If you own a leasehold property in England and Wales, you’re usually required to pay Ground Rent and a Service Charge to cover maintenance and upkeep costs to the freeholder, sometimes via a block management company. In this article we will explain what these costs are and why you’re required to pay them.
What is Ground Rent?
Ground rent is the money that leaseholders pay to the freeholder to occupy the land that their property is built upon. This may be paid directly to the freeholder, or via a block management company like Valor Properties.
If you’re unsure whether or not you’re required to pay ground rent, check your lease. You only need to pay ground rent if it is set out in your lease and previously agreed to. However, the freeholder has the right to ask for any unpaid ground rent as far back as six years.
If you’re considering purchasing a leasehold property, make sure to check out ground rent terms before proceeding.
What is a Service Charge?
Service charges cover costs associated with building maintenance and the upkeep of communal areas, including cleaning, maintenance, and repairs.
Landlords, or freeholders, generally do not pay the service charge. It is the responsibility of the leaseholder to pay. However, if you sublet your property these charges can be passed on to tenants through rent.
It is important to note that service charges are not capped and can be changed at any time by the freeholder without repercussions. Although, service charges must be reasonable and the freeholder must inform you if scheduled work is valued above a certain threshold.
You might find, however, that such communication is carried out via a block management company acting on behalf of the freeholder. If you have any questions, queries, or disagreements, the block management company can assist in communicating these with the freeholder and may help to resolve any disputes.
What Do Service Charges Cover?
Service charges cover a variety of services that contribute to the maintenance and upkeep of communal areas such as hallways, stairwells, courtyards, and gardens. Such services include:
- Cleaning of communal areas
- Communal heating
- Building staff wages (where applicable)
- Block management company fees
- Building insurance
- Communal garden services
- General maintenance
I have Tenants Living in My Property – Who’s Responsible for Ground Rent and Service Charges?
If you sublet your leasehold property to tenants, you are still responsible for ground rent and service charges, although these costs can be passed on to your tenants through their rent. It is your responsibility as the leaseholder to ensure that payments are made regardless of who lives in the property, as the freeholder can take court action for missed payments.
What Happens if I Don’t Pay My Ground Rent or Service Charge?
It is your responsibility to ensure that ground rent and service charges are paid each month (or as your contract dictates), as frequent missed payments may result in the freeholder taking court action where you could lose your home.
To avoid this, if you have fallen into arrears or can’t afford the charges, contact the freeholder or your block management company to discuss repayment options. Taking responsibility for missed payments, and following through with the agreed course of action, may help you to keep your home.
However, the freeholder can only take court action if:
- You owe 3 or more years of ground rent
- Your total arrears in ground rent, service charges, and administrative costs are more than £350.
Block Management Services In Leeds and West Yorkshire
A block management company benefits the freeholder, leaseholder, and any sublet tenants as they can help everyone to keep on top of ground rent and service charges, and enforce them as dictated by your contract. Block management companies will also assist with communication between all parties and can help to resolve disputes before they get to the courts.
Valor Properties offers residential and commercial block property management in Leeds and across West Yorkshire. We have a wealth of experience in property management, leasehold accounting, and health and safety compliance, ensuring a block management service second to none.
If your current development is in need of a new block management company, get in touch with us today to learn more about our block property management service in Leeds.