Ground rent and service charge.

mizzbonita

Sorry if this seems like a silly question but my partner bought my flat from me recently and a property developer has bought the flat upstairs and the freehold. There are two flats in total in the building. 

I extended the lease about 7 years ago and the ground rent was peppercorned. There is no service charge. 

Can the new freeholder decided to charge service charge and ground rent? Does my partner have a right to a share of the freehold? 

anselld

The freehold has been purchased already so there is no right to buy a share.

The Ground rent and Service Charge provisions are outlined in the Lease.  

If the rent has been peppercorned at renewal then that cannot be changed.  There will be provissions in the Lease as to what contributions need to be made for maintenance etc and these will amount to a service charge.  The developer cannot charge for items beyond what is already specified in the Lease.

eddddy

mizzbonita said:

Can the new freeholder decided to charge service charge...

Service Charges work like this...

It's very likely that your partner's lease is structured as follows (because most leases are)...

• The freeholder must insure the building, and also maintain and repair the building (and maybe the garden)

• The freeholder has to pay all those bills, and your partner has to pay the freeholder 50% of those bills (and the other flat owner has to pay the other 50%)

• That 50% that your partner has to pay is called their Service Charge 

The freeholder can (probably) collect the Service Charge in 2 ways...

• 1) Each time there is a bill (e.g. for buildings insurance, or for repairing the guttering, etc), the Freeholder can ask your partner to pay 50% of the bill

• 2) The freeholder can estimate all the costs for the whole year (insurance, gutter repairs, etc), and ask your partner to pay 50% of that estimated amount at the beginning of the year. Then it will be adjusted at the end of the year - if the actual bills turn out to be higher or lower than the estimate

I'm guessing that the old freeholder did option 1. The new freeholder might stick with option 1, or might switch to option 2.

mizzbonita said:

... and ground rent?

The new freeholder cannot change the ground rent.

mizzbonita said:

Does my partner have a right to a share of the freehold? 

That depends on a number of factors - but I'm guessing probably not.


When the freehold of a building containing 2 or more flats is sold - the leaseholders (flat owners) usually get the right of first refusal to buy the freehold.

But the Right of First Refusal doesn't apply to...

...resident landlords who live in the building where the following two conditions apply:

• the building is not a purpose-built block of flats, that is, it must be a property, a house for example, which has been converted into flats since its original construction; and
• the landlord genuinely lives in the building as his only or principal residence and has done so for more than 12 months.

Link: https://www.lease-advice.org/advice-guide/right-first-refusal/

So I suspect you had a resident landlord.

But even if the Right of First Refusal did apply, both leaseholders (flat owners) would need to cooperate to jointly buy the freehold. And in this case, I imagine the owner of the other flat wouldn't cooperate.