I Inherited a Block of Flats – Now What? A Complete Guide for Unexpected Property Owners

Introduction

The phone call came as a shock. A distant relative has passed away, and you’ve inherited their block of flats. What seemed like a windfall might actually be a complex financial and legal responsibility you never asked for.

Unlike inheriting a single house, a block of flats comes with leaseholders, service charges, maintenance obligations, legal responsibilities, and potentially significant problems. Before you make any decisions, you need to understand exactly what you’ve inherited and what your options are.

This comprehensive guide walks you through everything you need to know as a new, unexpected block owner in the UK.

First Steps: Understanding What You’ve Inherited

1. Establish Legal Ownership

Action Required:

• Contact the executor of the estate
• Obtain a copy of the will
• Confirm the Grant of Probate
• Register your interest with the Land Registry

Timeline: This process typically takes 3-6 months from the date of death.

Costs:

• Probate application: £273 (or £155 if applying through solicitor)
• Land Registry fees: £40-£910 depending on property value
• Solicitor fees: £1,500-£5,000+ if using professional help

2. Gather Essential Documentation

Request these documents immediately:

Property Details:

• Land Registry title deeds
• Building plans and specifications
• EPC certificates for all units
• Planning permissions and building regulations approvals

Financial Records:

• Service charge accounts (last 3 years minimum)
• Reserve fund balances
• Outstanding maintenance bills
• Rental income records (if applicable)
• Mortgage details (if inherited with debt)

Legal Documents:

• All lease agreements
• Ground rent documentation
• Management company agreements
• Insurance policies
• Previous tribunal or court proceedings

Safety and Compliance:

• Gas Safety Certificates
• Electrical Installation Condition Reports (EICR)
• Fire Risk Assessments
• EWS1 forms (if applicable)
• Asbestos surveys
• Legionella risk assessments

3. Understand the Structure

Freehold vs. Leasehold Complications:

If you’ve inherited the freehold, you own:

• The building and land
• Right to collect ground rent
• Responsibility for common areas
• Obligation to maintain the structure

If you’ve inherited the freehold AND some leasehold flats:

• You’re both landlord and leaseholder
• Creates potential conflicts of interest
• May affect service charge calculations

Your Legal Responsibilities as the New Owner

Under the Landlord and Tenant Act 1985

You must:

• Maintain the structure and exterior of the building
• Keep common parts in repair
• Ensure water, gas, electricity, and heating installations work properly
• Comply with service charge transparency requirements

Under the Building Safety Act 2022 (For Buildings Over 11m)

You’re now the “Accountable Person” and must:

• Register the building with the Building Safety Regulator
• Conduct regular fire risk assessments
• Maintain a Safety Case Report
• Report incidents to the regulator
• Fix identified issues within specified timelines

Penalties for non-compliance: Unlimited fines and/or up to 2 years imprisonment

Under the Regulatory Reform (Fire Safety) Order 2005

You must:

• Carry out a fire risk assessment
• Implement necessary fire safety measures
• Keep detailed records
• Review assessments regularly (annually recommended)

Other Legal Obligations

• Insurance: Buildings insurance is mandatory if there’s a mortgage; best practice regardless
• Health & Safety: Compliance with asbestos, legionella, and electrical safety regulations
• Data Protection: If you hold tenant personal information, you’re a GDPR data controller
• Right to Manage: Leaseholders may form a company to take over management responsibilities

Hidden Financial Obligations You Need to Know About

1. Outstanding Maintenance and Repairs

Many inherited blocks come with deferred maintenance:

• Roof repairs: £15,000-£80,000
• Window replacement: £2,000-£4,000 per flat
• Boiler/heating system: £30,000-£100,000+
• Redecorating communal areas: £5,000-£20,000
• Damp remediation: £3,000-£15,000 per affected flat

Reality check: Budget £10,000-£50,000+ for “urgent” repairs in the first year.

2. Service Charge Arrears

If leaseholders owe unpaid service charges, you inherit:

• The right to collect (but enforcement costs money)
• Legal expenses from previous attempts
• Potentially hostile leaseholder relationships

Average recovery cost: £3,000-£10,000 in legal fees per leaseholder taken to tribunal

3. Mortgage Debt

If the block has an outstanding mortgage, you inherit:

• The loan obligation
• Monthly payments (can be £1,000-£5,000+)
• Potential for immediate demand if lender discovers ownership change
• Risk of repossession if payments missed

4. Ongoing Running Costs

Annual expenses for a typical 12-unit block:

• Buildings insurance: £3,000-£8,000
• Management fees (if using agent): £2,000-£6,000
• Utilities for common areas: £1,200-£3,000
• Cleaning and grounds maintenance: £2,400-£6,000
• Accountancy and legal: £1,500-£3,000
• Reserve fund contributions: £3,000-£10,000

Total annual costs: £13,000-£36,000 (£1,100-£3,000 per flat)

Tax Implications of Inheriting a Block of Flats

Inheritance Tax (IHT)

Current rules (2024):

• Estate worth over £325,000 (nil-rate band) is subject to 40% IHT
• Additional residence nil-rate band of £175,000 if main home passed to direct descendants
• Business property relief may reduce IHT if block qualifies as business property

Example: Inherited block valued at £2 million, total estate £2.5 million

• Amount over threshold: £2,175,000
• IHT due: £870,000 (40%)

Who pays: Usually paid from the estate before distribution, but confirm with executor.

Capital Gains Tax (CGT) – If You Sell

Key points:

• Your “acquisition value” is the market value at date of death
• CGT only applies to gains from that date forward
• Current CGT rates: 18% (basic rate) or 28% (higher rate) for residential property
• Annual exemption: £3,000 (2024/25 tax year)

Example:

• Value at inheritance: £2 million
• Sold 6 months later: £2.1 million
• Gain: £100,000
• CGT due: £27,160 (assuming higher rate taxpayer)

Income Tax – If You Rent Flats

Any flats you own (not leasehold) that generate rental income:

• Added to your personal income
• Taxed at your marginal rate (20%, 40%, or 45%)
• Can deduct allowable expenses (maintenance, insurance, management)

Example: 3 flats generating £3,000/month total (£36,000/year)

• Expenses: £12,000
• Taxable profit: £24,000
• Income tax (40% bracket): £9,600

Stamp Duty Land Tax (SDLT)

Generally not payable on inherited property, but if there’s an outstanding mortgage you’re taking on, complex rules may apply. Seek professional advice.

Common Problems with Inherited Blocks

Problem 1: The Block Is Unmortgageable

Why this happens:

• Dangerous cladding (EWS1 form failure)
• Major structural issues
• Short leases (under 70 years remaining)
• Building regulation non-compliance
• Missing documentation

Impact:

• Can’t sell to buyers needing mortgages (80% of market)
• Forced to accept cash buyers only
• Property value drops 20-40%

Problem 2: Leaseholders Are Hostile

Common scenarios:

• Previous owner neglected building
• Service charges disputed
• Legal battles ongoing
• Mistrust of new freeholder

Your position:

• You inherit the relationship problems
• May face immediate tribunal claims
• Reputational damage affects management

Problem 3: Major Works Are Needed

Expensive surprises:

• Cladding remediation: £200,000-£2,000,000+
• Structural repairs: £50,000-£500,000
• Fire safety upgrades: £80,000-£300,000
• Roof replacement: £40,000-£150,000

The dilemma:

• Can’t afford works personally
• Leaseholders can’t/won’t pay via service charges
• Can’t sell without addressing issues
• Insurance may be cancelled

Problem 4: Negative Cashflow

Income:

• Ground rent: Often just £250-£500/year per flat
• Rental income: Only if you own leasehold flats too

Outgoings:

• All running costs mentioned earlier
• Void unit losses
• Repair costs
• Mortgage payments

Result: You’re paying £1,000-£5,000+ per month to own the property

Problem 5: It’s in the Wrong Location

Challenges if the block is:

• 200+ miles from where you live
• In an area you don’t know
• In a declining market
• Difficult to access regularly

Consequences:

• Can’t oversee management properly
• Struggle to find reliable contractors
• Higher management agent fees
• Miss emerging problems

Your Options: Keep, Manage, or Sell?

Option 1: Keep and Self-Manage

Best if:

• Block is well-maintained and profitable
• You have property management experience
• Block is local to you
• Leaseholders are cooperative
• You want long-term income stream

Pros:

• Keep all ground rent income
• Potential property value growth
• No agent fees (saving £2,000-£6,000/year)
• Direct control over decisions

Cons:

• Time intensive (5-15 hours/week)
• 24/7 responsibility for emergencies
• Need to learn complex legislation
• Personal liability for mistakes
• Stress and hassle

Realistic assessment: Most people with full-time jobs find self-management overwhelming within 6 months.

Option 2: Keep and Use Professional Management

Best if:

• Block has good fundamentals
• You want passive income
• You’re too busy to self-manage
• Block is distant from you

Pros:

• Professionals handle day-to-day issues
• Legal compliance support
• Emergency cover 24/7
• Less personal stress

Cons:

• Management fees: £100-£250 per flat per year
• Still ultimately responsible
• Agent performance varies widely
• You’re paying someone to manage your headache

Realistic assessment: Reduces workload but doesn’t eliminate problems or financial obligations.

Option 3: Sell to Traditional Property Investors

Best if:

• Block is in good condition
• No major compliance issues
• Strong rental market
• You want market value

Pros:

• Potentially highest sale price
• Multiple buyers to choose from
• Estate agents market widely

Cons:

• Estate agent fees: 1-3% of sale price
• Legal fees: £3,000-£10,000+
• Lengthy process: 6-18 months typical
• Many buyers walk away after surveys
• Sales often fall through
• Meanwhile, you’re still responsible and paying costs

Realistic assessment: Only works for problem-free blocks in desirable areas.

Option 4: Sell to Specialist Block Buyers

Best if:

• Block has significant problems
• You want a fast, certain exit
• You can’t afford ongoing costs
• You live far from the property
• You don’t want the responsibility

Pros:

• Fast completion: 3-6 weeks typical
• Buyers factor in problems
• No estate agent fees
• Legal fees often covered by buyer
• No sale fall-through risk
• Immediate stress relief

Cons:

• Won’t achieve full market value
• Offer reflects problems and convenience
• Less competition (fewer buyers)

Realistic assessment: Best option for problem blocks or owners who need a quick exit.

Option 5: Sell Individual Flats to Leaseholders

Best if:

• You own multiple leasehold flats (not just freehold)
• Leaseholders want to buy their freeholds
• Block is otherwise unproblematic

Pros:

• Leaseholders often pay premium for freehold
• Gradual exit strategy possible
• Can retain some units if desired

Cons:

• Complex legal process (enfranchisement)
• Leaseholders have right to collective purchase at discounted rate
• Fragmented ownership reduces remaining value
• Takes years to complete

Real-Life Scenarios: What Others Did

Scenario 1: The Profitable Keep

Inherited: 8-flat block in Brighton, well-maintained, good location

Situation:

• £2,400/year ground rent income
• Owned 2 leasehold flats generating £1,800/month rental
• Total income: £23,000/year
• Running costs: £9,000/year
• Net profit: £14,000/year

Decision: Hired professional management company, kept the block

Outcome: After 3 years, refinanced to extract equity for other investments. Still owns block today as part of property portfolio.

Scenario 2: The Problem Block Exit

Inherited: 14-flat block in Wolverhampton, significant issues

Situation:

• Dangerous cladding requiring £420,000 remediation
• 6 flats void (no rental income)
• Service charge arrears of £34,000
• Hostile leaseholders threatening legal action
• Building Safety Fund application rejected

Decision: Sold to specialist block buyer within 4 weeks

Outcome: Received offer £220,000 below “perfect condition” valuation, but avoided:

• £420,000 cladding costs
• Years of legal battles
• Potential bankruptcy
• Ongoing stress

Net position: Better than if they’d kept the block.

Scenario 3: The Gradual Transition

Inherited: 6-flat block in Edinburgh, moderate condition

Situation:

• Block needed £80,000 roof repairs
• Mixed leaseholder relationships
• Some rental income from 1 flat owned

Decision: Phase 1: Hired managing agent and funded roof repairs from estate cash

Phase 2: Approached leaseholders about buying freeholds

Phase 3: After 18 months, sold freehold interest to leaseholder collective

Outcome: Achieved good price, maintained relationships, orderly exit over 2 years.

Step-by-Step: Making Your Decision

Week 1-2: Assessment Phase

Day 1-3: Gather information

• Collect all documentation
• Meet with previous managing agent (if any)
• Review financial records
• Inspect the property

Day 4-7: Commission professional surveys

• Building survey: £800-£2,000
• Fire risk assessment: £500-£1,500
• Electrical inspection: £400-£800
• Gas safety checks: £300-£600

Day 8-14: Calculate true financial position

• Total all debts and arrears
• List all required repairs
• Calculate annual running costs
• Project cashflow for next 12 months

Checkpoint: Do the numbers work? Is this profitable or a money pit?

Week 3-4: Explore Options

Speak with:

• 2-3 managing agents for quotes
• 2-3 traditional estate agents for valuations
• 1-2 specialist block buyers for offers
• Property solicitor for legal obligations
• Accountant for tax implications

Checkpoint: What’s the best option based on my circumstances?

Week 5-6: Decision Time

Consider:

• Your financial position: Can you afford ongoing costs?
• Your time: Do you have 10+ hours/week for this?
• Your location: Is the block manageable from where you live?
• Your goals: Does this fit your life plan?
• The block’s condition: Solid investment or endless problem?
• Your stress tolerance: Can you handle leaseholder issues?

Make a decision: Keep or sell?

Week 7+: Implementation

If keeping:

• Appoint managing agent
• Register as new owner with all utilities
• Introduce yourself to leaseholders
• Set up bank accounts for service charges
• Arrange insurance
• Fund reserve account
• Address urgent repairs

If selling:

• Instruct estate agent or accept specialist buyer offer
• Appoint property solicitor
• Provide all documentation to buyer
• Cooperate with surveys and due diligence
• Complete sale

Tax-Efficient Strategies

1. Declare It as a Business

If you’re actively managing the block, it may qualify as a business for tax purposes:

Benefits:

• More generous expense deductions
• Potential business asset disposal relief when you sell
• May reduce IHT liability if held for 2+ years

Requirements:

• Regular, substantive involvement
• Profit-seeking motive
• Business-like operation

2. Transfer to a Limited Company

Some owners transfer ownership to a company:

Benefits:

• Corporation tax (19-25%) vs. income tax (up to 45%)
• Can retain profits in company
• Cleaner sale structure later

Drawbacks:

• SDLT payable on transfer (3-15% depending on value)
• Complex tax implications
• Annual accounts and filing requirements

Recommendation: Only consider if planning long-term hold with significant rental income.

3. Gift to Family Members

If you don’t need the asset, you could gift it to children or other family:

Benefits:

• Potentially IHT efficient if you survive 7 years
• Can spread income among family members

Drawbacks:

• Loss of control
• Potential CGT implications
• Recipient inherits all problems

Questions to Ask Before Making Any Decisions

Financial Questions:

1. What’s the block truly worth (adjusted for problems)?
2. How much debt is attached?
3. What are annual running costs?
4. What repairs are needed in next 1-3 years?
5. What’s my worst-case financial exposure?

Legal Questions: 6. Am I compliant with all regulations? 7. Are there ongoing legal disputes? 8. What notices have been served by authorities? 9. What’s my personal liability risk?

Practical Questions: 10. How much time will this require? 11. Can I manage from my location? 12. Do I have the skills/experience needed? 13. What happens if I do nothing?

Personal Questions: 14. Does this fit my life plans? 15. Can I handle the stress? 16. What would I do with freed-up capital? 17. Am I keeping this for the right reasons?

Red Flags: When to Sell Immediately

Consider a fast sale to a specialist buyer if:

🚩 Cladding or fire safety issues with remediation costs over £100k
🚩 Building Safety Regulator enforcement action pending
🚩 Multiple leaseholder tribunal cases ongoing
🚩 Block is unmortgageable (no EWS1 or structural issues)
🚩 Insurance coverage cancelled or unaffordable
🚩 Negative cashflow exceeding £2,000/month
🚩 You live 200+ miles away
🚩 Major repairs needed that you can’t fund
🚩 You have no property experience and don’t want to learn
🚩 Health or personal circumstances make management impossible
🚩 The stress is severely impacting your wellbeing

Don’t let pride, guilt, or family expectations trap you in an unmanageable situation.

Getting Professional Help

Property Solicitor (Essential)

Specialisms needed:

• Leasehold/freehold law
• Service charge disputes
• Building safety compliance

Cost: £250-£400/hour, or fixed fees for specific work

When to use: Before making any major decisions

Accountant (Highly Recommended)

Specialisms needed:

• Inheritance tax
• Property taxation
• Business structures

Cost: £150-£300/hour

When to use: Before deciding to keep or sell

Managing Agent (If Keeping)

Services provided:

• Day-to-day management
• Service charge collection
• Contractor coordination
• Legal compliance
• Financial reporting

Cost: £100-£250 per flat per year

When to use: If keeping the block

Surveyor/Engineer (Recommended)

Services provided:

• Condition assessment
• Repair cost estimates
• Compliance advice

Cost: £800-£2,500 for full survey

When to use: Within first month of inheritance

Conclusion: It’s Okay to Walk Away

Inheriting a block of flats is not the same as inheriting a windfall. For many people, it’s inheriting a complex, demanding, expensive responsibility they never wanted.

Remember:

• You’re not obligated to keep property just because it was left to you
• Your financial wellbeing comes first
• There’s no shame in selling to specialists who handle problem blocks daily
• The “loss” of selling below market value may be tiny compared to years of stress and expense

At Citywide Blocks, we’ve worked with dozens of people who inherited blocks they didn’t want. We understand the emotional complexity—honoring a relative’s memory while making the right financial decision for yourself.

We buy inherited blocks across the UK, regardless of condition or complexity. We move quickly, cover legal costs, and make the process as stress-free as possible.

Inherited a block of flats and feeling overwhelmed? Contact us for a confidential, no-obligation discussion about your options.