Right for management company to change the service charge apportionment for my flat

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    Right for management company to change the service charge apportionment for my flat

    Hi
    i own a leasehold flat and pay a yearly service charge on the flat. The management company for the block recently remeasured the floor space in all the flats in the block because they said the existing apportionment of the service charge did not add up to 100%.

    As a result, the new floor space measurement for my flat is higher that it was before, which means my service charge is going to go up, considerably. I do not agree with the method the management company have used to measure my flat (as they have incorporated areas of the flat that i do not think should count towards the floor space).

    The management company are now asking me to pay a sum of money to amend the lease to my flat to reflect the increased floor space measure and consequently, increase my service charge payments, going forward.

    Question:
    Am I legally obliged in any way to pay the management company/directors of the block the fee to amend my lease to my flat to amend the service charge? What are the repercussions if I do not pay, given I do not agree with their measurement methodology?
    Thanks

    #2
    You are only obliged to pay if there has been an FTT ruling.

    If there hasn't been such a ruling, you should consider the possible cost implications of getting a ruling, which will be in addition to the conveyancing costs you already face.

    If there has been an FTT ruling, you should have been invited to join in by the FTT.

    If the lease figures add up to more than 100%, it is certain that they could get a ruling. Less than 100% is a bit of a grey area, as the lease could be read as saying that the freeholder makes up the difference.

    Please remember that RTMs have no money of their own, so if the figures add to less than 100% they can be in serious financial difficulty.

    Comment


      #3
      And in any case there is no reason to think that floor area should be the basis. Your position is straightforward -- if they want to amend the lease then they seek advice from the FTT as to whether that is permissible. At the moment you do nothing and continue to act according to your lease. You would want a whole lot more details as to what does not add up and why that is the case and whether that was always the case.

      Comment


        #4
        I believe the lease might state the apportionment method to be used? If it is stated that floor area is the apportionment method to be used for all the flats, then the management company would be acting correctly in re-measuring the apartments if the apportionments don't add up to 100% (and provided the freeholder is not liable for the missing proportion, as Leaseholder64 noted).

        The RICS method is the gold standard for measuring—for service charge calculations they use GIA (gross internal area). See:
        https://www.rics.org/globalassets/ri...ition-rics.pdf

        The management company would only have to apply to the FTT if they can't get your agreement to amend the lease, but this may be a waste of time and money if they are acting correctly. Have all the other leaseholders in the block agreed to the new percentages?

        I don't think you have to pay the fee to amend your lease unless your lease states that such expenditures are collectible via the service charge. It might fall under the remit of "any other costs reasonably incurred by the management company" or some such wording. How much are they saying this is going to cost? It might be worth shopping around for your own solicitor to draft the amendment as I've found fees for this can vary greatly!

        Comment


          #5
          What exactly does your lease say? Does it mention a percentage or how your share of the costs is to be calculated? Is there a freeholder involved and if so, does he contribute towards the expenditure? How old are the leases? How long have you paid the current percentage? How has the management company dealt with the difference between the actual expenditure and the amounts collected in the past?

          Comment


            #6
            andrewdod, hazletonlane, leaseholder64, eagle2 - thanks for the replies.

            there hasn't been a first tier tribunal at any point, nor has it been mentioned as something that has been initiated.

            There's no freeholder in the block, we all own a long lease on our flats (there aren't many flats in the block - around 10 flats in total). The management of the block has been outsourced to a management company.

            I think at that moment the figures add up to more than 100%

            I'll double check the lease to see what it says, it's very old (over 70 years)

            there's no freeholder involved, the current method has been in place for 50 years or so i think

            as the amounts add up to more than 100%, the management company have been putting the excess back into the reserves.

            so if the management company do use the FTT, would i have to pay their costs? Or i only pay if i lose the case at the FTT?

            Thanks

            Comment


              #7
              Presumably the same method would have been used on all flats? Therefore your proportion would be the same, surely, whether they measure corridors (say) or not?

              I really don't think this is worth arguing over, unless there are outrageous discrepancies.

              Comment


                #8
                If there is no freeholder, the flats are unmortgageable and I'm not sure you you got right to manage.

                Right to manage companies have only existed for 17 years, so it is not possible for the current arrangement to have existed for 50 years!

                If it is an RTM, it has no possible source of funding other than the leaseholders for this, so you either pay directly or through the service charge.

                An RTM is a management company! Did you mean outsourced to a managing agent? Managing agents are agents of the management company (RTM if you are correct) and must follow any legal directions it gives them.

                I think you need to step back and properly understand the management and freeholding arrangements for your block.

                Comment


                  #9
                  The actual wording of the lease is important, it will say whether or not the management company has the right to change the basis of allocating costs, so I recommend that you check it. I am assuming that there is no such right contained within the lease.

                  If the management company receives more than 100% of the costs and the surplus has been dealt with as a reserve and if no-one has complained for 50 years, there is an argument for leaving the allocation as it is. There is also an argument for reducing equally all the leaseholders contributions so that the management company recovers 100% of the costs in future.

                  So, charging according to floor space is not the only or the most logical method to apply.

                  I would object to the management company’s proposals and try to agree an alternative. You should be mindful of the costs involved which would normally become payable by the members or leaseholders one way or another. Meanwhile, you should object to the Deed of Variation and pay in accordance with your lease (another reason to check it)

                  Comment

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