Terms Explained: M to R

By | 03.10.2018

Management Fee: This is a fee a Landlord or Property Manager charges for organising the provision of services and work, invoicing the Service Charge and other activities as determined by the relevant Lease. The Lease will normally determine (to some degree) the way the amount of the Management Fee charged to Leaseholder should be calculated. The two most common ways of calculating a Management Fee are as (1) percentage of the cost of services provided (this tends to be the method used by Councils and Housing Associations) or as (2) flat fee per resident per year (this tends to be the method used by private sector Landlords and Property Managers).

Preliminary Costs: These are also known as ‘Enabling Costs’ or simply ‘Prelims’, and they are the costs incurred during a building project to support the building process. Common examples of Preliminary Costs are site huts, portable toilets, generators and personal safety equipment. Sometimes scaffolding is (incorrectly) included as a Preliminary Cost. Preliminary costs tend to be accounted for separately, particularly if there is more than one building involved, because these costs cannot be accurately attributed to any specific set of work or particular building. Scaffolding works can generally be attributed a particular building which is why they should not normally be classed as Preliminary Costs. For example, if a building project is taking place on 5 buildings, the cost of a site hut cannot be attributed to one of those buildings specifically as the workers who use the site hut will be working all 5 buildings.

Qualifying Long Term Agreements: Contracts of over 12 month which result in a leaseholder being charged £100  or more per year.

Qualifying Works: Works which result in a charge of £250 or more per leaseholder

Reasonableness of Service Charge: Section 19 (1) (a) of the Landlord and Tenant Act 1985 says that a Service Charge is only payable to the extent which the costs of ‘reasonably incurred’. The Legislation does not though state in detail what it means for a Service charge to be reasonable, and this is one of the main points of argument when Service Charge disputes are determined in a Court or Tribunal. For more information see Section 19 (1) (a) (Service Charges Must Be ‘Reasonably Incurred’).

Rent: Payment to a freeholder for use of a property. All tenants pay rent, even long leaseholders who pay a ‘ground rent’ to the landlord as a rental payment for use of the land on which the property is located.

Reserve Funds: Also known as a ‘sinking’ funds. This is a sum of money collected by a Landlord from Service Charge payers to use to pay for future Service Charge costs, typically to fund infrequent items of major expenditure such as a roof replacement. For Landlords other than Registered Providers (ie. Councils and Housing Associations) there is a legal obligation to hold any such funds in a designated trust account, for more information on this see Section 42 (Service Charge Contributions to be Held in Trust).

Reserved premises: these are the parts of the building which the landlord retains control over. This normally includes the structure of the building, the roof, corridors, lift and communal front door.

Residential service charge: an amount of money a tenant or leaseholder must pay, in addition to any rent, for services enjoyed in common with other residents.

Resident Management Company: A limited company in which shares are owned typically by each of the Leaseholders within the relevant building or development. The purpose of such a company is generally to undertake all the management functions normally undertaken by a Freeholder. Resident Management Companies often come into existence through a Tripartite Lease which identifies a Manager, which is in fact a Limited Company. The shares (and control) in this limited company will generally pass to Leaseholders once all the flats in a development have been sold.

Right to Manage: Right given by the Commonhold and Leasehold Reform Act 2002 to apply for the Landlord’s management functions to be transferred to a special company (called a ‘Right to Manage Company’)set up by the Leaseholder’s within the relevant building or development. The Right to Manage Company can either do the management itself directly or, as is more common for large developments, hire a profession Residential Property Manager to carry out the management functions. In order for an Application to succeed it must be supported by at least 50% of the affected residents (all of whom must be Leaseholders) and a set process must be precisely followed. In practice, many Leaseholders have found it difficult to exercise the Right to Manage.