Advice from the experts

Association of Residential Managing Agents - the regulatory board for the property management industry. Client A person or organisation who has instructed you or your organisation to act on its behalf. For example, this may include the freeholder, superior leaseholder, residents’ management company or right to manage company 

A future expense which is possible but cannot be predicted with certainty at the moment. Contingencies are usually for excess unforeseen day-today expenses.  (See Reserve/sinking fund)  

Areas within your development which are shared by two or more properties - such as pathways, gardens, internal stairways, lift.  

The chief administrative office of the company responsible for maintaining company records

The Landlord’s response to the initial Notice of Claim served by the Leaseholder in a lease extension, or the participating Leaseholders in a collective enfranchisement. 

When the time comes to complete the paperwork to extend a lease, the Deed of Variation is the legal document which will allow the Leaseholder to make changes without signing a whole new lease

Under the Leasehold Reform Housing and Urban Development Act 1993 gives leaseholders the right, upon qualification, to collectively purchase the freehold of their development. This process is called Enfranchisement

Strictly speaking all land in England is owned by the Crown; ‘freehold’ refers to the ownership of an estate in land. In simple terms, you own the freehold if you own the whole of the land and any immoveable property attached to it

The basis of British Health & Safety law is the Health and Safety at Work Act 1974, although there are around 10 additional Acts of Parliament which relate to the communal areas of residential developments. The Health & Safety at Work Act sets out the general duties which employers have towards employees and members of the public and employees have to themselves and to each other. The communal areas are deemed to be ‘places of work’ and these various pieces of legislation are in place to ensure the safety of residents, visitors and contractors. Landlord & Tenant Act Provides security of tenure for occupying tenants under certain leases of residential property

The right provided by the 1993 Leasehold Reform Act (as amended) for the grant of a new lease for a term of 90 years, plus the present unexpired term, all at a peppercorn rent, i.e., rent free. This process is not automatic and lessees must meet certain qualifying criteria.  

In general, a lease granted for a term certain of more than 21 years

The Leasehold Property Enquiries forms (LPE1 and LPE2) for leasehold property enquiries. Their aim is to standardise the collection of information required for the conveyancing process. They have been approved by The Law Society and trade bodies www.lawsociety.org.uk

Employed by freeholders, Resident Management Companies or Right to Manage Companies to manage the day to day running and cyclical maintenance of their buildings on their behalf

The notice served by the Leaseholder on the Landlord under Section 13 of the 1993 Act, the service of which formally commences the enfranchisement process

A particular standard which is judged on the standard of conduct expected of a professional, experienced person dealing with the same situation or in assessing whether the costs of services are appropriate and proportionate

A limited company, whose members or shareholders are leaseholders, which is defined within the lease as being responsible for the management of the communal parts of the development

This is a sum of money which is held back when the rest of the sale price is paid. It is usually withheld from the seller of a property pending an event or events happening after completion of the sale – for example, the issue of year-end service charge accounts which may reveal a deficit incurred during the seller’s ownership of the property

A limited company, whose members or shareholders are leaseholders, which is defined within the lease as being responsible for the management of the communal parts of the development

Section 20 is a consultation process under the Landlord & Tenant Act required to carry out major works costing in excess of £250 for any one unit

Residential service charge accounting guidance issued jointly by RICS, Association of Residential Managing Agents (ARMA) and the professional accountancy bodies comprising the Association of Chartered Certified Accountants (ACCA), the Institute of Chartered Accountants in England and Wales (IUCAEW) and the Institute of Chartered Accountants in Scotland (ICAS) Available from www.icaew.com 

Insurance for the common parts of your development - this is usually compulsory as per the lease

Circumstances in which an agent has an interest that could appear, or potentially appear, to influence the objective exercise of their professional duties

The contract between the landlord and managing agent setting out the terms of appointment. Also known as Management Agreement, Management Contract or Terms of Engagement

Registrars for all UK limited companies. They incorporate/dissolve companies, examine and store company information and make all this available to the public

Any person who, either directly or indirectly, receives the services of a managing agent

An officer of the Company, registered with Companies House, responsible for ensuring that the communal areas of the development are managed properly and in accordance with the lease and current legislation  

Having a fire risk assessment in place is, in most cases, a legal requirement and involves managing the risk of fire in the communal areas. The purpose of the fire risk assessment is to identify possible fire hazards; reduce the risk from these hazards to an acceptable level and identify what action needs to be taken to ensure safety if a fire does break out

Owner of the land that the development is built on and usually the legal entity ultimately responsible for management of the development. Freeholders can be investors, house builders or be the Residents Management Company of the development (leaseholder owned)

This is a payable by the Leaseholder(s) when they are buying the freehold of their property. It is extra value attributable to an interest under the freehold where there is a likelihood of being able to negotiate a lease extension in the future. For example, the participating Leaseholders in a collective enfranchisement would pay a ‘hope value’ for the nonparticipating flats, on the basis that they may profit in the future from granting lease extensions

Ownership of leasehold property means that the Leaseholder has a right to use and enjoy that property for a defined period of time, for example 99 years, 125 years or 999 years 

Flat owner within a block of flats/development

This is an agreement between the landlord, the assignor (or seller) and the assignee (or buyer). By signing the Licence to Assign, the landlord is giving its consent to the assignor to sell the property to the assignee. The grant of a Licence to Assign is sometimes required under the terms of a flat lease

These are typically works which will result in more than £250 being payable by each flat and which occur on a cyclical basis, such as internal and external redecoration, replacement of the roof or lift. Section 20 of the Landlord & Tenant Act will usually apply

For a lease extension, the value of the Leaseholder’s interest increases when he/she buys a new lease while the value of the Landlord’s interest falls. However, there will often be an overall increase in the total value of the two interests. The difference between the total value of the interests before and after lease renewal is the marriage value

Insurance to cover you against a compensation claim if you have made a mistake or are negligent 

or without a formal constitution or corporate status is called a resident’s association. It is also possible to have a residents’ association ‘recognised’ (recognised tenants’ association) by law with a formal constitution

A restrictive covenant is an obligation or restriction placed on land, be it freehold or leasehold, that limits what the owner of the land or the lease can do with their property. Restrictive covenants can cover many things but some of the more usual covenants prevent, for example, any extensions to the property being built or the running of a business from the property

The Commonhold and Leasehold Reform Act 2002 provides a right for leaseholders to force the transfer of the freeholder’s management duties to a special company - set up by them. The RTM process allows leaseholders to take control of the management of their development

Charge levied by the freeholder or Resident Management Company in accordance with the lease to recover costs incurred running the communal parts of a development, insurance of the building and general maintenance and repairs

This arises when the relevant leaseholders (i.e., the flat owners) also jointly own the freehold property. The owners will still hold their leasehold interest but will also have a legal interest in the freehold to the land, whether as individuals or as members or shareholders of a company which has been formed to own the freehold estate

A person or organisation who has instructed you or your organisation to act on its behalf. For example, this may include the freeholder, superior leaseholder, residents’ management company or right to manage company 

The term used to describe all money held or received by a managing agent over which they have control but which does not belong to the agent or their organisation. It is not restricted to money held on behalf of a client. It can include rents, service charges, reserve funds, deposits and retentions in respect of taxation obligations. It is a statutory requirement to hold service charge contributions in trust. All client money that is service charge money should therefore be held in a separate bank account that includes words in its title to clearly indicate that it is ‘client money’text and make it your own. Click here to begin editing.

Usually found in the Memorandum and Articles of Association and the lease, these form the basis of the way in which the development must be run and include ‘estate’ regulations and restrictive covenants  

This is an agreement between the buyer and landlord under which the buyer agrees to comply with the terms and conditions contained in the relevant lease. This binds the new tenant (i.e., the buyer) in the same way as the former tenant (the seller).

Insurance designed especially for directors and officers to protect themselves against claim in the event they are perceived to have failed in any of their duties

The First-tier Tribunal (Property Chamber) has 5 regional offices throughout England that deal with settling of disputes in relation to leasehold property and the private rented sector. They deal with various matters including service charge disputes, lease variations and the determination of premiums for freehold purchase and lease extensions. This tribunal covers matters previously heard by the Leasehold Valuation Tribunal in England. 

Ground rent is a payment made by the leaseholder to the landlord under the terms of the lease. A lease is a tenancy and so it is subject to the payment of ground rent.  It is an income for the landlord rather than payment for the provision of services

The IRPM was launched in 2002 as a means of delivering a portable professional qualification in residential property management, available to anyone working in the sector and accepted by all those operating within it 

The landlord’s obligations to lessees as detailed in the lease. These can include obtaining and arranging insurance, upkeep of the structure of the building and the provision of services such as lighting in common areas and ground maintenance. 

A property specifically designed for dual use, combining both residential and business use. It usually has a formal division between the residential and business areas. Specific planning consent falling within the General Use Classes. The unit may be covered by some areas of residential leasehold legislation and the lease will have specific obligations for both the landlord and leaseholder

This is a document stipulating the managing agents’ terms of business and conditions of appointments

Legal documents required by law that set out details and rules for internal regulation and management for a company

A Leaseholder who fulfils the qualifying criteria, that is, a Leaseholder of a flat under a long lease 

who does not own three or more flats in the building

Funds collected over a period of time to be used for a specific purpose to avoid a very large bill in one service charge year, typically used for major works

A specific company created by the Commonhold and Leasehold Reform Act 2002 enabling qualifying leaseholders of the building to take on the management without proving their existing manager is at fault. RTM is restricted to leasehold flats and maisonettes, but is not available to individual leasehold houses or estates

The Royal Institute of Chartered Surveyors is the professional body for qualifications and standards in land, property and construction

Clients who entrust money to firms regulated by RICS are protected in the unlikely event that the money is mishandled

An indication of the annual costs associated with running the development in accordance with the terms of the lease, e.g., cleaning, gardening, electricity for communal areas, etc. 

A shareholder of the RMC that owns the freehold. They are entitled to have a say at company meetings and take part in decision making 

The Tenant’s obligations as detailed in the lease. These can include paying rent, not disturbing other tenants and maintaining leased property