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QUESTION I am a leaseholder of a property with a total of seven leaseholders. Five of the leaseholders are also freeholder as they bought the property five years ago. We were unable to raise funds to join in with the enfranchisement. I have noticed on Companies House they have taken out two bank loans using the property as security. Within the printed document it states the bank can take each leasehold as security. Can my freeholder take out this type of loan without consulting us? ANSWER Obviously, in order to give a full answer it would be necessary to review all of the relevant paperwork, such as the Articles of Association of the freeholder and the loan agreement. The basic principle here is that the freehold title is entirely separate from your leasehold titles. The freeholder can use the freehold title as security
for the overpayment may be set off against the leaseholder’s future liability (for rent or service charge) (Fuller v Happy Shopper Markets Ltd [2001] 1 WLR 1249). So, one option would be for you to simply deduct c.£500 from their next service charge bill, and explain to the freeholder (or its agent) why they are taking that course of action. It may be more complicated if the amount is in fact credited, but then a demand is raised for a reserve fund contribution, of an equal sum. In that case, the safer course of action would be to pay the reserve fund contribution, making it clear that in making the payment you do not admit that the sum in question is payable and/or reasonable, and then submit an application to the First-tier Tribunal (Property Chamber) pursuant to S27A of the 1985 Act. Do not take any action, however, until you have taken legal advice.
but, obviously, the value of the freehold title is affected, for the purposes of a loan, by the income generated by the ground rents from the leasehold properties. It is likely that the loan agreement to which you refer has a slightly different effect than that which has caused alarm – if the freeholder defaulted in repayment of the loan, the bank or building society making the loan would be able to take possession of the freehold title and would, in effect, become your landlord until such time as the property was sold to a new freeholder. The lender could not take possession of or have any effect at all on your leasehold title. That is within your ownership and only you can create security over that title. I hope that puts your mind at rest but I am happy to give further detail if you would like me to review the loan agreement. Charlotte Collins is a solicitor and operations director at Realty Law Ltd
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are equal to the amount of the overpayment, so the two cancel each other out. However, requests for contributions towards any reserve fund must be reasonable: S19(2) of the Landlord and Tenant Act 1985. reserve fund to be based on an assessment of likely expenditure on substantial “non-routine” items (such as roof repairs or external redecorations), usually following a capital expenditure plan or planned preventative reserve fund totalling £198,000 would require a concrete and reasoned explanation, and justification, for example by reference to additional works which are anticipated. In principle, if there has been an overpayment of historic service charge, as there has here, the leaseholder’s claim in restitution I would generally expect contributions towards a maintenance survey. The demands for additional contributions towards the
Roger Hardwick is a partner at Brethertons
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Call of theMonth C hristmas Day always brings its challenges – not least fulfilling the rota with the required 14 staff! But one resident ringing early in the morning had enough time to speak to our supervisor for over 20 minutes demanding photos of a callout he initiated regarding a large tree branch that had come down blocking the highway. He was convinced a neighbour had pulled it down on purpose in a bid to have the whole tree removed as it had been the cause of arguments between residents. Thankfully the rest of the day was more serene for both our residents and staff.
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