Invalid S20 costs when completing

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    Invalid S20 costs when completing

    The council is buying back the flat I bought 6 years ago through RTB. The sale completes next week. They issued a S20 Invite to consultation letter in July 2019 however the works have not yet begun. No other correspondence received. Their solicitor has insisted on payment of my share of the future major works bill before completion even though I won't be around to benefit once the works are actually carried out. I've paid under protest but intend to lodge a complaint after the sale completes. Have read Jastrzembski v City of Westminster.
    Is there any other advice on my chances of getting the money back? It's just under £1k. Thanks.

    #2
    You could negotiate with the buyer. Either way you pay.

    What possible substance to the protest. Service charges are payable when they are payable -- nothing to do with who benefits.

    Comment


      #3
      It's unreasonable to expect payment for major works that a) are an estimate from 11 months ago, b) I haven't received a bill for and c) works have no estimated start date and d) I won't be the owner whenever the actual works are carried out.

      I took advice from a lawyer at Lease Advice and they said the council were being unreasonable.

      I wouldn't pay for council tax for the period after I've sold the property so why would this be any different?

      Comment


        #4
        It is totally different (vs Council Tax). You own (and are selling) a contract. That contract says you have to do certain stuff at a certain time. Payment for works is always before those works take place, and there often is not an estimated start date.

        You are not paying "for a period". Payments are due at the point they are due.

        Your lawyer at Lease Advice talking nonsense. If they are advising on leases they should be fired on the spot. I really really don't believe they told you that payment of service charges is not required if the person paying will not be around to benefit from the payment. because that is patent c_)_p.

        Normally what happens is that you negotiate with buyers on the apportioning of certain matters (in this case something that is clearly, by default apportioned to you). The buyer then adjusts their price based on that negotiation.

        Comment


          #5
          Ok I understand the point you are making but then what about the fact that I haven't been billed for it yet? The other leaseholders in our block haven't been billed either.
          ​​​​​​And the length of time between the notice of intention and the works beginning. Case law above states work should take place within "months rather than years".

          Comment


            #6
            OK a private bill for you does not fly. The fact that the S20 process might be invalid does not make it non-payable. But I agree that the freeholder cannot try to claim a private amount from you. But that is not what is happening at all.

            Going back to your original post it seems that the buyer sees an anticipated service charge for major works, and is trying to negotiate with you that you pay it (to them) otherwise they are going to pull the plug. That is completely normal. I am presuming they are not suggesting you pay it to the FH, but to the seller by way of a discount. Why would the FH accept unbilled cash. It had zip to do with the FH.

            Comment


              #7
              Thanks. The FH is the council. They are not deducting the major works sum from the sale price. They are accepting it as a separate payment into the usual account that they would collect major works money from leaseholders.

              Comment


                #8
                That makes no sense. I am starting to agree with you. The freeholder, who is effectively purchasing themselves can't really look ahead in this way and request a special service charge that is not requested from other lessees. However they can (like other purchasers) negotiate a reduction in the price in view of pending PROPOSED charges.

                Comment


                  #9
                  Thanks for your help. I'll challenge the bill next week once I've completed and report back on the outcome. Likely to be 5 or 6 months to exhaust their complaints procedure.

                  Comment


                    #10
                    The starting point is to consider the provisions relating to apportionment contained in the Standard Conditions of Sale, which may be regarded as some sort of a default:

                    6.3.1 On evidence of proper payment being made, income and outgoings of the property are to be apportioned between the parties so far as the change of ownership on completion will affect entitlement to receive or liability to pay them.

                    6.3.2 If the whole property is sold with vacant possession or the seller exercises his option in condition 7.2.4, apportionment is to be made with effect from the date of actual completion; otherwise, it is to be made from completion date.

                    6.3.3 In apportioning any sum, it is to be assumed that the seller owns the property until the end of the day from which apportionment is made and that the sum accrues from day to day at the rate at which it is payable on that day.

                    6.3.4 For the purpose of apportioning income and outgoings, it is to be assumed that they accrue at an equal daily rate throughout the year.

                    6.3.5 When a sum to be apportioned is not known or easily ascertainable at completion, a provisional apportionment is to be made according to the best estimate available. As soon as the amount is known, a final apportionment is to be made and notified to the other party. Any resulting balance is to be paid no more than ten working days later, and if not then paid the balance is to bear interest at the contract rate from then until payment

                    The period over which the service charge is to be apportioned is the service charge year in which completion of the sale takes place. The exact amount is not going to be known until sometime after the end of the service charge year when the final account for that year is available. That means that on completion an estimated apportionment will have to be made in accordance with clause 6.3.5 with a balancing payment made when the account is available.

                    A major snag with clause 6.3.5 is that when it comes to service charges it does rather assume that major expenditure not covered by a reserve fund does not occur during the service charge year in which completion takes place or soon after. When the parties are aware that that is the case, the seller will want to argue that he will get no benefit from the works and the buyer that the wants of repair occured before he was an owner and should have been covered by contributions made to a reserve fund by the seller. The only way forward is to do a bit of horse-trading. There are a number of possible solutions, but whatever is agreed the drafting needs to ensure that there is no room for argument.

                    Comment


                      #11
                      Thanks, really useful.
                      I complete on Tuesday hence why I paid under protest as I don't want £900 to hold the sale up. The fact the council are buying the property back, presumably to let it out as temporary accommodation, makes me wonder how hard they will contest my challenge when I do make it. I could possibly understand the argument if a private buyer were purchasing the property and effectively inheriting my debt.

                      Comment

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