Clarkson Wright and Jakes Ltd Banner Image

Insights

Frustrated with your landlord?

A GUIDE FOR RESIDENTIAL TENANTS OF FLATS ON THEIR RIGHTS AND OPTIONS

It is a frequent complaint for residential tenants that they are not happy with the way that the premises are managed.  There could be several options available.  Here is an overview of some common issues and possible solutions:

1. I am not happy with the level of service charges.


Option 1: Challenge the service charge on the basis of reasonableness

Often service charges are variable; it is written into the lease that the tenant must pay a proportion of the total service charge costs for the estate, which could go up or down. 

The landlord can only recover service charge costs which are reasonable.  Tenants have a right to ask for a summary of service charge accounts under section 21 of the Landlord and Tenant Act 1985.  On reviewing the summary, if a tenant has doubts about the reasonableness of a service charge, it is possible to make an application to the Leasehold Valuation Tribunal for determination as to whether the service charge is reasonable. 

Budget: The Leasehold Valuation Tribunal charges a fee for applications concerning service charge disputes, on a scale depending on the amount in dispute.  The fee is between £50 and £350.  It is possible to make an application without professional representation. 

Option 2: Apply for the appointment of a third party manager

Under section 24 of the Landlord and Tenant Act 1987, the tenants may make an application to the Leasehold Valuation Tribunal to appoint a manager. 

Broadly speaking, the tenants will be eligible to make an application where:

  • The landlord is in breach of some obligation which is owed under the terms of the lease; 

    and

  • The building contains two or more flats.

Before making the application, the tenants must serve a notice on the landlord requiring him to remedy the breach within a certain period of time.  Only once that period has expired can the application be made.  The Leasehold Valuation Tribunal will make an order appointing a manager where it is satisfied in the circumstances that it is just and reasonable to do so

Budget: The Leasehold Valuation Tribunal charges a fee for making an application, which is dependent on the circumstances.  The fee is capped at a maximum of £500. 

2. My fellow tenants and I want to take over the management of the premises.


Option 1: Collective enfranchisement. 

This is where the tenants come together collectively to purchase the freehold.  It can be a useful tool in allowing the tenants to acquire the freehold as a valuable asset.  It also allows the tenants to take control of the management of the premises, which can be attractive where the tenants are frustrated with the current management. 

Broadly speaking, you will meet the criteria if:

  • There are at least two flats in the building; and

  • No more than 25% of the floor area in the building is used for non-residential purposes; and

  • At least two thirds of the flats in the building are let to qualifying tenants (i.e. tenants on long leases of 21 years or more). 

  • It is the qualifying tenants who can band together to make a claim to purchase the freehold.  At least half of the qualifying tenants have to participate in the enfranchisement, or both qualifying tenants where there are only two.

Having taken over the freehold of the property, it is then possible for the tenants to grant themselves lease extensions at peppercorn rent for no premium, therefore not only do they acquire the freehold asset, but also increase the value of their lease, which can be useful if the tenant wants to sell or re-mortgage. 

Budget: The first step is to ensure the tenants are able to afford the premium.  The tenants will need to obtain a surveyor’s report to assess the value and should engage a solicitor to assist with the statutory notice procedure.  As well as the tenants’ own legal and surveyor’s fees, the participating tenants will be liable for the reasonable legal and surveyor’s fees of the landlord. 

Option 2: Right to Manage

This could be an alternative to collective enfranchisement, particularly where the funds are not available to pay the premium for the freehold.  Under right to manage, the freehold will remain with the landlord and the tenants simply take over the management.  There is no requirement so show that the landlord has been negligent or has mismanaged in any way. 

Broadly speaking, the right to manage will be available where:

  • There are at least two flats in the building.

  • No more than 25% of the building is used for non-residential purposes. 

  • At least two thirds of those flats are let to qualifying tenants (i.e. tenants who are on long residential leases of 21 years or more).

  • At least half of the qualifying tenants are participating in the right to manage, or both qualifying tenants where there are only two. 

As part of the procedure, a notice must be sent to all of the qualifying tenants to ask if they want to participate.  Having obtained all the participants, a special right to manage company must be set up and one share is allocated per flat.

Having set up the company, a notice must be sent to the landlord stating that the company intends to take over management of the block on a certain specified date.

Budget: There is no premium to pay, which means that there are also no surveyors’ fees.  The participating tenants will be responsible for paying the landlord's reasonable legal fees as well as their own legal fees.

3. My landlord is absent and cannot be located.


Option 1: Collective enfranchisement

Under the collective enfranchisement legislation, the county court may make a vesting order allowing the freehold of the property to be vested in the tenants if the court is satisfied that the landlord cannot be found.  The county court will only be satisfied if reasonable steps have been taken to locate the landlord, such as placing advertisements and hiring tracing agents. 

Option 2: Right to manage

Likewise, an absent landlord does not prevent the tenants from applying to the Leasehold Valuation Tribunal for the right to manage, but efforts should be made to locate the landlord beforehand. 

If you have a query regarding any of the issues in this article, please contact Laura Thompson or Rebecca Pyne in the Property department on 01689 887887 or email laura.thompson@cwj.co.uk or rebecca.pyne@cwj.co.uk

Laura and Rebecca epresent both landlords and tenants in relation to collective enfranchisements, lease extensions, rights to manage, rights of first refusal and both commercial and residential sales and purchases.