Advice- New Agent Trying to Collect Previous service charges

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    Advice- New Agent Trying to Collect Previous service charges

    I would like some advice please. There are 4 owners in a converted block of 4 flats. I have owned one on leasehold for about 12 years. The other owners have part of the freehold each. The previous two sets of agents have been terrible at managing the property. Due to various disputes, I was not invoiced since 2016 for my service charges or any other fees for my portion. Now a new agent has been appointed of the type who like to throw legal jargon at you, and who like to charge for 'reports' to be done before any work is appointed. Reports always add £250-350 to the bill for all.(Combined.) They have already spent £1000 doing reports, some of which had already been done -such as asbestos for example.

    In the past my service charge has been in the region of £3-400 per year. New agent who took over this year in April is charging over £700. Now they are trying to recover the last two years service charges, but at THEIR value, not a value previously paid. I am trying to find out what others have paid.
    I am wondering if;
    1. these charges are statute barred as per the 18 month rule
    2. if they can charge £700 for last year when that was not the previous value and they were not in charge for the period they are trying to charge for.

    The agent has threatened me with 'passing the account to their solicitor' if I don't pay. The agent has already spent all the money paid into the account since April ( having said they wanted an extra £1000 for the year as the account was depleted when passed to them). Now they've sent another letter saying rear wall needs 'extensive' repair and they will charge for an S20 consultation (£250). Their guess-timate before for this repair was £800 included in the years charges, now this will be extra. (Surprise!) No doubt my builder could do it far cheaper with a free estimate.

    I have requested that the agent add me as a director on companies house twice now, and they keep denying they got those messages. There is only one owner/ director on the management account who they take orders from and she was only appointed this year last minute when the last agent who owned a flat in the block, resigned. I am friendly the new director, and am trying to get her to agree to RTM ourselves.
    I feel they are trying to stall allowing me to be a director so they can keep looking for more ways to spend money on work that's not really needed IMO, thus using the inexperience of the director as their sledgehammer. She did seem quite keen before to manage ourselves.

    These agents are very aggressive in their approach re threats of legal proceedings etc. Personally Id just sack them. But at least with two of us on the directorship they would need agreement from both before proceeding.
    Please can anyone advise my best course of action?
    Many Thanks

    In the same way that it has been pointed out in another thread, the agent cannot remove a director, they also cannot appoint a director, so you should not be asking them to appoint you but rather asking the other director(s) to appoint you. The agent may also be contracted as company secretary, but they still can't submit an AP01 without a valid resolution from the board or the members.

    As discussed a few weeks ago, changing a share of the freehold RMC to an RTM doesn't make sense as it does not address the real problem.

    michelle230 This is another failed pseudo commonhold case. (Someone is propagandising that commonhold is the panacea for all leasehold ills.)


      Your service charges are very low. You need to pay for surveys that haven't been done. Whether you need a new asbestos survey may depend when the last one was done.

      Agents manage the service charge fund, and will inherit costs from the previous agent, so they will not be limited to recovering charges that arose after they were appointed.

      If the 18 month rule has been broken it is the company, of which you want to become a director, that is responsible for the resulting shortfall. Applying the 18 month rule is an own goal unless some big commercial organisation owns the freehold, which you say is not the case. You have basically said that the excess expenditure arose before the new agents took over, so the company has no claim against them.

      Have you seen the contract? I would hope that the contract made the company responsible for the final decision on non routine expenditure. I the expenditure is unnecessary, the company is at fault either for negotiating a bad contract with the agent, or for approving the expenditure.

      As part of section 20 you get to nominate a builder. Make sure you nominate a quality, B2B builder, no the sort of white van man favoured by amateur landlords. They don't have to be chosen, but if they are cheaper, and not chosen, a very good reason needs to be given, or you can take action for unreasonable service charges.

      Also please consider the business model of the agent. When added together, are they making enough money from you to have a viable business. Typically there will be a mix of fixed and variable charges, and the only way to reduce the variable part will be to increase the fixed part.


        Sorry, but Im still confused about my rights. The current agent was seeking directors because the last resigned at the same time as her flat sale went through, thus leaving the block without a director or secretary. The agent appointed could not act without a director. I was asked, and I responded, they ignored my response and in the meantime the other flat owner agreed instead. I have spoken already to the director expressing my wish to join in.
        Re the charges, regardless of if you consider them cheap or not, the new agents are charging double that any previous ones have and I still have no idea if they can do that, and for what they are charging as no work was done in the time between last charges and their takeover.
        I have not seen the contract ( presumably the agent supplies this?)
        Regardless of whether the agent needs to make money or not, surely they cant just charge willy nilly after stating one charge at the start, now less than 6 months later they are seeking double again that charge to cover works and reports for works.
        To become a director the agent said I had to go into the office and sign the APO1 from companies house. They are in possession of the auth code for CH, and have not supplied it to the director yet to my knowledge. The director had told them not to do or sanction any more work/ reports in January. They now say they have authorisation. The director said works will go ahead but it was not a demand for money, yet the agents are now seeking £250 ( split x 4 for the report alone) plus the work costs ( which we have been told we can get builders for.)
        Additionally, the director herself is questioning exactly how much is or not covered by the service charge as this has been quoted incorrectly twice so far and they siad stuff was included then not..


          The outgoing director should have called a shareholder meeting to try and get a replacement director. The law is not very clear on how to resolve a lack of directors, but it is not up to the company secretary to appoint one. The best of a bad job would be for a shareholder meeting to have been called, by one of the shareholders, to try and appoint a new director..

          The service charges need to be justifiable, but if you have just changed managing agents, there is a good chance the place was not being managed properly and a higher spend is required.

          I'm guessing that you have considered insurance to be distinct from service charges, even though, it is legally a service charge, but in London, I believe the typical service charge is around £1,800 pa, although that will depend on whether you need cleaners, gardeners, etc. In London the agent's fixed fee will be of the order of £200, plus, VAT, before any work is contracted out, and that is for rather larger developments, where there will be better economies of scale.

          Also, used properly, reports can save you money, as they can determine that work is not necessary, whereas a contractor will be trying to maximise the work.


            Your opening post doesn't make it clear whether you have a share in the freehold company (it is possible for you to own a leasehold but not have a share in the company). Presumably you mean that all four leaseholders, yourself included, have equal shares of the freehold? This is important because if you don't have any share of the freehold company you may have no right to be a director.

            If you do have a sharea of the freehold, you need to be speaking to the existing director to be appointed, as has been said.

            As for the rest of your concerns, there may be legal arguments that can be used to prevent past service charges from being collected, but if the amounts concerned were spend on block maintenance etc., the freehold company will have to find the amounts somehow - which will mean getting shareholders to fund any shortfall.

            If amounts being demanded aren't reasonable you will need to get rid of the managing agent - especially if they aren't doing what the existing director tells them. The amounts you are currently paying do seem to be very low though and, unless no maintenance work at all is actually required, you probably should be paying more to help prevent far larger bills in the future.


              You should ask the current director to appoint you as a director. All she needs to do is instruct the agent to update the Companies House details online, there is no need for an AP01 form to be completed.

              I agree that the agent is being unduly aggressive if he has been appointed only this month and he is already threatening legal action against leaseholders.

              You should check carefully all the charges and how much precisely is being paid to the agent and persons connected with the agent. You do not need to be concerned with the business model of the agent but you should be aware that managing a block of only 4 flats is not particularly of interest to most agents and he may well be trying to increase his fees by other means. You should request a copy of the management agreement and note particularly the right to charge additional sums to the basic fee. Legal action and s20 notices probably give the agent the opportunity to charge additional fees, so you should be wary of those in particular.

              The service charges should be no more than reasonable. It is impossible to say whether a service charge is unreasonable without knowing all the facts but you have noted that repairs are required which would increase the charge. If unnecessary reports are being prepared, you have grounds for stating that some of the charges are unreasonable.

              You should not dismiss the 18 month rule, there may be a claim against the previous managing agent. Was a budget issued? Was there no indication at all of expenditure being incurred?


                Submitting electronically still results in an AP01 (or rather an AP01 (ef)). I was using AP01 and TM01 as shorthand for the transaction types, not for specific paper forms.

                Also note that the other director can file directly with Companies House (unless the company has been registered with PROOF and he doesn't have the authentication code). Technically, even the new director can file. (Although people seem to think that an appointment is only valid once filed, that is not true. However failing to file is a criminal offence.)


                  Originally posted by leaseholder64 View Post

                  If the 18 month rule has been broken it is the company, of which you want to become a director, that is responsible for the resulting shortfall. Applying the 18 month rule is an own goal unless some big commercial organisation owns the freehold, which you say is not the case.
                  leaseholder64, how would it help matters if a large commercial organisation owns the freehold?
                  Do you mean that the freeholder is responsible for service charge shortfalls, or does that depend on what is stated in the leases?


                    The freeholder is responsible for doing the work required by the lease If they are unable to recover the costs from the service charge payers or their shareholders, there the only other options to paying from their own pocket is to declare bankruptcy. If they do work that is not permitted by the lease, they are fully responsible for paying for it.

                    RMCs generally have no or negligible money of their own, so would have to go begging to the leaseholders. RMC shareholders are generally the same as the leaseholders, so when they recover money from the shareholders, they are effectively doing so from the leaseholders.

                    A large company, especially one with a large ground rent income form the property, will have money of their own. Also, their shareholders, will not be the leaseholders.


                      Originally posted by leaseholder64 View Post
                      A large company, especially one with a large ground rent income form the property, will have money of their own. Also, their shareholders, will not be the leaseholders.
                      Agreed. In an RMC or RTM or Commonhold set up, you are essentially litigating against your fellow leaseholders/neighbours and you yourself may have to shoulder some of the cost of doing this and/or any financial settlement that has to be made as a result of doing this.


                        That seems to be very much the line of some managing agents that I know – “We can charge you anything we like because there is a RMC and if you take action, you are effectively taking action against the other leaseholders.” They then proceed to use their own contractors and inflate costs.


                          It doesn't take a managing agent to convince RMCs that they are immune from the lease and legislation. They tend to fail to see the distinction between being a shareholder/trustee of the owner of the freehold, and actually owning it, and think that they are more like freeholders for the flats than they really are.


                            Thanks for all the replies. We have had a change of circumstance since I asked this question. First, for clarity, I am the only leaseholder in this block of 4 converted flats, all others are on the freehold. ( Others have joined as the flats have been sold on over time. Ive owned mine for over 10 years.) I am a landlord and rent out my flat there. I have asked the current director ( who owns and lives in one of the flats) to add me to the directorship. So far I have had no response from her. She is now the only director on this RTM account. There are no secretaries.

                            In the meantime since the agents decided to send out ridiculous bills, it seems others have complained. The agents have now decided not to continue managing and have resigned. I am hoping now that the director will try to get everyone on board so we can do it ourselves without an agent. She was keen to do that before.

                            I have a couple of queries; my lease is getting a bit short and I am considering my options. I would prefer to be on the freehold. A previous poster here said I may be able to do that for free if we manage it ourselves and I was a director. If true, how would I go about that? Do I need a lawyer, or can I do it myself if I were part of the directorship?


                              I suspect there is more than one leaseholder. Being a joint freeholder is a different hat from being a leaseholder. You can be both.

                              If the agents have resigned, it suggests to me that they have been forced into a position where they are making a loss; that doesn't suggest excessive bills.


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