Life after enfranchisement - what next? 

Once you have acquired your freehold asset, you will have invested a price equivalent to a value for extending your lease. It is important to secure that value by undertaking the task of extending your lease. Usually this can be done by all lessees who participated in the purchase of the freehold in order to save costs.

Most solicitors will recommend certain basic requirements for extending your lease but it is also an opportunity to ensure it is modernised and provides the requirements you need to run your company and your building.

Opportunities are sometimes overlooked for ensuring the lease meets modern-day requirements so as, for example, to allow you to improve your block and not simply to repair it and ensure you can pass all legitimate expenses through the service charge account and that all company matters are attended to.
A thorough review of your lease at this stage is a worthwhile exercise. If you have acquired the right to manage and have not yet considered acquiring the freehold or a formal lease extension then you will need to be quite clear about the provisions of your lease in order to carry out your management duties.

So what is involved in the Management of your Premises?

You might consider that nothing further needs to be done and you can simply operate the company and therefore the building as you like. That is not the case. The legal framework for running your building is still enshrined in the terms of the lease.

While you may reach a separate agreement between you to do certain things such as improve the property or collect service charges in a different way than prescribed by the lease, if this is not set out in the terms of the lease, you might run into difficulties in future if subsequent purchasers of flats do not adopt the same view.

This issue is particularly significant if you purchased or acquired your right to manage by a majority. In that case, those lessees who form the minority will still expect you to abide by the terms of the lease. You need to ensure demands for service charges and ground rent are sent out entirely in accordance with the lease.

More importantly, the year-end accounts must be prepared. There is a statutory provision known as “the 18-Month Rule” by which, if you fail to demand service charges within 18 months of them becoming due (normally the invoice date), you may lose the right to recover them. If accounts are prepared annually and are delivered to the lessees within six months of each year-end you should not fall foul of this rather draconian provision.

You must budget properly for your block. You must continue the good practice you expected to see from your previous freeholder/managing agent but might not have incurred. You must also comply with the statutory requirements that are in place when you send out demands for service charges and ground rent including the written summary of tenants’ rights and obligations and the correct format for ground rent demands.
You must also include in your service charge demands an address, which must be in England or Wales, for service of notices on you as freeholder. If it is not included, you might lose the right to recover monies due.
You will no doubt also be familiar with the consultation requirements in respect of major works. There are two principal types of consultation requirements.

The first is where you are going to carry out works to repair and maintain where one person in the block will be required to contribute more than £250. The second is where you are going to enter into a long-term agreement (usually for more than one year) where the cost for a lessee will exceed £100. The statutory consultation requirements can only be waived if all of you are members of the freehold company and you all agree – ideally in writing – to waive them. This should only be done with the benefit of legal advice. Emergency works are an exception, but only in limited circumstances.
If you have a large block or a block where not all lessees are members of the company, given the number of regulations involved in management, you might wish to consider the appointment of a managing agent.