We’re always happy to remind people about the importance of all parties having a clear understanding of exactly what a lease contains. Not only must property management agents become more aware of the need to have a comprehensive knowledge of contents of any new property leases which they take on, but Leaseholders too should be made more aware that they should familiarise themselves with the contents of a lease before signing. After all, a lack of knowledge often leads, in the long run, to legal action being taken.
With a view to preventing issues arising regarding the terms of a lease, here are some important points to be aware of, whether you’re a property management professional or a leaseholder.
Important Factors For Professionals In The Property Management Sector To Bear In Mind
All professionals working within the property management sector are aware of the importance of ensuring maximum cash flow to their properties so that services can be provided seamlessly. Cashflow comes by way of Service Charge collection – this needs to be in the most efficient manner possible. However, this often cannot happen unless the answer to certain questions are found in the lease (and understood).
- When must demands be sent out?
- How much can be charged?
- Is there any inbuilt flexibility in the lease?
- Have sinking funds and reserve funds been written into the lease?
- Are charges variable?
- Who must pay the insurance?
- In which name must that insurance be obtained?
Answering these key questions is key to avoiding future lease disputes and possible First-tier Tribunals.
Important Factors For Leaseholders To Bear In Mind
Leaseholders are, of course, keen to live in a well-maintained property, however that doesn’t mean that they should overlook the importance of checking the terms of their lease. Two key questions which all leaseholders should ask are:
- What are the additional costs, and how are they calculated?
- When must I make payment?
It is absolutely imperative that all additional charges which are contained in the terms of the lease are fully explained during the early conveyancing stage. Failure to obtain an answer to the above questions could mean that people end up choosing a property which they cannot afford in the long run, and thus fall into arrears with service charges or payments for ground rent. Unfortunately, if this happens, there can be very severe consequences.
Of course, there are currently government consultations taking place to try and safeguard this process for leaseholders further. More on that in future issues.
Paying Attention To Community Rules
Although the financial terms of the lease are perhaps deemed the most important, other terms must also be borne in mind. Community rules, for example, are one area which may be overlooked by both property managers and leaseholders alike.
Property managers must familiarise themselves with all of the community regulations relating to the properties that they work with. They must be able to respond to leaseholders’ questions and be aware of all requirements and restrictions mentioned in the lease so that any breaches can be spotted. For example, property managers must be aware of the rules regarding satellite dishes, washing lines and the handling of refuse.
Leaseholders, sometimes fail to pay close attention to their own obligations when it comes to their property. One area which is often overlooked is that of pet ownership, for example. Some leaseholders assume that, while a cat or dog may be unacceptable, a smaller pet such as a goldfish or hamster will be permitted. However, strictly speaking this may not be the case at all.
There may also be restrictions regarding the playing of music, walking on wood floors after a certain time, or specified quiet hours which must be adhered to under the terms of the lease. Leaseholders must make themselves aware of these conditions, or they could find themselves in breach and, in the extreme case, at risk of eviction.
Maintenance Lease Issues
When it comes to maintenance of a property, again both property managers and leaseholders have their own obligations which will be outlined in the terms of the lease.
Property managers will need to be familiar with all of their own requirements when it comes to handling the upkeep of the property. Although handling regular wear and tear is standard practice, if there are regular major upkeep works to be carried out under the lease condition, extra planning will be required. Property managers must also ensure that appropriate suppliers have been arranged to cover any specialist or complex maintenance tasks.
Meanwhile, leaseholders must familiarise themselves with the rules regarding the upkeep of their own property. A surprising number of leaseholders redecorate their property without checking whether they are permitted to do so. Others fail to repaint their walls, even though their lease requires them to do so regularly.
The Value Of The Lease
For any property manager, knowing the value of a lease is vital to ensure that all steps are taken to protect or enhance that asset. The date and term of the lease must be known to property managers as well as the length of time remaining on it.
Leaseholders too must be aware of the length of time remaining on their lease since taking action at an early stage could avoid hefty premiums. It is also important for leaseholders to be aware of whether subletting is permitted under the terms of their lease.
While leases may seem complex and hard for the average layperson to understand, taking the time to go through the terms and conditions is imperative for all parties to avoid disputes arising and potentially serious financial consequences being the result.