Date:  28 May 2009

DEVELOPERS – ARE YOU MANAGING?

It was always a fairly common scenario, and the current economic climate means that it is surely going to become more common. I am sure you are familiar with this sort of arrangement.  A developer constructs a development, which includes flats, to be let out on long lease. The idea at the start was that the flats would all be sold quickly, then the developer would sell off the freehold, and get on with the next project.  

The flats did not sell as quickly as they might have done, and the developer was left with some management responsibility for a couple of years.

This is surely going to be more prevalent now in “credit crunch Britain”.

The trouble is that the world of management has always been a changing one, and there is plenty of scope for developers like this to fall foul of recent legislation. 

As an example, how many developers now realise that ground rent is not payable, even if it is referred to in the lease, unless the landlord serves a statutory notice in the proper form and at the proper time?   A landlord who forgets about this, or never knew in the first place, risks taking action which will fall flat on its face because an essential pre-requisite has been overlooked.   The requirement for a notice is set out in Commonhold and Leasehold Reform Act 2002 Section 166 and the regulations made under that section. The form of notice is not complex but you must use the wording in the regulations. The notice must be served between 30 and 60 days before the rent becomes due.

Perish the thought, but service charges can also be a problem some times. If an unexpected major item of work is needed, to where do you go to find the consultation requirements? Again these are set out in regulations. If you do not follow these to the letter, you risk being unable to recover the costs of major works from leaseholders – and obviously these might be substantial costs. In cases like this you may only be able to recover £250 from each leaseholder. 

Are you familiar with leaseholders’ rights to request information, and inspect documents, in connection with service charges, and do you know about the 18 month time limit for claiming recoupment of landlord’s expenditure through the service charge? These are set out in various provisions of the Landlord and Tenant Act 1985. This also contains the requirement to give a set of explanatory notes when serving your demand for payment of service charges. Again, more details in more regulations. Without these notes your demand for payment is not effective!

Many developers see these short periods of property management as a nuisance to be endured.   This is quite understandable, but surely it makes sense to reduce the headache by taking just the basic steps to ensure that statutory requirements are adhered to.

We are very happy to supply a brief summary of the more common problems, and how to deal with them, or alternatively to give a view on a specific management problem which arises.  For further information please contact Richard Davis by following the link below.

Richard Davis