Problem with Service Charge Demands

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    Problem with Service Charge Demands

    Recently appointed director of RMC, self-managing for the first time. Having a problem recovering 2019H2 service charge (the 2019H2 demand was issued by the previous external property manager) from one leaseholder, who believes that the demand was not issued in accordance with the law but is refusing to explain what in particular he objects to.

    Conceivably this could be a number of things. I should add that I haven't actually seen the service charge demand that he received, but I think I can assume that it's in the same format as the one that I received.

    My thoughts:

    1. The demand was served by email, and I don't know if the leaseholder has previously given written permission to receive service charge demands in this way

    2. The demand included the "summary of rights and obligations" documents so I don't see a problem there.

    3. The demand was for 2019H2. The demand for 2019H1 (and he paid this promptly) included a budget statement which showed a breakdown of expenses for 2018 (budget), 2018 (actual), 2019 (budget). The 2019H2 demand did not include this, however.

    4. The 2018 actuals I mentioned above were just a column of numbers in a spreadsheet - and I don't think a copy of the 2018 service charge accounts (which were properly prepared by a chartered accountant) have been sent out to leaseholders. These weren't available until July of this year, after the 2019H2 demands were sent out.

    5. The correct name and address of the RMC were shown at the top of the demand letter (not the name & address of the freeholder, but I don't think this is needed...?)

    6. Nothing in the service charge demand relates to costs incurred more than 18 months prior. I gather this can be valid grounds for non-payment, but not here.

    7. Was his service address (which isn't the same as the address of the flat he owns) shown wrongly on the demand? Having not seen the demand, I don't know.

    8. The demand was issued in early July, a week after the start of the period of time to which it relates. Could this be a problem?

    Leaseholder seems to want to play a guessing game, which is very silly. I'm not being paid for the work I do and I could do without the aggro!

    I'm envisaging a conversation along the lines of:

    Me: what was the problem with the demand?
    L/H: I'm not telling you.
    Me: was it X?
    L/H: No, but now you mention it, I think I'll object to X too
    Me: was it Y?
    L/H: No, but now you mention it, I think I'll object to Y too
    Me: was it Z?
    L/H: No, but now you mention it...and so on.

    So, frankly, I'm unsure how to play this one.

    Going forward I want to make sure that our process for issuing these demands is legally watertight, so that this sort of problem doesn't keep happening - but I'm having to clear up the mess left by the previous property manager, who is is being very unhelpful in answering questions about things like this, so I'm left groping in the dark, which is very frustrating.

    Thank you.

    ps I'm new to the leasehold management business (recently appointed director of an RMC and self-managing for the first time) and I'm using this forum quite a lot for info & guidance...a big thank you in advance to everyone who has replied to my previous postings. In time I hope to repay my debt to the forum by answering lots of questions (instead of asking lots of questions).

    #2
    Also: demands historically have been combined - one amount for service charges and one amount for ground rent. Is this a problem? (Won’t happen going forward)

    Comment


      #3
      I would never advise issuing only a email. As well as the fact that most leases don't allow it, it is rather difficult to ensure at least 10 point type for the summary of rights; that legislation has not been updated to account for non printed documents.

      The address of the freeholder must be included: http://www.legislation.gov.uk/ukpga/1987/31/section/47

      It is easy to use an out of date version of the summary of rights; make sure it refers to the first tier tribunal.

      There is no statutory requirement to include the budget.

      The service address shown on the demand is irrelevant. What matters is whether it was sent to the service address. Was the official service address really an email address?

      You need to find out whether there is an underlying grievance. You will probably find people on this forum advising the other side to drip feed the defects.

      Comment


        #4
        Ground rent must be demanded in a specific way that makes it impossible to create a combined demand. The danger of putting them in the same envelope is that the ground rent part may be overlooked.

        The other reason for keeping them separate is that the ground rent is income to the freeholder, but the service charge is not.

        Comment


          #5
          By saying there is a freeholder address that is different from the RMC address, you are implying that you aren't the freeholder. In that case, you can only demand ground rent as agent for the freeholder, in which case it is even more important to distinguish between service charge and ground rent.

          Comment


            #6
            Originally posted by leaseholder64 View Post
            I would never advise issuing only a email. As well as the fact that most leases don't allow it, it is rather difficult to ensure at least 10 point type for the summary of rights; that legislation has not been updated to account for non printed documents.

            The address of the freeholder must be included: http://www.legislation.gov.uk/ukpga/1987/31/section/47

            It is easy to use an out of date version of the summary of rights; make sure it refers to the first tier tribunal.

            There is no statutory requirement to include the budget.

            The service address shown on the demand is irrelevant. What matters is whether it was sent to the service address. Was the official service address really an email address?

            You need to find out whether there is an underlying grievance. You will probably find people on this forum advising the other side to drip feed the defects.
            Thank you - much appreciated.

            The lease is silent on how service charge demands should be served (post vs email, etc.). I'd rather not print everything out, stuff it in envelopes, etc. if I can avoid it - but I will do it if I have to. If a leaseholder gives written consent to be served by email, does that suffice, or could it still leave the door open to a challenge later on?

            On including the name & address of the freeholder: I'm relying on section 4.1 of the Leasehold Advisory Service's guidance:

            https://www.lease-advice.org/advice-...-other-issues/

            which says:

            Demands for service charges which you must pay to your landlord must be in writing and must contain your landlord’s name and address. If your landlord’s name and address are not on the demand, you do not have to pay the service charge until you are given this information. (The name and address of the managing agent will not count unless they are also the landlord.) If your landlord’s address is outside England or Wales, the demand must contain an address in England or Wales which you can use to send notices to your landlord.

            This does not apply if you must pay the service charge to a management company named in the lease, rather than directly to your landlord. The demands must still be in writing, but they do not need to contain your landlord’s name and address.


            The service charge is indeed payable to the management company named in the lease, so I had assumed there was no problem with not having named the freeholder in the demand. Have I missed something?


            I think the summary of rights documents are up to date - the same wording as specified on the Leasehold Advisory Service website (and they do include the reference to the FTT)

            The service address on my demand was my home address (but I live in the flat I own). For this leaseholder I don't know what the service address was given as. I didn't receive my demand through the post though (only by email) so I'm assuming he didn't either.

            Underlying grievance - yes there are other points of contention (too long to go into here!) which is making it a tricky situation to manage.

            ===============

            On your other reply re: combined demands - understood. In the past the management company (which was run by the freeholder until we took over 4 months ago) had collected service charges and ground rents via combined demands. The money had all gone into the management company's bank account, and then the freeholder has later on invoiced the management company and taken the money back out again. Following the change of management it won't be done this way any more - freeholder will collect ground rent directly from leaseholders so the management company won't be involved.

            ===============

            We're about to issue service charge demands for 2020H1 (our first time doing it). If I do this properly, but add the arrears to this leaseholder's account statement, could whatever objections he had about the 2019H2 demand still apply? Or would they be deemed to have been remedied? (in other words, is this enough, or should I reissue the 2019H2 demand "properly" instead?)

            Comment


              #7
              You need to reissue the defective demand.

              I'd have to look further to see if the legislation I quoted is in a context that would mean that the address was not needed if there was a management company. Our RMC owns the freehold, so it isn't an issue for us.

              Note that there there is another current thread that seems to hang on failure to comply with that clause.

              If the lease is silent, I think the only safe method is paper. As I've said the, the anti-small print clause for the summary of rights was written with the assumption of paper. However, the reason I asked about other issues is that it is normally the case that people only challenge such technicalities where there are other issues. If you can't resolve the other issues, I'd suggest making the demands too perfect, then being prepared to state your case on the other issues to the FTT (possibly when the County Court redirects your debt claim them. At the moment you are probably being played on the basis of making it costly for you to get a ruling against them on the real issues, by forcing cases to be thrown out on technicalities.

              As mentioned in another thread, if they have a mortgage, tell their lender they haven't paid. They can still veto the lender paying, but may have to justify the veto to the lender.

              Comment


                #8
                I reissued the invoice yesterday - I included the freeholder's name and address, included the "summary of rights and obligations" documents, I sent everything by email but also printed out and posted, and I removed the ground rent part (ref: discussions about combined demands).

                He's still refusing to pay - stock reply is "I need an invoice that complies with LTA 87" (but refusing to explain what it is that he feels doesn't comply with LTA87). I have no idea what he means.

                Also now sending requests for information - fire safety report, GDPR compliance, etc. which I'm quite happy to supply (we don't have anything to hide here) but it's pretty obvious that he's asking us to jump through lots of hoops just to be awkward.

                I hope he's not reading this (unlikely but possible)!

                Comment


                  #9
                  The only part of L&T 87 referring to invoices is the section 47, already referenced above.

                  Can you confirm that you gave the full name and residential or registered office address of the landlord.

                  Although not L&T 87, did you give the registered office address, and the company registration number for your company?

                  L&T 87, does amend L&T 85, but those changes should be considered to be in L&T 85, and they don't affect the overall validity of the demand only mean that part of the demand might eventually be treated as unreasonable. In that case they should be paying at least the undisputed part, or they risk having costs awarded against them even if they are partially successful.

                  As I said, if you believe your are right on the underlying issues, I think you will need to take this to court, anyway. If the issues involve interpretation of the lease, you should try getting free advice from Lease Advice first.

                  I think there is a good chance that he leaseholder has been mis-advised on the law, or has misunderstood it (e.g seen something about best practice and assumed it was mandatory), but you may have to go to court to prove that. Unfortunately the nature of leaseholder owned companies can make it very difficult to safely take such action. Your main hope, if the leaseholder really has found a defect, is that you can argue that costs incurred as a result of defects they identify in the response to the letter before action are their own fault.

                  (The only common problem with L&T 87 and leasehold flats is actually section 42, the need to keep the service charge trust, but that doesn't affect the demand.)

                  Comment


                    #10
                    Thank you.


                    Now...I've just discovered something which might muddy the waters. The guy who was previously:
                    (a) director of the RMC
                    (b) owner of the proprerty management company appointed by the RMC
                    (c) the freeholder

                    ...it would appear is not really the freeholder at all! The freehold title downloaded from the Land Registry website gives the name and of someone else - the name in fact of this guy's former business partner, who died in 2015.

                    I know nothing about wills & probate, etc. at all but obviously I can imagine that a dead freeholder could be a complicating factor...

                    Anyway I've suggested to the other directors that we seek legal advice on the whole situation. I'm still finding my way with this stuff and I don't want to put my foot in it, which frankly - left to my own devices - I might, most likely by losing my rag, which would be very unprofessional.

                    All the problems are with this one leaseholder (everyone else has been very supportive and helpful). As well as the refusal to pay the service charge (and the ground rent, although I'm not concerning myself with that), he's been letting his flat room by room on the quiet (breaching the lease in several different ways), which has caused quite a lot of problems with insuring the building. He tried to foist his own favourite insurance broker on us (which I ignored). Now asking questions about fire safety, GDPR, etc. and I suspect this will continue.

                    I've found the name of his mortgage lender - it's mentioned in the leasehold title document at the Land Registry. Is there any downside (other than annoying him further) to me just contacting them next week and telling them that he's in arrears?

                    Comment

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