A Guide To Leaseholder Rights and Obligations

Leaseholders have a number of specific rights and obligations that govern how they can enjoy and maintain their leasehold property. In this article, we’ll explore some of the key leaseholder rights and responsibilities, so you know what to expect from your leasehold.

What are Leaseholder Rights and Obligations?

Leaseholder rights and obligations refer to the legal entitlements and responsibilities of an individual or entity that holds a lease to occupy or use a property owned by someone else (the freeholder or landlord) for a specified period. Both are governed by the lease agreement itself, local property laws, and government regulations specific to leasehold property ownership.

Leaseholder rights are the legal entitlements granted to a leaseholder by the lease agreement and relevant laws. Leaseholder obligations, on the other hand, are the duties or responsibilities that the leaseholder agrees to fulfil under the lease agreement. 

7 Key Leaseholder Rights To Understand

Right to Quiet Enjoyment

The Right to Quiet Enjoyment or the “Covenant of Quiet Enjoyment” means you have the right to live in your home without being disturbed by the landlord or people they send round to your home. You have this right even if you do not have a written agreement, or if your fixed term assured shorthold tenancy ends.

Your landlord might be breaking your right to quiet enjoyment if they abuse or threaten you, come into your home without permission or visit a lot without notice, appointment or agreement, refuse to carry out repairs or safety checks, or interfere with the gas, electricity or water supply.

Right to Extend a Lease

Leaseholders have the right to extend the lease of a flat (under the Leasehold Reform Housing and Urban Development Act 1993) once they have owned it for two years if they qualify. The right is to add 90 years to what is left on the existing lease. For example, if the present lease had 70 years left to run, the new extended lease would be for 160 years.

Freeholders are also required to extend the lease at a “peppercorn” rent, a nominal amount meaning that no ground rent is to be paid. Eligibility requirements for lease extensions include the lease originally being at least 21 years when granted.

Right To Manage the Building

The Right To Manage is a legal option for leaseholders (flat owners) to take control over the way their building is looked after and to decide how their money is spent. It was first introduced through the Commonhold and Leasehold Reform Act in 2002, and can be enacted without the landlord’s consent as long as leaseholders are eligible, and sufficient leaseholders participate.

Right to Purchase the Freehold (Collective Enfranchisement)

Under the Leasehold Reform Housing and Urban Development Act 1993, leaseholders have the right to collectively purchase the freehold of their building, a process known as collective enfranchisement. To qualify, certain conditions must be met, including a minimum number of participating leaseholders.

This process allows leaseholders greater control over their property’s management and enhances the value of the property.

Right to Challenge Service Charges

Leaseholders can challenge service charges they believe are unreasonable. If a charge doesn’t comply with legal standards, you can apply to the First-tier Tribunal (Property Chamber) in England or the Leasehold Valuation Tribunal in Wales to determine its reasonableness. This ensures transparency and fairness in the costs you’re required to pay.

Right to Be Consulted on Major Works

Landlords must consult leaseholders before undertaking significant works or entering into long-term agreements that will result in service charges above a certain threshold. This process, outlined in Section 20 of the Landlord and Tenant Act 1985, ensures that leaseholders have a say in substantial expenditures and can challenge unnecessary or overly expensive projects.

If the landlord fails to notify leaseholders or consult them properly under Section 20 of the Landlord and Tenant Act 1985, leaseholders may not be legally obligated to pay the full cost of the works or long-term agreements. The consultation process involves specific regulations to ensure fairness and transparency.

For more information on Section 20 of the act, visit the Leasehold Advisory Service.

Right to a Fair Lease Agreement

Leaseholders have the right to a fair and transparent lease agreement under UK law. This means the terms of the lease must not be unfair or misleading, and any clauses that disproportionately favour the landlord can be challenged under the Consumer Rights Act 2015.

Additionally, leaseholders have the right to request a variation of the lease if its terms are causing significant hardship or are outdated.

5 Key Leaseholder Obligations To Understand

1. Paying Ground Rent: Ground rent is a periodic payment made by leaseholders to the freeholder for the land on which the property is situated. It typically applies to long leases and is governed by various pieces of legislation, including the Ground Rent Act 2022. The amount of ground rent is stated in the lease agreement and may increase periodically.
2. Maintaining the Property But Not Communal Building Areas: Leaseholders are usually responsible for maintaining the interior of their property, including fixtures, fittings, and internal repairs. This obligation is typically outlined in a “covenant to repair” or a similar clause in the lease.
3. Contributing to Service Charges: Leaseholders are obligated to contribute to service charges, which cover the upkeep of communal areas, building insurance, and major works.
4. Compliance with Lease Terms: The lease sets out specific obligations and restrictions for leaseholders, which may include subletting restrictions (e.g., requiring permission from the freeholder), prohibitions against causing nuisance or noise disturbances, and restrictions on making structural alterations without consent. 
5. Allowing Freeholder Access: Leaseholders are legally obligated to grant the freeholder access for necessary inspections, repairs, or maintenance of the property. The lease typically outlines the conditions under which access must be granted. By law, freeholders must provide reasonable notice before accessing the property, usually 24-48 hours, unless it’s an emergency.

How to Resolve Leaseholder and Freeholder Disputes

Mediation and Alternative Dispute Resolution (ADR)

When disputes arise between leaseholders and freeholders, mediation or Alternative Dispute Resolution (ADR) can be an effective route to explore. These methods allow both parties to engage in constructive discussions facilitated by a neutral third party, often leading to amicable resolutions without the need for litigation.

Benefits of mediation without legal action include:

• Cost-effective: Mediation and ADR typically cost significantly less than court proceedings, saving both parties substantial legal fees.
• Time-efficient: Disputes can be resolved faster compared to the lengthy process of court cases.
• Preserves relationships: A less adversarial approach can help maintain a more amicable relationship between the leaseholder and freeholder, which is crucial when ongoing interactions are necessary.

Taking Legal Action

If mediation or ADR proves unsuccessful, taking legal action may become necessary to resolve the dispute. Leaseholders and freeholders can seek independent advice and escalate their issues to tribunals or courts, depending on the nature of the conflict. Legal proceedings could include:

• First-tier Tribunal (Property Chamber): This is the primary body for resolving leasehold disputes in England and Wales. It handles a variety of issues, including service charge disputes, breaches of lease agreements, and enfranchisement claims.
• County Courts: More complex cases, such as claims for damages or injunctions, may be heard here.

Purchase the Freehold

One of the most effective ways to eliminate disputes with an external freeholder is for leaseholders to collectively purchase the freehold of their building. This option, available under the Leasehold Reform, Housing and Urban Development Act 1993, grants leaseholders full control over the property and removes the need to negotiate with a third-party freeholder.

To exercise this right, leaseholders must meet specific criteria. For example, at least 50% of the leaseholders in the building must agree to participate in the purchase, the building must consist of at least two flats, and no more than 25% of the building’s internal area should be used for non-residential purposes (e.g., shops or offices).

Participating leaseholders must also hold long leases, typically exceeding 21 years when initially granted.

Benefits of purchasing your freehold include:

• Control over both the property itself and building management: Shared freeholders can self-manage or appoint a managing agent of their choice, ensuring transparency and efficiency, and also gain full control of their building in the process.
• Avoidance of disputes: Ownership eliminates many common sources of conflict with external freeholders, such as service charge disagreements or consent for alterations.
• Increased property value: Flats with shared freehold often command higher market values, making it a sound financial investment.

Closing Thoughts

Understanding your rights and obligations as a leaseholder is crucial to ensuring a harmonious and legally compliant relationship with your landlord. While leaseholder rights protect your ability to enjoy and use your property, your obligations ensure its upkeep and adherence to the terms of your lease.

If disputes or limitations arise, purchasing your freehold can be a transformative solution. By becoming the freeholder, you gain greater control, eliminate ground rent, and secure long-term peace of mind.

Ready to take the next step? Learn more about buying your freehold or contact us for expert advice. Empower yourself and your property today.