Managing your block of flats

Linz Darlington | November 2021

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.

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.

If someone else set up the company for you, they should provide the login details and this account will probably contain their email address. The first thing you should do is replace this email address with your own.

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.

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.

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.

Insurance

The first thing you need to do once you have purchased the freehold to your block is to take out building’s 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.

Section 3 Notice

When you purchase the freehold title to a property with tenants, 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. You should do this even if all the leaseholders have already been notified of the change.

For completeness, it makes sense for the Freehold Company to issue a notice to every tenant in the block – including those who took part in the freehold purchase.

An example Section 3 notice can be found here.

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.

You can learn how to file this on this Government Video.

File Annual Accounts

Each year you must file accounts for your company. If you’re using the ‘Dormant Company’ method this is a simple process. If you’re not, you should speak with your accountant or Property Managing Agent.

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 should write back to them explaining that the company is dormant, and you consider that you don’t need to file a Corporation Tax Return and ask them to let you know if they disagree. We would recommend that you send this letter Record Delivery and keep the receipt for your files.

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.

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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