Lease flat small estate service charge and communal area issue - help required

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    Lease flat small estate service charge and communal area issue - help required

    Good morning

    So I purchased a leasehold flat on a 999 year lease recently. The flat is accessed by a very small communal area with a stairway which serves one flat downstairs on entrance and two flats upstairs. My flat is located upstairs. The estate consists of 23 properties overall which are all long leaseholds but the others are town house style properties with car parking spaces etc.

    So the builders were never really forthcoming with the service charge amount but since the development has been completed, the managing agents have sent out the service charge schedule which I consider to be extremely high. As I have a car parking space with my flat along with the bins being kept near the car park spaces I am also required to contribute to the rest of the estate (gardening, landscaping etc despite me not having a garden). I understand and accept this as this is the way the lease was drafted and implemented whether fair or not, it is what it is I guess.

    The ground rent is not collected and is a nominal fee.

    The "silent management company" was set up by the builders and then transferred to 5 leaseholders who decided to become the Directors and attend meetings quarterly to discuss issues and decide on the budget allocation and expenditure etc. The actual management company who the builders employed to carry out maintenance etc are the ones who seem to do everything subject to the directors wishes but as the directors are lay people who have a common interest in the estate they just do what the management company tell them to do.

    I am confused as to why the budget consists of the following considering that it is relatively newly converted:

    - "Lightning / storm protection" = what is this exactly? Surely normal houses do not have this
    - "Sinking fund" = what is this for?
    - "Repairs and maintenance" = I understand what this is but surely given the estate is relatively new there shouldn't be any need for these costs at this stage - maybe in 10 years time or so

    Then there are just budget items for the communal area which I don't understand given that it only really serves two properties

    - "Emergency Lighting" = what is this?
    - "Fire risk assessments" = I have done some research into this and discovered that myself and the neighbouring properties could possibly conduct these ourselves and in any event they are only required once every 5 years
    - "Cleaning" = surely myself and the neighboring property can care for the cleaning ourselves

    IF you can let me know what you think that would be much appreciated, the conveyancers when I purchased weren't particularly helpful and I appreciate they should have probably provided more details but with this being a new build estate they said they were fairly limited on information

    John

    #2
    Fire risk assessments need to be done whenever they are needed. Five years is a guideline for how often to to a full top to bottom one, and one year is a guideline for how often to review one, but you also need to review or even redo, if there is any significant change in circumstance.

    Cleaning, we found that although our lease allowed for the leaseholders to do the cleaning, they abdicated to the freeholder very quickly. That was with 100% owner occupation. I imagine that, in generation rent, it will be even more difficult to find volunteers.

    Our lease basically allows the freeholder to intervene if asked, or if they think the cleaning is inadequate. Yours may insist that the freeholder arranges it. Read it!

    Emergency lighting will be required if there are any internal communal areas on escape routes that don't get more than 1 lux on their centre line when the power fails. It is likely they exist.

    Paint doesn't last 10 years, nor do light bulbs, although it is true that maintenance costs are lower in new builds. You may also find that this heading has to be used to deal with the results of ASB. The lease may require redecoration on a particular schedule. Read it.

    A sinking fund is a mechanism where money is saved up for a future big spend items, to smooth out the service charges. It may also include provisions for "rainy days". If you have one it will be detailed in the lease. Read it!

    Lightning and storm protection is a little odd. All buildings have some level of storm protection, but why that is separate unclear (maybe just a standard heading, used just for lightning protection). Whilst UK houses don't have lightning protection it is standard for houses in some parts of the USA.

    Comment


      #3
      Thanks for the quick response but I have some further issues as below:

      Cleaning, we found that although our lease allowed for the leaseholders to do the cleaning, they abdicated to the freeholder very quickly. That was with 100% owner occupation. I imagine that, in generation rent, it will be even more difficult to find volunteers. = who is your Freeholder? if someone other than the estate owners then I could understand that they will decide on the cleaning aspect.

      Our lease basically allows the freeholder to intervene if asked, or if they think the cleaning is inadequate. Yours may insist that the freeholder arranges it. Read it! = The Lease defines that the cleaning is part of the "maintenance expenditure" determined by the "Management Company" however I have noticed that the Management Company does not have a definition as to who it is within the Lease....

      Paint doesn't last 10 years, nor do light bulbs, although it is true that maintenance costs are lower in new builds. You may also find that this heading has to be used to deal with the results of ASB. The lease may require redecoration on a particular schedule. Read it. = Sorry but what is ASB? The lease doesn't include any provision on when it should be redecorated. It just refers to it within the maintenance expenditure as mentioned above

      A sinking fund is a mechanism where money is saved up for a future big spend items, to smooth out the service charges. It may also include provisions for "rainy days". If you have one it will be detailed in the lease. Read it! = so the sinking fund is saved up but never paid back to the leaseholders at the end of the year? Does this mean in the future that the calculated budget should be less taking this into account? What exactly does the sinking fund need to cover as I have mentioned the estate is relatively new which still benefits from NHBC cover and the budget seems to account for repairs and maintenance in any event

      The lease also details that if the service charge is to be determined it needs to be by an arbitrator appointed by RICS and all costs are paid by the tenant, I wonder if this is worth investigating or whether they will side with the directors. I am just unsure given the usual circumstances of the lease and the setup of the estate and management company and I do not consider it to be fair.

      Comment


        #4
        Have you been invited to become a director of the management company? I would make further enquiries as to how the 5 leaseholders came to be appointed. It is sometimes a method used by the developer to retain control by carefully selecting certain individuals to run the management company and issue work to contractors associated with the developer.

        Comment


          #5
          In our case, the leaseholders are the only members of a, not for profit, limited by guarantee, company, that is the freeholder

          There isn't one lease. Every leaseholder has their own lease. If you want the complete picture, you will need to obtain copies of all the leases.

          ASB is anti-social behaviour (e.g fly tipping, graffiti, and other vandalism). You should expect external re-painting about every 5 years and internal every 7.

          If a sinking fund is operated perfectly, the budget should exactly follow inflation and otherwise not vary from year to year. If the budget drops in later years, it means too much was put into the sinking fund, or politics have resulted in expenditure not happening as reasonably expected.

          I though this was a new development. I was under the impression that arbitration clauses like this were no longer valid and the only route was the First Tier Tribunal, although I may have misunderstood.

          On the other point, it can be so difficult to obtain competent people to volunteer as directors that you don't need a conspiracy theory.

          Comment


            #6
            None of the Directors are associated with the developer however the Management Company I believe are affiliated with the original developer but the Directors seem happy with the management company employed. I do happen to know one of them is personally related to someone who works at the management company.

            Comment


              #7
              I think you mean managing agent. The directors are either directors of the actual management company or, like in our case, it is the same company as the freeholder.

              If they are only having quarterly meetings, it means that they do not feel they have the time to take an active role in management, which is the normal problem with leaseholder run companies, particularly where the leaseholders are, themselves, landlords. As a result they will take the path of least resistance on managing agents, as it takes director effort to change them.

              Comment


                #8
                There is a big difference between (1) all leaseholders being invited to become directors of the management company and only 5 applying and (2) 5 being cherry picked by the developer. That is why I enquired if you had been invited to act as a director. Nothing to do with conspiracy theories, it happens in practice.

                Comment


                  #9
                  I would ask the directors if they have carried out due diligence by obtaining alternative quotes for the managing agent and the main contractors.

                  Comment


                    #10
                    The Directors leave everything to the Management Company. They attend meetings, have a general chit chat and that's about it. I just feel its extremely unfair why I am paying for the whole estate but have no real use of it except for the bin storage and car park. They aren't paying towards the communal area because they have no use of it.

                    Does anyone have any experience of approaching the FTT with this issue in an attempt to have the Lease varied?

                    Comment


                      #11
                      I'm fairly sure you mean managing agents, and the actual management company is the one the directors run.

                      Your lease will tell you what you have to pay for. Not having use for something is not a valid reason for ignoring what the lease says.

                      Comment


                        #12
                        Yes apologies I mean Managing Agents who carry out the day to day duties along with invoicing for various work they consider appropriate

                        I just don't see this as very fair

                        The Lease stipulates I pay for the communal areas so I am bound to do this?

                        Comment


                          #13
                          Originally posted by ghk2010 View Post
                          The Lease stipulates I pay for the communal areas so I am bound to do this?
                          Yes that is the contract you signed in front of witness (who also signed).

                          Comment

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