Legal Letter for Service Charges

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    Legal Letter for Service Charges

    I received some excellent advice from the forum on behalf of my partner, and now have a personal question that I hope someone may be able to assist with.
    I received a "letter before action" last week from a solicitor asking for service charge arrears. I assumed my service charge account was in credit as, whilst we do't have a sinking fund, I had made a large deposit a couple of years ago to cover impending major works that still havent happened, and it seems the last half-yearly demand in Sept 2019 exceeded what remained and left a balance owing of a few hundred pounds.
    I received a copy of the service charge demand in Sept but since then I've had no correspondence from the managing agent at all. If they'd called or emailed me with a reminder I would have paid it right away, but now there are £250 legal fees from their solicitor just for writing me a letter.
    Does the managing agent have to follow a certain protocol, i.e. sending reminder letters, before initating expensive legal action?

    Also, the demand is in the name of our Right to Manage company and the Landlord. Since the managing agent is appointed by the RTM co, the landlord has no involvement with managing the building, so I'm puzzled as to how the solicitor can be acting on their behalf. A clause in my lease does state that the landlord can recover legal fees, so I am wondering whether the solicitor is relying on this clause to force me to pay their charges.

    Any advice would be appreciated, and thanks in advance.

    #2
    Did you request the managing agent to issue the service charge demand via email or post?

    Comment


      #3
      Hi Ledger, tks for the reply. I have a vague recollection that I asked for demands by email, but Im not 100%. Why dyou ask?

      Comment


        #4
        Originally posted by Holy Cow View Post
        Also, the demand is in the name of our Right to Manage company and the Landlord. Since the managing agent is appointed by the RTM co, the landlord has no involvement with managing the building, so I'm puzzled as to how the solicitor can be acting on their behalf. A clause in my lease does state that the landlord can recover legal fees, so I am wondering whether the solicitor is relying on this clause to force me to pay their charges.
        Where an RTM company exists, as you say the freeholder landlord steps aside especially for service charges - except in one respect. If an RTM company wishes to rely on the clause in the lease concerning 'contemplating' s146 forfeiture as the means of recovering their legal costs for pursuit of breach, they need the freeholder to authorise this. The freeholder expects to be indemnified so has no skin in the game for collecting service charge arrears. Not clear to me the solicitors are technically acting for both at the same time but presumably just covering their bases. The advice always is to pay first and argue later. That way you cannot be hit with more legal costs.

        Do not read my offerings, based purely on my research or experience as a lessee, as legal advice. If you need legal advice please see a solicitor.

        Comment


          #5
          I am only asking because, to my knowledge, managing agents will not call to remind leaseholders to pay up. They will contact by whichever method you requested, provided the managing agents are up to par. Have you asked the managing agents how many service charge demand letters they issued before getting into arrears? It's interesting how you managed to receive the solicitor's letter but not the managing agents. It would be interesting to find out how many remainder letters the managing agents issued before contacting the solicitor.

          Comment


            #6
            Tks Ledger. I havent asked the managing agent yet, and I certainly havent received either email or postal reminder: they have my email address on file and I receive regular emails and post from them regarding works and other ongoing day-to-day goings on, so I know there's not a problem with either emails or snail mail... they just havent sent any reminders at all.

            Comment


              #7
              Thanks for your reply MrSoffit. I had a read of section 146 of the Law of Property Act 1925, but legalese isnt my strong point im afraid.

              Originally posted by MrSoffit View Post
              If an RTM company wishes to rely on the clause in the lease concerning 'contemplating' s146 forfeiture as the means of recovering their legal costs for pursuit of breach, they need the freeholder to authorise this.
              This bit intrigued me, so I was wondering by what mechanism/process this is undertaken? Is this authority it part of the original RTM application and as such a blanket authority going forward; or does the new RTM Co have to request authority formally from the landlord in each case; and, if so, does the freeholder need to authorise before legal action starts, or can it be granted retrospectively?

              Originally posted by MrSoffit View Post
              Not clear to me the solicitors are technically acting for both at the same time but presumably just covering their bases. The advice always is to pay first and argue later. That way you cannot be hit with more legal costs.
              The letter was addressed to me from OUR CLIENT: XYZ RTM Co Ltd, XYZ Landlord Ltd, c/o XYZ Managing Agent Ltd and states "despite formal requests..."
              I havent had any "formal requests" (does this mean reminder letters?) Legal action should be taken as a last resort, so does the managing agent have a legal obligation to notify a leaseholder before they take legal action?


              Originally posted by MrSoffit View Post
              The advice always is to pay first and argue later. That way you cannot be hit with more legal costs.
              I'll make a bank transfer today, should I:
              a) pay all to the solicitor
              b) arrears to the Managing Co and legal fees to the solicitor or
              c) arrears to the Managing Co and query legal fees with the solicitor?

              My apologies for so many questions, I just need to get it right in my head what their rights are, and I want to make sure I fulfil my obligations and not get stung with fees that are unreasonable if the managing agent has acted hastily.
              thanks again.

              Comment


                #8
                Hi. Can I first set the scene...

                In your OP you said you received a service charge demand in Sep 2019 on behalf of your RTM company. It is now March 2020 so presumably a new half year demand will arrive in a few days. As a leaseholder who's helped run an RTMC for years entirely voluntarily without pay, and just had our AGM to agree our budget, it is a real b****r with two gees trying to run a budget when people don't pay their contribution. This is because the budget is set based on costs. There is no legal right to add random sums as these would not be reasonable - even the reserve contribution is costed for works ahead. One lost contribution cuts into what can be done. So, unless a lessee has a reason to dispute the amount, it is rather nice they pay up. With an RTM comany they can be a member and attend AGMs and vote on the budget and if their RTMC doesn't give them this opportunity they should work with other members and replace the directors.

                As to your questions: the RTMC has to get the freeholder's consent in advance and on a case by case basis. It is for some reason not built into the acquisition powers because who wants an RTMC to be able to function like a real landlord. The 'industry' makes no profit with successful RTM companies and that will not do.

                Once the invoice is in default it is standard for reminder letters to be issued ending with a warning of court action. Once the landlord engages solictiors those folks annoyingly want to be paid - often on a 'no fee we'll collect' basis. Our RTMC was once shocked at the costs a solicitor loaded onto their first recovery letter which included pre drafted court papers. We didn't use them again. But the point is somebody has to pay those legal costs. If a lessee is taken to court and successfully argues against costs, (though since 2015 and the Kumari case things are a little - just a little- less murky - it can get tense for the landlord. I'd be surprised any landlord wants to rush into court for arrears but the small claims track is do-able. Sounds like you have had your notice in effect.

                As to who you pay, I am no legal expert just a country chicken, but I'm not sure of the mileage in splitting the 'argument' and paying the debt alone. It makes great sense to pay that and keep recorded evidence of paying it - but LL may have a deal where the debt is returned until paid in full - as who is going to pay the disputed legal fees? The legal fees become part of the debt as they would not engage solicitors to collect if people paid their invoice and went to tribunal to argue they should have money back. It is the way it is designed you see. As a lessee self, I would never defend leasehold and there is a lot of exploitation over obscene service charges and not even an RTMC is automatic defence you are not being ripped off. They can go to the dark side very quickly.

                Why not become a member and use all the tools this gives and end up a director? Sort the coves out if they need it. Good luck.


                Do not read my offerings, based purely on my research or experience as a lessee, as legal advice. If you need legal advice please see a solicitor.

                Comment


                  #9
                  MrSoffit,

                  Good advise there! You're right about leasehold being undefendable, especially when leaseholders are being told to pay up for other people's mistakes. Right now, leaseholders are being forced to pay up for removal of unsafe cladding non-leaseholders put up in the first place. An outrageous money grab!

                  Comment

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