Managing your block of flats

Linz Darlington | February 2022

Introduction

Once you’ve purchased the freehold title to your building, you'll need to manage it.

For many leaseholders, it will be a huge relief to have ousted your existing freeholder – but now you have the responsibility for ensuring the block is properly managed.

This guide is not legal or financial advice but is simply a starting point for leaseholders embarking on the process of managing their block. It doesn't cover everything - just the most common requirements.

If, having read the article, you think that managing your block is not for you then we would recommend speaking to some Property Managing Agents.

Decide how to manage your building

You and your other leaseholders need to decide how you want to organise yourselves.

There are broadly two approaches for managing your building.

The 'Dormant Company Approach'

The first approach is to simply leave the company which manages the freehold as a dormant company – so all it does is hold legal ownership of the freehold title on behalf of the leaseholders.

When an expense needs to be paid – for example the annual insurance – then one of the leaseholders organises it and the others pay their share to them directly.

This approach keeps things very simple, but it only really works if the block has just a few flats and all the leaseholders own a share of freehold. If they don’t, the other leaseholders can complain that they’re not being charged their service charge correctly.

The 'Management Company Approach'

The second approach is to run your freehold company like a management company. You’ll need everything from a bank account to an accountant.

The company will need to charge a service charge in accordance with each of the leases and bill the expenses back to the leaseholders too. This is the “proper” way of doing it.

The easiest way of taking this approach might well be to appoint a Property Managing Agent to manage the day-to-day running of the block – so you don’t have to worry about it. This will clearly be more expensive than doing it yourselves, but it is still likely to be easier on the pocket than when you paid a charge to your old freeholder. We don't have an affiliation with any Managing Agents, but the Leasehold Knowledge Partnership have a list on their website.

Even if you don’t employ a Property Managing Agent and manage the block yourself, you may well want to employ an accountant. Again, we don't have a formal affiliation but know that Hart Shaw in Sheffield are excellent - ask to speak with Hannah Jones.

Once you've purchased the freehold

Once you've purchased the freehold to your block of flats there are likely to be a few tasks that you'll need to crack on with fairly quickly.

Insurance

The first thing you need to do once you have purchased the freehold to your block is to take out buildings insurance, usually in the name of your freehold company.

We don’t have an affiliation with any company to provide buildings insurance, but UKInsuranceNet has provided a competitive quote before.

Information Commissioners Office (ICO)

At some point the Information Commissioners Office is likely to write to you asking if your freehold company is processing data and to pay a small fee if it is.

If you’re using the Dormant Company Approach listed above, you almost certainly won’t have to pay this – but you should check anyway, and then let them know.

If you have appointed a Property Managing Agent, you can ask them about this.

Section 3 Notice

When you purchase the freehold title to a property with tenants who were not involved in collective enfranchisement claim, you must let them know that the freehold title has changed hands, as per Section 3 of the Landlord and Tenant Act 1985. It should be served within two months of the transfer of the ownership.

An example Section 3 notice can be found here.

Annual Tasks

Even the smallest block of flats requires some ongoing administration - but once you've done it once it shouldn't take you more than an hour or so a year.

Take control of your Companies House Web Filing Account

To complete some of the other tasks in this article you will need access to the Companies House WebFiling system.

You will need to register for a WebFiling account. All you should need is the company number associated with your company and the authentification code. This will have been sent to you by the organisation you used to set up the company.

Having done that, you should familiarise yourself with a) when you need to file your confirmation statement and b) when you need to file your annual accounts. This information is available on your WebFiling system, or you can find it by searching for your company here.

If you're using an accountant, they will be able to help with these things.

File Confirmation Statement

Once a year you must file a document with Companies House called a ‘Confirmation Statement’ – which tells them about any changes which have been made to the ownership structure of the property since the last year. You need to pay at £13 fee.

Do it yourself: You can learn how to file this on this government video.

Use a paid-for service: You could use a service for this, like the one provided by 1st Formations.

Ask your Accountant: Finally, If you're using an accountant, they will be able to help you do this.

File Annual Accounts

Each year you must file accounts for your company - which must be done within 9 months of your year end. If you’re using the ‘Dormant Company’ method this is a simple process.

Do it yourself: You can do this by following this process.

Use a paid-for service: You could use a service for this, like the one provided by 1st Formations.

Ask your Accountant: Finally, If you're using an accountant or Property Management company, they will be able to help you do this.

Corporation Tax Return

It is likely that once you have filed the ‘Dormant Accounts’ with Companies House, HMRC will contact you to ask whether you need to pay any Corporation Tax.

You can usually tell them that your company is dormant using this link.

It might be that they send you a request each year to pay Corporation Tax, and if they do you'll need to let them know that you don't. However, our experience is that once you let them know the company is dormant, they leave you be for a few years before asking again.

If your company is not dormant your accountant or Property Managing Agent should take care of this for you.

Selling your flat

When you sell your flat, you’ll need to transfer the share from the old flat owner to the new one, and probably remove and appoint a director as well.

If you are the flat owner who has control over the Companies House Webfiling system, you should pass over these details to whoever is taking the responsibility on.

The solicitors handling the sale / purchase of the property will be able to advise you on what is required.

Conclusion

This article isn’t legal or financial advice, but hopefully has pointed you in the right direction to get started managing your building.

Start your lease extension today

Article author photo

Linz is the CEO and co-founder of Homehold. He’s always looking at how we can improve our service and better support you through the lease extension process. If you have any questions about your lease he’d be delighted to help.

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