FH trying to introduce management fee not mentioned in lease

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    FH trying to introduce management fee not mentioned in lease

    I am a LH of a flat in a converted Victorian terrace house comprised of two flats in North London. As per the lease, our financial obligations to the FH are an annual ground rent, which is paid on time every year, and the responsibility to share costs of maintenance and repairs to the common parts of the property with the LH of the other flat.

    There is no management company and both LHs have separate buildings insurance policies covering the property, the FH does not hold any BI.

    Recently the FH have written to us saying they will start charging us an annual £200 ‘management cost’.

    Our lease makes no mention of a specific 'management cost', and I have written to them to say that as it’s not covered in the lease we don’t feel this is reasonable to pay. They have responded noting that recent Land Tribunal decisions have ‘accepted the principles that management costs are part and parcel of service charge expenditure’ and that a landlord is ‘entitled to include the cost of management within service charge expenditure even where no express provision is made in this respect.’

    On a side note, they also suggest we consider exercising RTM – which in my view is an unnecessary and expensive procedure to go through for a 2-flat house. I can see they would, strategically, like this to happen as it would reduce their formal responsibilities and the time and costs of arranging future hypothetical repairs, but that's a matter for how they run their business, and not a priority for me as LH (plus in a 2-flat property would require both LHs to sign up to).

    The reality is that our FH is a large company that owns a lot of ground rents, and are very distant from the property, with minimal to zero communication other than yearly letters re: the GR. We have no evidence of any actual management service (repairs, maintenance) that has been requested or required, certainly since 2014 (for which we have records) and likely for a long time prior, it’s a small house with minimal communal areas and generally in good nick.

    What is our standing re: this imposed management fee?
    Is the vague comment re: Land Tribunal decisions correct or relevant here?
    What response would be appropriate?

    I would hope that if it’s not in the lease it’s not an obligation. The fact that no servicing has been required of the FH in recent times, implies that they are looking to collect extra monies that are not borne out by any actual management activity on the property. The current lease has operated for 15yrs+ without, to my knowledge, any management fees being requested or imposed before now, so this request seems open to question.

    #2
    On the information presented, the freeholder is out of order.

    On the other hand, I am surprised that you can get mortgages on flats with no block level buildings insurance.

    Are there any internal common parts? If so, who is the responsible person for health and safety legislation?

    Comment


      #3
      Thanks for the speedy reply leaseholder64, much obliged.

      Re: the buildings insurance, my general understanding (without checking the documents) is that the policy held by myself (and therefore, I assume, similar to the separate policy held by the LH of the other flat) does cover the whole property, so that in the instance of any insurance claim affecting both flats, we would need to coordinate between two separate insurance assessors.

      Re: internal common parts, there's a small common hallway from the front door (2m x 1m). I can't recall H&S legislation being mentioned in any of the paperwork when the flat was bought (again I would need to check this to be sure). I imagine that the 'responsible person' status must default to the FH as they own the hallway (and there is no MA or RTMC).

      Comment


        #4
        I suggest that you ask the landlord to let you have details of the specific cases to which he is referring and let us know the response. The lease forms your contract with the landlord and unless it specifically permits the landlord to charge a management fee, it cannot be introduced as a new term to the contract without your agreement.

        Comment


          #5
          I would check the buildings insurance to ensure that the hallway is covered as it does not form part of either flat.

          Comment


            #6
            The standard questions are in the insurance section of LPE1. It asks whether there is a fire risk assessment, whether it ha been complied with, and if the insurers have confirmed acceptance of any failure to do either.. However, the obligations under the Regulatory Reform (Fire Safety) Order and the Health and Safety Work Act apply regardless of what happened in the sale, and the former, at least, says there has to be a responsible person, who is the one that can get prosecuted.

            The main reason I mentioned this, is that there will be costs involved in complying this.

            As to the insurance, how is the mortgagee going to ensure that the other person has adequate insurance?

            Comment


              #7
              I recommend that you have one insurer, the last thing that you want is for two insurers and two assessors to argue between themselves who is responsible and for both to deny liability.

              Comment


                #8
                Originally posted by KilburnDave View Post
                Our lease makes no mention of a specific 'management cost', and I have written to them to say that as it’s not covered in the lease we don’t feel this is reasonable to pay. They have responded noting that recent Land Tribunal decisions have ‘accepted the principles that management costs are part and parcel of service charge expenditure’ and that a landlord is ‘entitled to include the cost of management within service charge expenditure even where no express provision is made in this respect.’
                I believe that it is correct that there have been tribunal decisions at least broadly in keeping with what they suggest, although each case would have been dependent on the individual details, including whether or not there were any more openly worded clauses in the lease that could be reasonably construed to include management fees.

                On the other hand, I have definitely recently read a tribunal/court decision where the decision was that it was unreasonable for a management fee to be charged when the only management work done was arranging insurance. Unfortunately I can't remember the case.

                Comment


                  #9
                  We cannot comment without knowing the details of the cases so it is best to request the landlord to supply further details as suggested at #4.

                  Comment

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