The leasehold and the PRS are viewed as separate sectors but they are actually interwoven on a number of levels. Whilst many flats are purchased with the aim of subletting, most leases require freeholder consent which, when granted, creates the leaseholder-landlord. The leaseholder landlord is not only bound by the covenants (promises) contained within their leases but also those of the tenancy agreement (which ideally will reflect the terms of the lease). If their properties are to be rented for 7 years or less then they are required by common law to ensure the safety of their property and its contents so that no injury or damage is caused to the occupants, neighbours or to the public.
This also applies to their letting agents if they use one.
Leaseholder-landlords have three management options they can choose from which are:
1: Lettings Only/Landlord Management
In this option the letting agent will carry out the following:
- The marketing of the property;
- Providing advice about what rent the landlord should ask for;
- The finding of a tenant and subsequent reference checks if required;
- Providing the tenancy agreement.
Once the tenancy agreement has been provided the landlord then takes on all the management of the property when the tenancy starts. The agent will usually charge a one-off fee for their work in getting to this point and payment will normally be based on the rent (usually one month). The agent is also likely to charge the tenant an administration fee (for the same reason). Both the landlord and agent must be in agreement about what the amount of the tenancy deposit should be and make sure that tenants receive protection for those deposits .The landlord will then have to give proof to the tenant that the money is in one of the three government-approved deposit protection schemes (2 insurance-based and 1 custodial-based).
2: Tenant Finder/Rent Collection
Self explanatory and again whilst the agent will usually charge a one-off fee they may also add a small monthly percentage for rent collection. The landlord will deal with repairs, and regaining possession at the end of the tenancy if the tenancy is not renewed.
3: Full Agent Management
This covers all aspects of management including repairs that can either be carried out without requiring the permission of the landlord or those which the landlord prefers to deal with. Rent collection, commencement of the tenancy and the first steps of bringing a tenancy to an end such as serving notice (but not proceeding to court action) are also provided.
This level of service will naturally be the more expensive option.
COMMON AREAS AND BUILDINGS INSURANCE
Managing and maintaining the physical health and safety of what are known as the ‘common areas’, i.e. all the areas not owned by individual leaseholders, is the overall responsibility of the freeholder, whatever form that freeholder takes. In turn these areas are governed by the Health and Safety Executive and the Courts because they view them in the same way as they do commercial properties. This means freeholders have to abide by a considerable amount of health and safety legislation in addition to all the repairs they carry out.
The common areas of our building are:
- The building structure;
- The roof;
- The land the building stands on;
- The foundations;
- Load-bearing walls;
- External electricity cupboards
- Garden shed
- Rear garden
Unlike more modern buildings, it doesn’t have interior common areas such as:
- Plant rooms;
- Lifts and lift motor rooms;
- Meter cupboards;
- Internal bin chutes.
The following broad guidelines on how to manage those areas and when, have been sourced from the Federation of Private Residents’ Associations (FPRA). Not all will apply, (depending on the type of the building) and it is the terms of the lease that should be the definitive guide.
- Asbestos Review Report
- Buildings Insurance (a condition of purchasing a flat)
- Emergency Lighting
- Garden Review
- H&S Audit/Update
- PAT Testing
- Porter/Staff Reviews
- Roof Inspection
- Tree Inspection
- Water Risk Assessment for the Legionella bacteria
- Window Cleaning
Every 6 Months
- Inspect/Clear Gutters
- Jet Wash Paths
Every 3 Years
Health & Safety – Major Review
Buildings Insurance – Alternative Quotations
Every 5 Years
- Communal Electrics – Full Inspection by a Part P registered electrician
- External Decorations
Every 7 Years
Common areas are insured on one block policy and effectively link freeholders with leaseholder-landlords. For example, when any internal leaks occur that cause water ingress into surrounding flats, the water has to get through the ceiling voids and structure, common areas which belong to the freeholder. Another example of how freeholders and leaseholder-landlords are linked is when a flat has issues with the exterior of the property such as rising and penetrating damp and a leaking roof for example, ad individual landlords must advise the freeholder for them to undertake the repairs as would owner-occupiers.
HOUSING HEALTH AND SAFETY RATING SYSTEM
When the individual landlord and freeholders don’t abide by the lease covenants and the tenancy agreement, redress is linked through the use of the Housing Act 2004, specifically that of the Housing Health and Safety Ratings System.
Although this legislation is primarily used for assessing the conditions of rented flats, it actually applies to all residential properties. We have used this legislation ourselves for both the common areas (when we had no freeholder) and for individual flats and with the latter, leaseholder landlords can be bound under it. So rentals must always be gas safe, smoke and carbon monoxide safe, and electrically safe, with a repairs procedure in place and access always arranged in advance (unless it is an emergency).
Landlords also have to check the immigration status of their tenants under ‘right to rent’ legislation and ensuring that the tenancy deposits they receive are protected.
Note: There are signs though that the deposit schemes may be changing such as deposit-free renting in the build-to-rent sector and apps offering tenancy insurance.