Leasehold and block management questions, answered

A managing agent is a firm appointed to run the communal parts of a building or estate on behalf of whoever is responsible for them. That is usually a freeholder, a residents' management company or a right to manage company.

The agent does not own the building. It acts on instructions, and only within the limits the lease allows.

In practice the work falls into four parts.

Money. Setting the service charge budget, issuing demands, chasing arrears, paying contractors, and getting the year-end accounts prepared.

Buildings. Arranging reactive repairs and planned maintenance, inspecting the site, and running major works projects from specification through to completion.

Compliance. Making sure risk assessments are in date, and that the actions coming out of them actually get done. Fire safety, asbestos, legionella and water hygiene, lifts, electrical installations and communal gas, depending on what the building has.

People. Answering residents, serving notices correctly, supporting the directors of an RMC or RTM company, and keeping everyone informed.

A good agent also does the unglamorous part well: reading the lease before spending money, and writing to people before they have to chase.

Four roles come up again and again, and they are easy to mix up.

The freeholder owns the building and the land it stands on. In a block of flats the freeholder grants long leases of the individual flats and retains the structure, the roof and the common parts.

The leaseholder owns a flat for the term of the lease, typically measured in decades or centuries. You own the inside of the flat as your lease defines it, and you pay a share of the cost of running the whole building.

A residents' management company, or RMC, is a company named in the lease that carries the management and repairing obligations. Its members or shareholders are usually the leaseholders, and its directors are usually volunteers from the building, giving up evenings to read quotes.

The managing agent is the firm appointed and paid to do the day-to-day work. The agent is not the landlord. It is accountable to whoever appointed it, and ultimately to the lease.

If you are not sure which applies to your building, the first few pages of your lease and the title register at HM Land Registry will usually tell you.

Both are companies controlled by leaseholders. They arrive by different routes.

An RMC, a residents' management company, is built into the arrangement from the start. The developer normally sets it up when the block is built, and each leaseholder becomes a member when they buy. The lease gives the RMC the repairing and management obligations directly, so the RMC carries them whether or not it employs an agent. Its directors are leaseholders, and they hold real legal responsibility.

An RTM company, a right to manage company, is set up afterwards by leaseholders who want to take management away from the landlord. The Right to Manage was created by the Commonhold and Leasehold Reform Act 2002, and it is a no-fault right: you do not have to prove the landlord has done anything wrong.

There are qualifying conditions, covering the building itself, the proportion of it that is non-residential, and how many leaseholders join the company. There is also a formal notice procedure. Get that procedure wrong and a claim can fail on a technicality, so most groups take advice before serving anything.

An RTM company takes over management functions. It does not buy the freehold, and the landlord remains the landlord, which is why ground rent usually still goes to them.

It is your share of the cost of running everything you do not own outright. The lease sets out what can be charged and how the total is split between flats, often by floor area, by a fixed percentage, or in equal shares.

For most blocks the budget covers:

• buildings insurance for the structure and common parts
• repairs and maintenance to the roof, structure, and common parts, and to windows where the lease says so
• communal electricity, lighting, door entry, aerials and lifts
• cleaning, including communal window cleaning
• grounds maintenance and gardening
• fire safety: alarm and emergency lighting testing, extinguisher servicing, and the fire risk assessment
• water hygiene and legionella control
• lift servicing and statutory engineering inspections, where there is a lift
• accountancy for the year-end service charge accounts
• the managing agent's fee
• a contribution to the reserve fund, where the lease allows one

Two things it does not cover. It does not cover the inside of your flat, which is yours under the lease. And it does not cover your own contents or anything you have installed yourself.

Whatever is charged has to be reasonably incurred, and the work has to be of a reasonable standard. That is a statutory test, and it applies however the budget was put together.

Service charges move for ordinary reasons, and a well-run building should be able to explain each one in a sentence.

Insurance. Premiums for blocks of flats have risen sharply across the market in recent years, and any claim on the block policy feeds into the next renewal.

Contractor costs. Labour, materials and energy prices go straight into cleaning, grounds maintenance, lift servicing and communal electricity.

Compliance. A new fire risk assessment, or a change in regulation, can create work that simply was not in last year's budget.

Catching up. If a building has been under-budgeted for years, the first honest budget looks like a big increase. Usually it is not an increase at all. It is the real cost finally arriving.

Reserves. A building saving properly for its roof costs a little more every year and far less in the year the roof is replaced.

One-offs. A major repair, a legal cost, or bad debt that the rest of the block has to carry while arrears are pursued.

If your charge has risen and nobody has explained why, ask. You are entitled to understand the figures behind the budget, and leaseholders have a statutory right to request a summary of the costs behind the accounts and then to inspect the invoices supporting it.

A reserve fund, sometimes called a sinking fund, is money collected a little at a time so the building can pay for big, occasional jobs without a sudden bill landing on the doormat.

Think about what every block eventually needs. A new roof covering. External redecoration every few years. A lift replacement. Windows. A communal boiler or heating plant. Resurfacing to car parks and footpaths. These are predictable in kind, even when the timing is not.

Two things make reserves matter.

The first is fairness. Without a reserve fund, whoever happens to own the flat in the year of the works pays for twenty years of other people's wear. With one, each owner contributes for the years they were actually there, and sellers are not handing over a problem.

The second is that it simply works. A planned contribution of a few hundred pounds a year is manageable for most households. A demand for several thousand with eight weeks' notice is not, and that is exactly where arrears, disputes and stalled projects come from.

Your lease decides whether a reserve fund is permitted and what it may be spent on. Where one exists, the money is held on trust for the leaseholders. It is not the landlord's money and it is not the agent's money.

If your building has no reserve fund and the lease allows one, it is worth putting on the agenda.

Different payments, different reasons, often demanded at different times of year, which is why they get confused.

Ground rent is paid to the freeholder under the lease simply for holding the lease. You get nothing specific in return for it. It is usually a fixed sum, sometimes with a review built into the lease. The Leasehold Reform (Ground Rent) Act 2022 restricted ground rent on most new residential long leases in England and Wales to a peppercorn, which in practice means nothing is collected. Leases granted before that generally keep whatever ground rent they already had.

Service charge is your share of actual costs spent on the building. It is variable, it has to be reasonable, and it has to be accounted for at year end.

A ground rent demand has to be served in a prescribed form before it becomes payable, which is why one occasionally arrives looking unexpectedly formal and legalistic. That is not a sign of trouble. It is the statute.

If an RTM company manages your building, you will usually still pay ground rent to the freeholder, because management and ownership have separated.

The budget issued at the start of the year is an estimate. The accounts produced at the end of it show what was really spent.

After the year end, the figures are prepared and passed to an independent accountant to examine or audit, depending on what your lease requires. You should then receive a statement setting out the budget, the actual spend by cost heading, and your share.

If the building spent less than it collected there is a surplus. If it spent more there is a deficit. What happens next is a matter for the lease. Some leases carry the balance forward into the following year, some require it to be credited or demanded, and some leave it to the management company's discretion.

Two timing points are worth knowing.

Many leases set a deadline for producing accounts, commonly within six months of the year end. Check yours.

Separately, there is a statutory limit on how long a cost can sit before it is passed on. Broadly, costs must be demanded within eighteen months of being incurred, unless leaseholders were told in writing within that period that the costs had been incurred and would be charged. It is one of the reasons a good agent keeps on top of invoicing rather than letting it drift.

If the statement does not give you enough detail, leaseholders have a statutory right to request a written summary of relevant costs and then to inspect the invoices and receipts behind it.

These come up on estates rather than inside a block, and they affect houses as well as flats.

An estate charge is a contribution towards shared estate facilities. Public open space, play areas, woodland and planting, private roads and footpaths, street lighting, drainage and sustainable drainage systems, and sometimes the management of a biodiversity scheme attached to the planning permission. On a modern development these areas are often never adopted by the local authority, so the residents fund them instead.

A rentcharge is one of the legal mechanisms used to make an estate charge binding on a freehold house. The obligation sits in the transfer deed rather than in a lease, and it runs with the property when it is sold, which catches some buyers by surprise.

The practical difference from a leasehold service charge is in the protections. Some of the statutory machinery written for leasehold service charges does not apply in the same way to freehold estate charges, and this is an area the law has been reforming. Your transfer deed is the starting point for what can be charged and how it is challenged.

Estate management is one of our two service lines, alongside block management, and the landscape and biodiversity side of it is work we know well.

Section 20 of the Landlord and Tenant Act 1985 requires leaseholders to be consulted before certain spending goes ahead. It bites in two situations.

Qualifying works. One-off works where the amount any single leaseholder would have to contribute rises above a threshold set in regulations. External redecoration, roof replacement, window renewal, lift refurbishment.

Qualifying long-term agreements. Contracts running for more than twelve months where any one leaseholder's annual contribution rises above a threshold. A multi-year lift maintenance contract, or a long cleaning or grounds contract.

The thresholds are set by regulation rather than by your lease, and they can be changed, so rather than quote a figure that may have moved, ask your agent to confirm the current one before a project is costed.

The consequence of not consulting properly is serious. The amount recoverable from each leaseholder is capped at the threshold, however much the work actually cost. The only way out is an application to the First-tier Tribunal (Property Chamber) for dispensation, which is granted on the tribunal's terms and is never a formality.

One thing consultation is not: a vote. Leaseholders are entitled to be told, to nominate a contractor, and to make observations that must genuinely be taken into account. The decision still rests with whoever carries the repairing obligation.

The regulations set out the stages. The shape of it is this.

1. Notice of Intention. Written notice to every leaseholder, and to any recognised tenants' association, describing the works or the proposed agreement and explaining why they are needed. Leaseholders then have a consultation period, at least thirty days, to make written observations and to nominate a contractor they would like asked to tender.

2. Tendering. Estimates are obtained, including from any contractor properly nominated by a leaseholder, where it is reasonably practicable to do so.

3. Statement of estimates. A second notice sets out the estimates. There must be at least two, and at least one must come from a contractor wholly unconnected to the landlord. The estimates must be available for inspection, and leaseholders get a further period, again at least thirty days, to comment.

4. Notice of reasons. Unless the lowest estimate is chosen, or the chosen contractor was nominated by a leaseholder, a further notice explains why that contractor was selected.

Observations have to be considered at each stage, not filed.

Emergencies are the practical difficulty, because the process takes months. If something must be done immediately for safety, the usual course is to make it safe and then apply to the tribunal for dispensation, rather than assume it will be overlooked.

The projects that go well, in our experience, are the ones where consultation starts earlier than the law requires. A residents' meeting, a walk round the scaffolding plan, and a clear explanation of the scope before the first formal notice lands.

Start by working out whose repair it is. Anything inside your flat that the lease makes your responsibility is yours to arrange. Anything structural, communal, or serving more than one flat is usually for the building.

If it is a building repair, report it with three things: exactly where it is, what is happening, and a photograph if you can take one safely. Those three things are the difference between a contractor attending once and attending three times, and you pay for both.

What happens then depends on the job. A straightforward repair is instructed to a contractor on the approved list. A larger one may need two or three quotes, and if the cost crosses the Section 20 threshold it will need consultation before anybody can be instructed. Occasionally the honest answer is that the work has to wait for the next budget year or for funds to build in reserve. We would rather tell you that than leave you wondering.

For genuine emergencies, an escape of water, a lift entrapment, a total failure of power to the common parts, or a fire safety failure, there is an out-of-hours route.

For a block of flats, the building is almost always insured as a whole, on a single policy, arranged by whoever the lease says must arrange it. Normally that is the freeholder, the RMC or the RTM company. The premium is recovered through the service charge.

You do not insure your flat's structure separately, and you should not be asked to. If a lender or a broker tells you otherwise, check the lease.

The block policy typically covers the structure and common parts, with property owners' liability, often terrorism cover, engineering inspection where there is a lift, and sometimes alternative accommodation if a flat becomes uninhabitable after an insured event.

What it does not cover is your own contents, your own improvements, and fixtures beyond what the policy defines. Those need your own contents policy, and it is worth telling your insurer you live in a flat so the cover lines up rather than overlapping.

Leaseholders have a statutory right to ask for a summary of the insurance cover and to inspect the policy. If you want to see it, ask. There is no good reason to refuse.

One practical point that saves a great deal of trouble. If something happens that might lead to a claim, tell the managing agent early, even if you are not certain yet. Late notification is one of the commonest reasons a straightforward claim turns difficult.

Say so early, and say so in writing. Most problems in block management are communication problems that were left alone until they hardened.

Start with the person handling your building. Set out what happened, what you would like done, and by when. If that does not resolve it, ask for the complaint to be escalated under the firm's formal complaints procedure. A written complaints procedure, with timescales, is something any managing agent should be able to give you on request.

If you exhaust the firm's own procedure and you are still not satisfied, managing agents in England are required to belong to a government-approved redress scheme, which can look at the complaint independently.

Disputes about whether a service charge is reasonable or payable are a separate route. They go to the First-tier Tribunal (Property Chamber), which can decide what is reasonable and what is payable. Before it reaches that point, a conversation and a look at the underlying invoices settles far more cases than people expect.

If you want free and impartial guidance before you do anything, the Leasehold Advisory Service (LEASE) is a sensible first stop.

We are a block and estate management company based in Leeds, working across two service lines: block management and estate management. Following guidelines set out by RICS & ARMA, we build the service around the specific needs of your budget, your block and its residents, rather than fitting you into a standard package.

In practice, that means four things.

A named person who knows your building. Someone who has walked the site, read the lease and can tell you why the gutters are on the list. Not a general enquiries inbox that forwards your email to whoever is free.

Budgets you can follow. Set out by cost heading, with the reasoning visible, and explained before the year begins rather than defended after it ends.

Communication as the default setting. We would rather tell you about a delay than be asked about it. Paperless wherever we can, which is part of how we keep the environmental commitments we have made.

Honesty when the answer is no. If the lease does not permit something, or the money is not there, we will say so plainly and set out what the realistic options are.

Our service is built for everyone with a stake in the building: those whose home it is, those who hold the property as an investment, and the obligations the freeholder is bound by.

It happens more often than people think, and it is usually more straightforward than they fear.

If an RMC or RTM company manages the building, changing agent is a contractual decision for the directors. Check the notice period in the existing management agreement, often somewhere between one and three months, serve notice in the form that agreement requires, hold a board meeting, minute the decision, and appoint the new agent to start the day the old one finishes. Avoid a gap. Nothing goes wrong faster than a block with nobody holding the compliance file.

If the freeholder appoints the agent, leaseholders cannot simply swap them. The realistic routes are to persuade the freeholder, to pursue the Right to Manage, or, where management has genuinely failed, to apply to the First-tier Tribunal for the appointment of a manager. Those are different processes with different thresholds, and it is worth advice on which one fits your situation.

Handover itself is a documents exercise. The outgoing agent should pass over the service charge funds and any reserve balances, the accounts and current budget, lease and title documents, contractor and contract details, risk assessments and compliance records, keys, warranties, and a clear statement of the arrears position.

If your board is weighing this up, we are happy to look at your current budget and accounts and tell you honestly whether a change is likely to help. Sometimes it is not, and we will say so.