Service Charge adjustment for 3 years ago!

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    Service Charge adjustment for 3 years ago!

    I purchased a flat in October 2015. The landlord at the time was also the management company and it was clear they were behind in producing their annual accounts. In 2016 another company took over management of the flats and they have only just published the accounts for 2015. As a result they are requesting additional service charges to be paid for the 2015 year.

    In the two years the new management company have been looking after the flats (2016 and 2017) they have also just asked for adjustments to service charges for both those years.

    Does anyone know how I stand legally with regard to the additional service charges for the last 3 years? How far back can they go?

    Thanks.

    #2
    12 years, 6 years or 18 months.

    They must tell you that they will eventually charge you within 18 months of spending.

    Otherwise, if the service charge is interpreted as a rent, I think you can use a delay of six years as a defence.

    Or if it is interpreted as a contract under a deed, I think you can only reject after 12 years.

    In you case, it depends on whether or not they told you they had been incurred within 18 months of actually paying out.

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      #3
      They are saying my solicitor who did the conveyancing in October 2015 "should have been advised" that the 2015 accounts hadn't yet been produced and that a section S20b had been issued (notice of delay to the audited accounts), and that my solicitor will have been advised to withhold a retention to cover any adjustments to the budgets. I assume this retention would have been taken from the seller. So I assume the seller would have to have agreed to pay an extra, undefined amount of service charge to our solicitor, which he would have held for 2 years, just in case an adjustment was made by the landord? This seems very unlikely.

      I have contacted my solicitor who says he will check, but isn't aware that anything was retained.

      I have been receiving invoices for service charges for over 2 years and have always paid the amount due on time and only now have they included additional service charge amounts for 2015, 2016 and 2017. That is the first documentation I personally have received from them.

      Do they have to specify amounts within 18 months or is it enough to simply say "we may need to charge more"?

      Comment


        #4
        Audited accounts don't come into this. The accountant certified summary of accounts doesn't really come into this either. There is no statutory requirement to audit service charge accounts (and most small businesses are now immune from audits of the money they own in their own right, as well).

        Section 20b refers to a notice issued within the 18 month time limit, that some time, in the indefinite future, the amount will be included in a service charge demand.

        The general life cycle of a service charge is:

        - A budget is set
        - A payment on account is demanded.
        - The amount actually needed is determined and spent.
        - Optionally, immediately after either it is determined or spent, a demand is made make good any shortfall
        - At the end of the year, a statement is prepared, showing what was paid on account, paid immediately, and spent, and any excess returned to the leaseholder (or transferred to a sinking fund) and any short fall demanded immediately.
        - Somewhat later, summary accounts are produced, which may be checked bay a qualified accountant.

        Roughly speaking, the 18 month rule applies between the time the money is spent and it is accounted for on the statement, or an immediate top up is requested.

        I hope I've got that right,as this particular rule has never been an issue for me personally.

        Some leases don't allow payments on account, and rather more do not allow sinking funds.

        It does seem to me that your freeholder is failing to maintain adequate financial records!

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