example from a leaking pipe or something from inside the property, then it’s likely not part of the freeholder responsibilities to repair it, as the inside of your property is the leaseholder’s responsibility.
Can a freeholder increase ground rent?
Ground rent is a fee which is paid each year by the leaseholder to the owner of the freehold of the property. In a freehold property you don’t pay ground rent, as you own the land your property is on. But when you’re a leaseholder, you only own the property and not the land.
The terms of how ground rent is paid will be set out in the lease, stating whether it should be paid in a one yearly instalment, half-yearly or quarterly.
There are two types of ground rent – fixed and escalating. If your lease states you have fixed ground rent, then your freeholder will not be able to increase the ground rent at any point.
Escalating ground rent will mean the ground rent will increase by a certain amount every set number of years. Escalating ground rent can also increase according to a formula, for example in line with the retail price index.
It’s not part of the freeholder responsibilities to increase ground rent at random points and they can’t demand you pay more than is set out in the lease.
BUT this isn’t to say the lease will have fair ground rent terms…
The ‘ground rent scandal’ hit the papers in 2017, where it emerged that freeholders were including unfair ground rent charges in the lease, causing ground rent to spiral so high that the leaseholders couldn’t afford to pay it but also struggled to sell their homes.
If you’re wanting to know more about the ground rent scandal and whether it will affect the saleability of your property, we have this article which will tell you everything you need to know.
What are the responsibilities of a leaseholder?
Just like the freeholder, leaseholders also have responsibilities when it comes to looking after the property. The responsibilities will be detailed in the lease and most of the time will consist of the maintaining and repairing of the inside of the home.
For example, the repairs the leaseholder will normally be responsible for are:
All internal decorations, including carpets and paintwork
Furniture and appliances
What do I do when freeholder not maintaining property?
When the freeholder is not maintaining the property correctly and not carrying out their freeholder responsibilities, the leaseholders have a few options – buy the freehold, acquire the right to manage or apply for a new manager.
The process of buying the freehold differs slightly if you’re in a flat compared to in a house, as in a flat you will need at least 50% of the building’s flats to take part in the buying.
When wanting to buy the freehold, there’s also certain criteria which the properties need to meet, which is:
Current lease must have at least 21 years left
Must not be a commercial lease
If in a flat - building must contain at least 2 flats
Building must not be a charitable housing trust, national trust or cathedral precinct
There are two routes that can be taken when buying the freehold, a formal and informal route. Following the formal route is more costly and means all parties must follow the strict instructions and timescales set out by law, but with the strict rules comes more protection for the leaseholders, in case they’re unable to agree on terms or price with the freeholder.
Through an informal route, there are fewer costs, and the leaseholders are able to go directly to the freeholder to ask if they want to sell the freehold. If the freeholder agrees, negotiations can begin between the two parties.
If negotiations fall through with the informal route, all parties who comply with the criteria could then take the process down the formal route.
If you were asking for our advice, we’d suggest going down the informal route first, making it more cost-effective. This way, if things do fall through, you can always then go down the formal route and have that extra protection.
Buying the freehold isn’t an easy process, though, and can be time-consuming and costly, whilst also relying on your neighbour’s co-operation. It also requires involving a solicitor to rewrite or rephrase the lease, adding another cost into the mix.
As we mentioned earlier, another option you can take if the freeholder isn’t carrying out their freeholder responsibilities is to acquire the right to manage from the existing freeholder. This will mean the leaseholders can manage the building themselves or pay a managing agent to do so.
The leaseholders won’t need to prove any fault on the part of the freeholder and if the procedure goes well, the leaseholders should be able to acquire the right to manage within three months.
Although on the face of it this procedure seems simple, the reality is the opposite. If there is even a small error, the claim will be invalidated and so the help of a professional will be needed, making it quite costly for the leaseholders.
The other option we mentioned earlier for when the freeholder isn’t carrying out their freeholder responsibilities is to apply for a new manager. This process is more complicated than trying to acquire the right to manage, as it will require you proving there’s been bad management, for example paying unreasonable service charges or that the freeholder hasn’t complied with the approved practice.
The bad news is all of these options are time-consuming and costly and are also not guaranteed to end in success. But the good news is we have another option which is FREE and FAST…
When the freeholder isn’t carrying out their freeholder responsibilities and you’ve had enough, it could be time to sell the property and move on.
‘But who’s going to want to buy a leasehold property with a freeholder who doesn’t do as they should?’ Good question…
Here at The Property Buying Company, we will buy your house for cash, covering all the costs associated with selling your house. Yes, the legal fees too! We forgot to mention, we won’t just buy your house, but we will buy it FAST meaning you can stop paying that high service charge and ground rent ASAP!
We have over 50 years combined experience and multiple good reviews on Trustpilot (be sure to check them out) meaning we’re a ‘sell house fast’ company that you can trust. We only require one quick viewing to make sure our valuation is correct, and our offer isn’t subject to survey – no sales falling through here!
Why not give us a call or fill in our online form today to receive a no-obligation cash offer to get you on your way to selling your leasehold property and getting rid of the freeholder who doesn’t carry out their freeholder responsibilities…