Belated Extra Service Charge

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    Belated Extra Service Charge

    For 2017/18 I paid my substantial management service fee for the leasehold apartment I owned and rented out. As usual, two instalments, in advance, April and October.
    With no prior warning or consultation, the managing agent, in mid 2019, suddenly asked for extra for 2017/18, just under £200 per apartment. They hadn't produced and circulated 2017/18 accounts or held a tenants/leaseholders meeting in 2018, as in previous years. There were no extraordinary one off costs or major repairs needed for the site. Just appeared they had overspent the estimated budget for 2017/18. Also, without consultation, they increased the 'financial reserves' for our site by far more than in any recent years, with no explanation.

    I've formally complained and contested this extra charge. They haven't responded to that but are just sending debt chasing letters with threats of escalation. I've since sold the apartment.
    Any views on legal position or practical advice welcome please. On principle I object to this but wonder whether for £200 it is worth a battle.

    #2
    I would just write off the 200 pounds. The principle is not a really important one. Think of your time and effort, just leave it.
    Also since you managed to sell, l clear away any possible complications which might, shouldn't, appear with new owners.

    Comment


      #3
      I would pay the money and avoid any further charges and costs as well as a CCJ. I'm surprised you managed to exchange and complete on your property with a debt still hanging over the property, and the other party didn't flag it.

      This post should be redirected to the appropriate forum.

      Comment


        #4
        This is not uncommon.

        Comment


          #5
          Originally posted by scot22 View Post
          Think of your time and effort, just leave it.
          Considering time and effort does not seem compatible with a matter of principle.

          Comment


            #6
            Most leases allow 'balancing payments' to be demanded in the event that there was an overspend compared to the estimated charges.
            Unless you are certain that your lease doesn't allow this, I would forget about trying to challenge this.

            In fact, since it would likely cost you almost as much, potentially more, to challenge the demand, I would forget about it anyway. What you could do is make it clear to the freeholder (in writing) that you dispute the charge and have reserved your right to challenge it at a later date. That way you can include it in any later tribunal/court action that might be started within the next few years, either by yourself or by the freeholder.

            Comment


              #7
              #5 Surely it depends on the status of the principle. I am not sure that any significant principle is involved. Effect on society ?

              Comment


                #8
                Thanks all, I appreciate your responses. I've decided to put pragmatism before principle and pay the extra charge.

                By the way, I made a formal complaint but, other than a very belated acknowledgement of receipt, never received a substantive response.

                Confirms my impression that Managing Agents are very poorly regulated. Consequently a great many leasehold apartment owners receive poor service and value for the inflated charges they pay. No surprise there I guess.

                Glad I'm not involved with them from here on.

                Comment


                  #9
                  Part of the problem with any kind of block of flats is that to operate any kind of service charge mechanism there are overheads, often a need for an audited set of accounts, fire risk assessments, asbestos and possibly legionnaires checking, smoke alarm testing etc; some clerical costs to cover the cost of collecting insurance premia so prior to a penny actually being spent on gardening and common parts repairs/renewals the service charge collection can easily run to a few hundred pounds per flat. As many readers will know the consultation process on anything over £250 per flat takes so blinking long that many builders don't really want to bother to quote for a job that may take months to greenlight and those who do price to take account of the disadvantages as compared to other forms of contracting.

                  Comment


                    #10
                    Originally posted by flyingfreehold View Post
                    Part of the problem with any kind of block of flats is that to operate any kind of service charge mechanism there are overheads, often a need for an audited set of accounts, ... [etc.] ...
                    It a properly managed block costs of the sort that you mention should not lead to the need to claim an additional payment at the end of a service charge year, and definitely not a payment that the leaseholders aren't told is required until well after the accounting year has ended.
                    These are all costs that the freeholder/managing agent should be aware will need to paid at the beginning of the accounting year, and should therefore have been budgeted for appropriately.

                    I agree that many of these costs do nothing at all to benefit the leaseholders (in most cases), and regulations need to be changed to remove any costs that are of no benefit. The need for service charge accounts to be certified by an independent accountant is an example of one cost that shouldn't be required, and should be actively discouraged for small blocks. This certification supposedly helps protect leaseholders, but in reality all that it does is mean that they need to pay more (potentially 10%, or more, above what they would otherwise pay in small blocks that require little maintenance) while failing to guarantee that any of the charges made are actually payable. All that the accountants usually do is check that the totals on the invoices they are provided with add up to the total service charges that are being claimed (and when there are only 20-40 invoices, as is the case for my block, even a halfway competent leaseholder should be able to do this in 10 minutes once provided with copies of the invoices).

                    There will, however, sometimes be occasions when work that was planned turns out to be more expensive than originally thought, and may even end up costing more than the contingency that should have been included in the budget, and this may result in overspends.
                    There will also sometimes be cases where the need for immediate maintenance comes up unexpectedly, or work that was know would be needed, but was going to be included in the next service charge year has to be brought forward.

                    Comment


                      #11
                      If you have already sold your flat , your buyer or buyer's solicitor should have registered the transfer of flat under name of new leaseholder . Then the management company would be chasing new leaseholder for service charge arrears- not chase you..

                      Comment


                        #12
                        clarrieblue,

                        How was this brought to your attention? I take it the current leaseholder (or their solicitor) contacted you about the £200 extra service charge? Was this invoice produced within 18 months? There is the 18 month rule Under Section 20B of the Landlord and Tenant Act 1985

                        Comment


                          #13
                          That’s correct, the new leaseholder is being chased for the extra service charge. The charge was for the period that ended 18 months before my sale of the apartment to them was concluded. Such a long delay in completing the accounts seems incompetent to me.

                          I did not want a debt of mine, though I thought it unjustified, to cause a problem for the new leaseholder, eg be detrimental to their credit rating. So today I settled the debt.

                          Comment


                            #14
                            Originally posted by Gordon999 View Post
                            Then the management company would be chasing new leaseholder for service charge arrears- not chase you..
                            Only because it is easier for them to chase the new leaseholder, because of the potential to threaten forfeiture.

                            It should really be the person who owned the lease when the money became due who is chased.

                            Comment


                              #15
                              I dont think Macro is correct; once the lease is assigned, the assignee becomes liable for the debts to the landlord of the assignor

                              Comment

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