Leasehold flats are a costly form of ownership for first-time buyers who want to move up the property ladder.

Around three million people in the UK – many first-time buyers – own leasehold flats, and this is set to rise as most new-build flats are sold leasehold.

“Naive leaseholders buy a flat and think that – more or less – they have bought the equivalent of a freehold home,” says Sebastian O’Kelly, spokesman for the Leasehold Knowledge Partnership. They bought a long-term rental with other people in the same position.

Contrary to popular belief the first-time buyer market is still strong despite the requirement for large deposits. The latest data from Council of Mortgage Lenders shows that mortgages for first-time buyers increased by 8%, 24% and 24% in November 2012 respectively, compared to November 2011. Halifax reported that the Halifax said that first-time buyers had reached their highest point for five years in 2012.

But those who have bought a leasehold will have merely purchased the right to live in a property for a set period – usually 99 or 125 years – rather than owning the land it stands on. The land is owned by a landlord or freeholder who will charge rent.

The managing agent is typically employed by the freeholder to maintain common areas, such as roofs, staircases and gardens, and to make sure that leaseholders comply with the lease terms.

There are growing disputes between leaseholders, freeholders and their agents. These disputes are on the rise. Leasehold Advisory Service , dealt with around 41,000 inquiries in the financial year 2011-12, while its website had more than 400,000 visitors – up 21% from the previous year. The number of enquiries by email and appointment increased 13%.

Leaseholders are required to pay maintenance fees. This is a major problem. It is the leaseholder or their agent who decides what work will be required, who will do it and how much.

Management agents often charge more than the commercial rate. Many managing agents have their own subsidiaries that complete work. Some take kickbacks from insurance brokers to buy high-priced buildings coverage, and pass the cost onto leaseholders. You can fight back, but it is much easier to find support from other leaseholders (see Box).

It is open to everyone and anyone, so anyone can become a managing agent. Agents are welcome to join the Association of Residential Managing Agents (ARMA)It doesn’t guarantee professional service at a fair price for leaseholders.

The long-standing demand for regulation and overhaul of the leasehold industry has been there since its inception. ARMA conducted a consultation last week about a self regulation scheme. It will soon report on its findings.

Rhys Davies is one of them. He was a leaseholder who regrets buying his apartment. Rhys Davies, a 25 year-old Cardiff resident who purchased the flat in May 2011 with his partner. Although the estate agent provided an estimate of service fees to the couple, their bill has increased since they moved into the flat.

He claimed that the company’s expenses were prohibitive and are hard to reach if there is any question. You will be at their mercy if they increase the cost. The worst thing is that I don’t know what service they are charging for other than lighting the corridors and mowing their grass.

You need to be aware of many factors when you consider purchasing a leasehold property. These include ground rent, future and historical service costs, projected expenses including major work, as well as clauses in leases that restrict property use. Some ban sub-letting, while others ban pets.

Chris Alexander, a solicitor at SA Law LLP says buyers should realize that they’re not purchasing a property. They are instead purchasing a contractual right to use the property for the duration of the lease. This can often be subject to many limitations.

Leaseholders have free advice from the Leasehold Advisory ServiceOr Leasehold Knowledge PartnershipYou can take the dispute to the Leasehold Valuation Tribunal where an independent panel will hear it. Another option is for leaseholders and their collective “right of management” to be exercised.

You don’t have to lease a flat. There are other options. The usual alternative is to own a share of the freehold – technically you will still be a leaseholder, but on a long lease of up to 999 years. Each leaseholder owns the freehold. Each leaseholder is entitled to a share of company stock. This arrangement requires that all common areas be maintained by the freeholders. They have the option to arrange for this work or hire a managing agency. Residents decide how their money is spent. Another system of tenure for flat owners – commonhold – was introduced in 2004.

Commonhold is very similar in that it can be used over a number years. Developers are reluctant to construct new flats because they don’t see the value in commonhold.

Freehold is an example.

Sally Briggs writes, “I believed that I made a smart purchase by buying a freehold interest rather than a leasehold when I bought my Manchester flat.” The freehold wasn’t shared with any other owners, which made this arrangement seem great. This view was quickly altered when I sold the property.

Joelson Wilson property partner Paul Goward said that individuals should be considered freeholders when purchasing a flat. Although it may not be an issue when buying, it is important that you consider the potential impact on your sale.

When I tried to sell the property I could not get any of my other freeholders to sign the document that transferred freehold property to the new seller. The problem took months to resolve and nearly cost me my buyer. The problem was only ended by court action.

This was something that I had never heard of before. But I know now that selling a portion of a freehold apartment can be problematic. Leasehold Advisory Service states that there are many disputes involving shares of freehold. Some of these disputes are similar to mine. There are things you could – and should – do before you buy a share of freehold property.

Goward suggests that freehold owners consider setting up a management company to own the freehold. “Each owner has a share in company. A director would direct the company to grant consent.

To avoid having to get each shareholder’s signature, an individual owner could decide to sell his shares in the management company.

The advisory service offered advice to individuals who are considering purchasing this type of property due to issues with share of freehold.

It’s not always a good idea for buildings with a small number of apartments to form a company in order to obtain the freehold. Simon Tye is a legal advisor to the LAS. This can be problematic for a small number leaseholders. The alternative to joint ownership is to have it owned on title deeds if there are less than 4 leaseholders. These cases warrant the signing of a declaration de trust. This declaration will set out the obligations and relationships between co-owners.

He stated that, while the declaration won’t be a panacea for all your problems, it can help to ensure that your flats sell and that all freeholders agree to participate in the sale.

Sally Briggs can be used as a pseudonym