Block Management Jargon

There is loads of different terms in this business. Just for starters, people refer to the work of block management companies by at least three other different titles – Residential Block Management Services, Block Property Management and Block and Estate Management.

Here’s our guide to deciphering block management jargon. The legalities are very complex and our definitions are deliberately simplistic so if you need more info or are unsure a lawyers help is invaluable.

 

Block management jargon

 

ARMA

The Association of Residential Managing Agents is the residential leasehold block management association for England and Wales. They provide guidance and advice to their members (including Orchard Block Management), and in turn our clients and the leaseholders of the properties currently held under our management benefit from this database and expert knowledge. More information about ARMA.

 

Arrears

When a leaseholder has not paid their Service Charge on time in accordance with the terms of their Lease, they are said to be ‘in arrears’.  If you are a leaseholder of a property currently held under our management and you are experiencing difficulties in making payment, please contact us as soon as possible.

 

Assignment

Transfer by the original Leaseholder (the assignor) to the new Leaseholder (the assignee).  Note that the original Leaseholder can still be obligated under certain circumstances unless expressly released by the Freeholder.  Most commonly in relation to ensuring the assignee keeps the covenants that the assignor is bound by. Notices of Assignment are typically prepared by the solicitors acting for and on behalf of the assignee upon completion.

 

Block Management

The management discipline of Residential Block Management by a managing agent.

 

Block Management Jargon

All the terms listed here that relate to the practice of Block and Estate Management by a managing agent.

 

Budget

We prepare budgets on an annual basis, the budget is the expected expenditure in the building over the forthcoming financial year.  The budget is then portioned among leaseholders under the appropriate apportionment details in their Leases.  Actual spend during the year at a property is closely monitored compared to budget.  At the end of the year there is likely to be either a Surplus compared to budget (less money was spent than anticipated) or a Deficit compared to the budget (more money was spent than anticipated).

 

Companies House

Companies House is the register of all companies in England and Wales. Company related matters are dealt with under the Companies Act 2006. The main purposes of Companies House are to incorporate and dissolve companies, examine and store information under the Companies Act 2006, and make the company information generally available to the public.

 

Company Secretary

The person responsible for the administration of the company, especially in terms of legal and statutory requirements. The Company Secretary ensures that documents are filed in a timely manner, and kept fully updated, at Companies House. The Company Secretary could be a leaseholder in the property, the managing agent or a specialist firm.

 

Deficit

When less money has been collected during the period than has been spent there is said to be a ‘deficit’. This is typically covered through cash in the bank initially and recovered from leaseholders with the subsequent period’s service charge. Details of this are generally contained in your lease.

 

EPC Energy Performance Certificate. 

A certificate is needed whenever a property is built, sold or rented. You must order an EPC for potential buyers and tenants before you market your property to sell or rent. In Scotland, you must display the EPC somewhere in the property, eg in the meter cupboard or next to the boiler. An EPC contains information about a property’s energy use and typical energy costs as well as recommendations about how to reduce energy use and save money. More information on EPC’s 

 

 Flying Freehold

A legal term used to describe a part of a freehold property which overhangs or is under part of another property.  Typical examples include balconies overhanging other properties or rooms in older terraced houses which may overhang rooms in adjacent houses or common parts of the building.

 

Freehold

A legal term used to describe land and everything built on it. A freehold is owned in perpetuity.

Freeholder

The person or company owning the freehold to a property.

 

 Grade I,  Grade II and Grade II*

Classifications used to describe the listing of buildings of particular or historical importance in England and Wales. Sites can also be scheduled, Registered or Protected but Listing is the most common designation. As at 2015 nearly 398,000 buildings are listed, and of them around 366,000 are designated Grade II, 22,000 are Grade II* and 9950 are designated Grade I.

 

Ground Rent

Rent payable by the leaseholder to the freeholder for the land on which the building sits.  This provides an income to the Freeholder (so is not payment for any services provided) and the level of ground rent is set out in the Lease.  Often, ground rent payable escalates over time, typically increasing every 25 years or so.

 

Head Lease

A lease between a tenant and a freeholder where contractual rights and responsibilities for the building are given to one tenant.  Further long leases are usually granted by the Head Lessor to leaseholders. This situation occurs quite regularly with blocks of flats and is often seen in relation to either Crown Estates buildings or buildings owned by some of the other large London land estates.

 

Landlord and Tenant Acts

The collective short name for several acts of parliament dating from 1709 to 1995 providing legislation in respect of the rights and responsibilities of landlords and tenants of leasehold property in the United Kingdom.

 

Lease

A contract whereby a tenant pays rent to a landlord, or leaseholder pays a freeholder, for the right to live in and/or use a property. Leases can be of short or very long duration. They are complex documents and specialist legal advice should be sought if you are considering entering into a lease.  The same lease is passed on every time the property is sold which means the term reduces over time. A premium is payable to the freeholder to extend the lease.

 

Leasehold

A leasehold to a property is the right to use a piece of land for a given period of time subject to certain conditions and (usually) subject to payment of a ground rent.

 

Leaseholder

The person or company owning the Lease to a property.

 

Listed Building

A listed building is one which is included in the Statutory List of Buildings of Special Architectural or Historic Interest.  There are three categories of listed buildings in England and Wales ranging from Grade I with greatest significance through Grade II* to Grade II.  Information about the number of listed buildings in England and Wales is above.

 

Leasehold Valuation Tribunal

A body established to resolve Leasehold-related disputes without the need to go to court to settle it.  The LVT is an independent legal body whose decision is legally binding.  The LVT typically deals with disputes regarding Service Charges, appointment of a Manager and Receiver for a property, building insurance, acquiring the Freehold estate or varying or extending a Lease.

 

Managing Agent

A managing agent performs most of the daily duties of running a property under the appointment, direction and control of the nominating party, whether that is the Freeholder, Resident Management Company, developer or under the Right To Manage.  Often the appointment of a Managing Agent is covered under the terms of the Lease.  A Managing Agent takes many of the pressures of running the building away from the Freeholder and/ r Directors of the Company, allowing them to enjoy their home or investment.

 

Managing Agent Enquiries

This is the set of questions raised by a purchaser’s solicitor on sale of a property. If you were selling your property, Orchard Block Management would for example receive and respond on your behalf to the questions via your solicitor. Please see the ‘Selling your property’ page for more information.

 

Party Wall

A dividing partition erected along the boundary between two properties providing common support to the building on both sides of the partition. The owner on each side of the dividing line has rights to enter the other property in order to repair or maintain their building or the wall. The legislation surrounding party walls is complex and specialist advice should be sought if necessary.

 

Peppercorn

A nominal or inconsequential rent set out in a lease in order to show that a commercial transaction exists

 

Residents Association

A residents association is generally a voluntarily formed group of the residents in an area, street, estate or block who have a common interest. It may be formed of freeholders or leaseholders. The interest can be anything from the general well being of the area to a specific issue. An association might, for example, be formed of all the leasehold owners in a block and exist to represent the interests of all to the landlord.

 

RMC (Residents Management Company)

A Residents Management Company (RMC) is the type of company that residents in a property typically establish in order to run the building themselves.  This may be enshrined in the lease or it may have come about as a result of legislation. The RMC is typically tasked with running the building, enforcing the covenants of the lease, often appointing a managing agent to act on their behalf in performing the day to day functions of running the building. The business is run for the benefit of the tenants or leaseholders and not for profit. Directors and the Company Secretary are often sourced from leaseholders in the property.

 

RTM (Right To Manage)

Under the Commonhold and Leasehold Reform Act 2002, the Leaseholders of a property have the right to form their own company and take management of the building away from the Freeholder. There are certain conditions that have to be satisfied in order to achieve this. The reasons typically stated for going through the right to manage process are either to reduce service charge and/or to control the appointment of the managing agent. There is no obligation on the leaseholders to prove poor or mismanagement by the current incumbent.

 

Section 20 Consultation

A consultation process under which leaseholders must be consulted if any works in the building are anticipated which are expected to cost more than £250 (including VAT) for any one Leaseholder in the property.  If consultation is not undertaken, the maximum that the landlord may legally be able to recover is £250 per Leaseholder. Qualifying long-term agreements, that is agreements of more than 12 months in duration, are also covered under the Section 20 consultation process.

 

Service Charge

The service charge is the charge made to leaseholders by the landlord for providing services to the property. It typically includes things like provision of on-site staff, payment of insurance, repairs and maintenance, communal utility supplies, maintenance contracts in place at the building and managing agent fees. The Service Charge timing and method of payment, and what can be included in the Service Charge, is usually set out in detail in the Lease and its associated schedules. In most modern leases, Service Charge is collected in advance of expenditure so that the landlord is not out-of-pocket in providing the services. However, we do occasionally still see leases where the Service Charge is collected in arrears – that is the landlord recovers the funds after he has incurred the expense of providing services to the building.

 

Service Charge Demand

The service charge demand is the document which sets out the service charge that each leaseholder has to pay in the current period. There is a proscribed format that Service Charge demands need to follow. It will typically include a cover letter explaining the budget, a copy of the Budget, an Application for Payment and notices in the proscribed format.

 

Share of freehold

Where the whole building is owned by all of the flat owners, typically through a company in which they each have a share. However, having a share in the freehold does not mean that you can do as you please, the terms of the lease remain and must be observed.

 

Surplus

When more money is collected in service charge than has been spent during the period, there is said to be a ‘surplus’. This is often either retained in the bank account or returned to leaseholders with the subsequent service charge demand. Further details are likely to be set out in your Lease.

 

Tenure

The nature of ownership of a piece of land, which determines whether an occupant is an owner or a tenant. Freehold and leasehold are examples of tenure that land can be held under.

 

Virtual Freehold

A term used to describe a very long leasehold interest (often 999 years).  In this situation, the Lease is worth the same as the freehold interest in the property, hence the term ‘virtual freehold’.

 

 

We hope you found our guide to Block Management Jargon  useful. If you would like to discuss any element of your lease in more detail please call us on 08450 53 53 36.  Orchard Block Management are experts in deciphering all the Block Management Jargon you come across and supported by a team of excellent property lawyers.