An interesting point arising from the discussions in the Kelton Court seminar group at the ALEP Conference on Wednesday was that the question of the ‘management risk’ associated with flats might also be abated not only in a situation where there is a head lease, but also if the flats are subject to ‘maisonette’ style leases.

These are effectively fully repairing and insuring residential leases typically found in small blocks of not more than 2 or 3 flats where all the maintenance responsibility and the obligation to insure rests with the individual flat owner.

In these leases the structure of the covenants is such that the property is divided into ‘layers’ with each owner fully responsible for the structure and interior at their ‘level.’

This is certianly a good point and one no doubt that will be taken in practice against anyone trying to argue for a 0.5% enhanced management risk factor in such a situation.

I would be interested to hear if anyone has encountered such an argument.

Mark Chick

12.3.2010