Court charges for flat X debt recovery charged to service charge for all flats

[Benzo]

Hi all

I'm pretty sure I know the answer to this one but worth checking.

Our Lease is an old 1980s one which allows the freeholder to on-charge of legal costs to specific leaseholders ONLY in relation to or in contemplation of a S146 forfeiture action.

However, all residents have received a 'balancing charge' which comprises of, in part, court costs spent in chasing specific leaseholders for non-payment of service / admin charges.

I do not believe this is allowed by the terms of the lease. Is it Tribunal time?

[eagle2]

Check the lease to see what may be included within service charge expenditure. it often says that the cost of appointing solicitors is permitted. The freeholder is likely to argue that all costs are taken from the service charge fund and then attempts are made to recover the costs and the service charge fund is credited if and when the costs are recovered.

If you apply to the FTT, you would need to explain that the charges were unreasonable and that was why leaseholders did not pay them and it was unreasonable of the freeholder to take legal action.

[Benzo]

Check the lease to see what may be included within service charge expenditure. it often says that the cost of appointing solicitors is permitted. The freeholder is likely to argue that all costs are taken from the service charge fund and then attempts are made to recover the costs and the service charge fund is credited if and when the costs are recovered.

If you apply to the FTT, you would need to explain that the charges were unreasonable and that was why leaseholders did not pay them and it was unreasonable of the freeholder to take legal action.

Nothing that I can see. Apart from the covenant to pay for any S146/S147 actions mentioned above, the only other one is a reserve fund plus this:

1. the fees of the Lessor’s Managing Agents for the collection of the rents of the Flats in the Building and for the general management thereof.

Would that count?

[andydd]

No..S146 costs are an admin charge payable but the defaulting leaseholder only. I dont think the paragraph you posted would allow legal costs either, it looks like they can only collect management agent fees (not legal fees), to be able to recover legal costs the lease as to make specific provision.

[eagle2]

Nothing that I can see. Apart from the covenant to pay for any S146/S147 actions mentioned above, the only other one is a reserve fund plus this:

1. the fees of the Lessor’s Managing Agents for the collection of the rents of the Flats in the Building and for the general management thereof.

Would that count?

No that only allows the freeholder to recover the charges of the managing agent. So it looks like the freeholder is restricted to recovering costs from the individual leaseholders, as andydd says.

[Benzo]

Thanks guys. I'll push back and suggest they remove the fees or I'll pay in protest and apply to Tribunal.

[leaseholder64]

Note that there are number of people lobbying, on the forum, for the s146 option to be removed, so you should give serious consideration as to how service charge arrears can be chased.

[fos333]

Note that there are number of people lobbying, on the forum, for the s146 option to be removed, so you should give serious consideration as to how service charge arrears can be chased.

My understanding is that in a tripartite lease the Management Company should not be using the s146 route as only the freeholder can forfeit the lease.

Therefore can't see that how the removal of the s146 option will change how service charge arrears are currently chased, especially if three parties involved.

[leaseholder64]

It's generally in the interests of the freeholder that the property be managed, so I would have thought they would have wanted to use that route on behalf of the management company. The management company generally has no money of its own, so the freeholder would have to make good any arrears, if work is to be done.

[eagle2]

If you go to the FTT, you should argue that only the freeholder would benefit from forfeiture therefore the legal costs should be paid by the freeholder.

[eagle2]

If the freeholder commenced legal action against the leaseholders whilst the RTM proceedings were being considered, you could also argue that the freeholder's actions were vexatious.

The freeholder could argue that monies were required to carry out the day to day running of the building, so you should be prepared to supply evidence that there were sufficient funds in the bank account eg a bank statement if you have one or the last set of service charge accounts showing the bank balance.

You may need to explain why the leaseholders were not paying the freeholder eg breakdown of trust or specific examples of unreasonable charges.