The majority of flats and some houses in England and Wales are leasehold. As a leaseholder you have bought the exclusive right to live in your property for a fixed number of years, which will reduce over time from the date the lease was originally granted. Flats and apartments can never be sold with an absolute freehold title as by nature they are built on top of each other and therefore occupy the same area of land.
The leasehold system in England dates back to William the Conqueror who claimed that all land was now under his ownership. Estates were granted to wealthy land-owning Lords through freehold agreements. Although the framework has evolved, the principle remains the same today – the owner of the freehold title of land has overall responsibility for it. If you own the freehold, it means that you own the building and the land it stands on outright, in perpetuity. It is your name in the land registry as “freeholder”, owning the “title absolute”.
A lease is a legal term to describe a particular type of property contract between you and your landlord and sets out the rights and duties of both parties. It will often cover things such as the length of the lease; payment of ground rent and service charge (and what this covers); insurance; restrictions and or carrying out improvements.
What are service charges?
Service charges are levied by property freeholders to recover the costs they incur in providing services to a building. Most leaseholders living in flats have to pay them because it is the only manageable way to share the costs of looking after the building.
The charge typically covers insurance of a building, cleaning and lighting the communal areas, general maintenance and repairs and tending to gardening in external areas. In some cases the charge will also cover the upkeep of an unadopted services such as drainage or an access road in estates. This money is held in trust in a bank account used for holding client money separately from the managing agent’s own money.
Dependent on your development setup you may have more than one service charge to contribute too – for example separate building and estate charges.
