A new lease of life: - CentreForum

A New Lease of Liferetirement apartments, have little choice but to opt for leasehold.As long as leasehold remains the main form of ownership for flats,millions of people will continue to use it. This provides reason tofocus on the protection of leaseholder interests and to consider theunderlying structure at the root of many problems.StructureTraditional leasehold contracts enforce positive covenants buteffectively exclude leaseholders from the process of propertymanagement. The freeholder is responsible for the maintenanceand insurance of a property as well as for collecting service chargesand enforcing the terms of the lease. 42 This occurs despite the factthat leaseholders have greater concern for a property’s long-termwelfare (they have far more equity in it) and also despite the factthat leaseholders living in the property have more concern for itsday-to-day management. 43 A standard leasehold contract compelsthe leaseholder to pay the freeholder an annual:1. Ground rent;2. Service charge – covering costs of managing commonparts, and a management fee;3. Reserve fund contribution – paid into a trust fund to coverlarge or irregular capital works.In theory, the landlord’s only lawful annual profit comes fromground rent and a management fee, as the service charges andsinking fund fees are designed solely to cover the costs of propertymanagement.RMCsResident Management Companies (RMCs) are usedto control management where leaseholders haveenfranchised or have a tripartite lease giving them controlof the management. These are distinct from the traditionalmanagement structure discussed, although they raise theirown questions around internal tenant democracy.42 A traditional arrangement is one simply between a freeholder and leaseholders.Alternatives with a different structure include: a headlease granted by thefreeholder (landlord just collects ground rent), or a tripartite contract betweenlandlord, lessee and a management company.43 The freehold of a property with a lease of 180 years is worth no more than a fewhundred pounds, whereas a leasehold is usually worth hundreds of thousands.25