Service Charge incorrectly calculated for 30 years, demand at new rate

[OhNelly]

Hi all,

I moved into my first flat 5 years ago. The first two years I received service charges which was dually paid. For the next 3 years I requested service charges each year from the managing agent , which they never did.

They have finally sent a demand through which has been adjusted to what they feel is proportionally accurate for the estate now. What it means is it's now 7 more than it was before. In addition to this they are back dating it to the 18 months (part of section20b, but not a formal letter request yet). It's a very large demand.

The major increase to the service charge they say is down to it being inaccurately calculated. When I purchased the flat the previous leaseholders payments was the guide for what the service charge to be, as I mentioned I did pay 2 years of that amount. The lease doesn't specifically set out the percentage of contribution, its just a proportion to the estate.

I've been speaking with managing agent and freeholder and they can't understand how service charge been calculated since the property came up in 1989! I'm really at a loss what I should do next.

I feel the previous 18 month demand is unfair as it's not in keeping historically. I've not budget to that high demand. Going forward if the service charge is inkeeping with the rest of the estate, then I'll have to live with that I suppose.

Any advise will really be appreciated. Thank you.

[JK0]

Hi all,
What it means is it's now 7 more than it was before.

£7 ain't much of an increase.

[OhNelly]

Lol Apologies that should be 7 x more than before

E.g £300 to over £2000

[JK0]

So how many flats are there in your block? What proportion are they charging you? Does it seem a reasonable proportion of the floor space?

[TruthLedger]

It is usually a percentage or proportion of the service charge but, from my understanding, the service charge for older leases is calculated based on the rateable value of the flat as a proportion of the rateable value of the whole building

[Macromia]

How much you are required to pay for service charges will depend on the exact wording of relevant clauses in your lease.
If the lease really doesn't do any more than stating that you are required to pay "a proportion of the costs to estate", your solicitor should have warned you against buying the property.

It might state that you are required to pay a "fair proportion" of the costs, but it should make it clear what building/area the total costs refer to.
You should ask the freeholder/managing agents how they have determined the proportion that they are asking you to pay (i.e. whether they have based this on floor space, number of bedrooms, eatable value, etc.). If you don't consider their system to be fair, you could ask a tribunal to rule on this.

As for the increase in costs, £300 per year seems extremely low, especially if managing agents are involved. This amount would be unlikely to cover your share of managing agent fees and insurance, without leaving any money available for any additional services or maintenance.

If there has been no maintenance at all for 5 years (perhaps longer), you may find that future demands will be even higher if the freeholder has now realised that they are supposed to be maintaining the property properly (although you might be lucky, and it might be a particularly low maintenance block that is still in good condition).

[Macromia]

Rather than looking at the amount you being asked to pay and worrying about it being 7 times what you have previously paid, you should be looking at what the money is intended to be spent on (or has been spent on), and whether or not the proportion of the total amount that has been charged to you is fair.

[OhNelly]

Thank you for all the responses, I will attempt to answer to each reply


JK0, there are 230ish flats on the estate. It does seem reasonable now, however when I bought the property I didn't know what the total cost of the estate, all I knew was what the contribution was for the flat in previous years. The demand then was set by the managing agent. I have the amounts demanded ( roughly £300-400) by the agent.


TruthLedger, the managing agent have come to the figure by calculating the proportion of the flat to the estate. Rateable value is something I have just come across from you highlighting. I have checked on the directgov council tax valuation site, and I'm on rate C while everyone else on the estate is a B! Tricky one what I should do next, but thank you for leading me down this path!


Macromia, proportion is just that. Our solicitor didn't warn this, but then it's hard to fathom after 30 years that this would change so drastically. I'm not trying to defend them, or, hide my ignorance. Our flat sits above the estate office away from the blocks (no flat above us or below us). I understand the management agent has come up with proportion now by floor space and the flat relative to the rest of the block. I understand that service charge is low, but that's one of the reasons I purchased the flat because it was acknowledged just that on the advert. The managing agent now have said that this looks like a miscalculation now and whatever exemptions that may have existed, they can't see anything on file. The lease just says a contribution to the flat or to the block. The freeholder is of no help whatsoever.


As the flat is away from the block, do I feel it's fair? Not really, but I understand that's not how it works when you're part of a block. Anything wrong with my flat I expect the whole block to cover the expense, vice versa. However I understand there was some major works done on the roof 10 years ago which the previous leaseholders had to contribute to as well as the managing agent. Reading some of the forums this looks like it's the norm though.

Thank you again everyone. Any comments are welcome.

[JK0]

I think you'll have to be grateful they are only able to go back 18 months. (Can you imagine the bill if it was the 30 years! )

I have 13 rental flats. The cheapest SC in quite a large estate is £960 pa, and the highest is £2170.

[MrSoffit]

I've been speaking with managing agent and freeholder and they can't understand how service charge been calculated since the property came up in 1989! I'm really at a loss what I should do next.

Seriously? So the freeholder and the managing agent have no idea how the service charge was calculated? I hope they put this in writing. It will give a judge a giggle for sure. Who pray was calculating it? The postman?

I found the opening title intriguing enough. How could a competent landlord/agent charge the 'wrong' amount of service charge for thirty years? Did nobody read the lease? Don't bother answering because there is a famous reply given to a court by a managing agent when asked if they had read the lease, "Oh you mean the small print?"

I don't understand why this is your fault where you talk about what you understood? It shouldn't be 'let's guess the service charge' game for a new lessee. If the lease is vague on your apportionment and you feel it is now unreasonable and download other leases to see what their share is, you could go to tribunal to challenge.

As for what happened for thirty years, if it was incorrect, as said the real question now is can the extra £300 a year charge be justified now based on what the lease says and accounts issued annually. You make no mention of accounts?

It should never have to be a suck your figure and guess caper, mind.

[Macromia]

Have you got account summaries and details of the amount you, and previous leaseholders of your property, have been charged in previous years?

If you have been charged a specific percentage of the total service charge costs for the estate/block for a long enough period of time, and you can provide evidence of this, it's possible that you might be able to claim that an estoppel applies which would prevent the freeholder from changing to a different way of calculating your charges (although you will probably need proper legal advice before trying to argue this).

[OhNelly]

Hi all,

Thanks for your replies, and apologies for not replying.

MrSoffit "the real question now is can the extra £300 a year charge be justified now based on what the lease says and accounts issued annually"
So from years 2008-2016 there are statements from the managing of the service charges paid roughly £350 a year. Now they're saying it's around £2000 a year. They've said they've been calculating incorrectly and don't know how it's been calculated in the past. They left it up to me to show how this is calculated, and I've tried to find this out to no avail. From my point of view, I think what I pay is reasonable and its one of the reason I bought the flat as the history of service charge was low. The managing agent are looking to apportion by floor space inline with all other flats.

Macrimia "If you have been charged a specific percentage of the total service charge costs for the estate/block for a long enough period of time"
The managing agent and now the freehold company aren't seeing it that way. Unfortunately the freeholder is a huge company and given the reigns to managing agent to sort and has no knowledge to what's happened before.

What hurts is that because they didn't send service charges for the last couple of years, they are demanding the last 18 months at the appointment they've calculated now with reserve fund which is £5500 (including this years). I've been budgeting and saved for around £1000 going on previous.

I dint have the money to get legal assistance. Any ideas to how much taking to a tribunaral?
Going forward with any new apportionment is far easier than demand for unexpected backdate one.

Thanks for everyone's advice.

[JK0]

Take it from someone who's been to a tribunaral three times... forget it and pay up IIWY.

[Macromia]

If you have service charge account summaries available for the years 2008 - 2016, and how much was paid in total each year + what the contribution for your flat was, you should be able to calculate the percentage that has been charged to your flat.
If the same percentage was charged for each of these years, and the current demand has significantly increased the percentage, you might have a potential argument for the change being unreasonable - but you still need find out what criteria the managing agent has chosen to use for the current demand.
They have no valid reason for not explaining precisely how they have chosen to calculate your percentage, or which clauses in the lease they believe allow them to split the charges this way.

It may also be worth asking for copies of the invoices that support the service charges and, if you can't afford to pay what they are demanding, writing to the managing agents and telling them that although you are not currently accepting that you are liable to pay the full amount, under the circumstances (their lack of billing) you feel that they should agree terms that allow you to spread the payment without any penalty.

Taking this to a tribunal yourself might cost you a few hundred pounds. It can also take up a fair bit of your time.
Before considering this course of action you need to make sure that you know exactly what your argument will be.

[OhNelly]

Hello
I added a message to this forum earlier this year, so if you'd like to hear about of background you can check that out... Yes this is still ongoing!

Anyway. I have a couple of quick fire questions...

1. The managing agent for my flat has recalculated how they apportion my service charge this year, which they believe is reasonable in comparison to other flats. They have admitted that the time I've been living here it they believe it has been incorrectly calculated and that it's been the case for the previous leasehold er who had been in the flat a number of years. They are unable to provide any reason to what this was the case and are unwilling to investigate, any advice on what I could do to do so?

2. The managing agent said to contact the freeholder, however the freeholder is non the wiser (or don't care as they're a huge company) and continually direct queries back to the agent. I have asked for them to investigate for any information on how it was calculated in previous years in which they don't know. Are they breach of anything in not having or providing this information?

Thanks for any advice.