Leaseholder Rights in Mixed-Use Buildings: Navigating the Challenges

Sinead Campbell from Flat Living Insurance looks at the challenges of leaseholder rights in mixed-use buildings.

Mixed-use buildings combine residential and commercial spaces, making their needs and challenges unique. Depending on the sort of commercial activity, number of residents, expected footfall etc, each building will require different maintenance plans and approaches to service charges.

A growing feature of urban environments, they make efficient use of land and can help to create vibrant communities. However, understanding your rights and responsibilities as a leaseholder is essential to navigating the complexities of mixed-use ownership.

Service Charge Allocation

One of the most contentious issues for leaseholders in mixed-use buildings is service charge allocation. Service charges cover shared costs such as cleaning, security, maintenance and insurance for communal areas. The challenge lies in fairly apportioning these costs between residential and commercial occupiers.

In purely residential buildings, these costs are split evenly among the leaseholders as each will use the common ways equally. It is not so simple for mixed-use buildings. A classic example is the shopfront issue. Residential leaseholders will not want to pay part of the bill for shopfront cleaning or extended security for business hours. They do not want to foot the bill for the services that only benefit the commercial units in the building.

Thankfully, service charges must now be provided in a clear and comparable format, making it far easier for leaseholders to spot and challenge any unjust costs. If leaseholders are unsure, they should first engage with their freeholder or managing agent to iron out the issue. If an agreement cannot be reached, the First-tier Tribunal will be able to assist.

Maintenance Responsibilities

Repairs and maintenance costs can also be complicated. Shared areas, such as lifts, corridors and external facades may require contributions from both residential and commercial occupants. But disputes often arise over who should pay for specific repairs.

For example, if a lift is primarily used by resident leaseholders to reach their units, but it also provides access to a commercial storage space, the cost of maintaining or fixing the lift can be difficult to portion out. Expensive, long-term repairs such a roof replacement, often lead to disagreements – although most leases will ultimately dictate who is responsible.

If leaseholders are struggling with the cost of maintenance and repairs, the first port of call will be the lease. Expert help may be needed to fully understand the terms and some may be frustratingly vague, but understanding your obligations is key.

Noise and Usage Restrictions

Noise is a common source of friction in mixed-use buildings. Restaurants, bars, shops or gyms can disrupt the quiet enjoyment of residential spaces. Usage restrictions are often included in commercial leases to mitigate these issues, although enforcement can be very tricky.

Residents struggling with noise pollution should again, check their lease for any protective terms and familiarise themselves with the law. Excessive noise can be reported to the local authority who can impose restrictions based on environmental health laws.

For any issues around noise or potentially disallowed usage by commercial leaseholders, residents should keep an accurate record of reportable instances, firstly raising their concerns with the freeholder or managing agent, and then, if necessary, with the council.

Legal Protections for Leaseholders

Leaseholders in mixed-use buildings are entitled to a range of legal protections. These include rights to information, dispute resolution mechanisms, and in some cases, the ability to take control of building management.

Thanks to updated regulations, residential leaseholders can exercise their Right to Manage more easily now. It used to be that a maximum of 25% of the total floor space could be in commercial use. This has now been increased to 50%, allowing far more mixed-use leaseholders to take over the management of or to buy the freehold of the building if they wish to.

The usual regulations apply in terms of fire safety and major works. Any major works set to cost leaseholders more than £250 each must be preceded by the Section 20 consultation procedure. Leaseholders also have the legal right to challenge poor management and undue service charges by taking their case to the First-tier Tribunal.

The Role of Managing Agents

Managing agents play a critical role in the smooth operation of mixed-use buildings. Their responsibilities include ensuring compliance with lease terms, allocating service charges and resolving disputes. Most managing agents work hard for their leaseholders and take great care in their work. However, mismanagement can exacerbate tensions.

Many leaseholders struggle with a lack of transparency in terms of the building’s financials, a lack of action around noise complaints or usage concerns and delays in addressing maintenance issues. Leaseholders should work together to address these concerns and perhaps even consider utilising the Right to Manage or taking over under collective enfranchisement.

All managing agents must now belong to a redress scheme by law, so contacting the professional body they have chosen to register with will be a good place to start if you have any concerns. This information should be clearly displayed on the agent’s website, but if not, they must give this information to leaseholders when requested.

Conclusion

Living in a mixed-use building offers unique benefits but does comes with its share of challenges. From disputes over service charges to noise complaints, leaseholders need to be proactive in understanding their rights and resolving conflicts.

Staying informed about legal protections, engaging with landlords and managing agents, and seeking expert advice where necessary can help navigate the complexities of mixed-use developments.

By fostering collaboration and fairness between residential and commercial stakeholders, mixed-use buildings can fulfil their potential as vibrant, functional spaces that benefit all occupants.

Flat Living Insurance arranges insurance for self-managed customers only, call us on 0333 577 2044 to get a quote for your block today.