Flat Ownership with Shared Ownership in the Building
In the realm of property ownership, flats, maisonettes, and apartments are commonly sold as leasehold titles. It is however important to note that the building itself, referred to as the freehold, has a separate title and ownership from the individual flats within it. This arrangement establishes a unique relationship between flat owners, who become both “landlords” and “tenants” due to their interest in the building.
The reason for the interconnected relationship lies in the shared nature of accessways and services such as gas, water supplies, and drainage within the building. As a result, all flat owners are obligated to contribute to a service charges and/or ground rents. These payments are designed to cover shared maintenance, as well as the costs associated with facilities, insurance and services provided to the residents.
Whether you are a member/director of a Residents’ Management Company or have a direct share of ownership of the building, in order to effectively manage the building, it will be necessary to ensure that there are adequate arrangements for the collection of service charges, payment of insurance and other payments whilst also overseeing the shared facilities.
Statutory Compliance Reports
It will also be imperative that Residents understand and ensure compliance with all their legal obligations in managing the shared building. Landlords must ensure that Fire Risk Assessments (“FRA”) and Asbestos Reports are up to date, as failure to do so may lead to criminal or/or civil sanctions and can delay any sale or remortgage of the flats in the building. The Fire Service recommend a full FRA report every 4 years and an interim review every 2 years or upon significant changes in regulations.
For example, the Fire Safety (England) Regulations 2022 imposed new requirements on the fire standards of flat owners. Landlords will need to ensure that the flat owners have upgraded or replaced their flat doors in compliance.
Sinking/Reserve Funds
If this is not already in place, in order to avoid large service charge payment requests, flat owners should consider putting in place a sinking/reserve fund into which each owner will be expected to contribute a regular set amount.
Contributions to such a fund are collected on a regular basis towards any ad hoc expenses. Collecting a contribution in this manner will mean that the potential large costs can be spread out over time rather than making a large cash call on flat owners. For example roof repairs, external decoration requiring scaffolding can result in large financial contributions.
Understanding the structure of flat ownership and building ownership together with the crucial role of the building management is essential for the flat owners. The interplay between ownership and shared responsibilities necessitates careful management to maintain not only a harmonious living environment, but by acknowledging the interconnected relationship and adhering to legal obligations, flat owners can ensure the proper functioning of the management and value of their properties
Freehold House Owners and Estate Resident Led Management Company,
House owners are not immune from the requirements of resident led management companies. Increasingly, modern houses are being built on Estates which have common shared estate areas, which will require future management.
This also creates a unique relationship between the house home owners on the estate and a Resident led Management company, due to their common interest in the shared estate areas.
As a result, all home owners are obligated to contribute to a service charges and/or estate charge. These payments are meant to cover maintenance of shared areas and services.
If you are a member/director of a Residents’ Management Company, it will also be necessary for you to ensure that there are adequate arrangements for the collection of service charges, and other payments whilst also overseeing the shared areas. Many Estate Resident Management Companies may have a Management Company instructed to deal with the management of the estate on the residents behalf.
It is essential to emphasise that property owners should never decide to dissolve the resident led management company. Dissolution can have serious repercussions, including difficulties in selling the property, potential revocation of planning consent, and rendering the property uninhabitable and unmarketable.
Dissolving the management company can leave property owners with a mortgage to pay for a property with no value, especially if the management company are responsible for maintaining the estate roads, or alternative sustainable drainage solutions which may have formed part of the initial planning consent or section 106 agreements.
If you are considering selling a property which involves a Management Company or you own a share in the building of flats, it is important to seek specialist advice from legal professionals early on to help you navigate the statutory compliance reports in order to avoid any delays in your sale..
Please do not hesitate to call the team on 01752 246000 (Plymouth) or 01548 857000 (Kingsbridge)