Excessive service charges - next step is First Tier Tribunal - 2 questions

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    Excessive service charges - next step is First Tier Tribunal - 2 questions

    I have made a formal complaint regarding excessive service charges to the management company. They haven't responded favourably and I have enough evidence to make a case against them at a First Tier Tribunal (FTT). In summary, they insist on using the same company for all tasks: cleaning, gardening, minor works (and even major works). We (the 5 leaseholders) are charged £60 an hour for cleaning, when the market rate is c.£20 and even the company they use has quoted me £30/hour.

    I have 2 questions:
    1. I am disputing 2019 and 2020 service charges and there are excess charges outstanding on both. If sucessful, will I be able to claim/backdate and excess costs to 2017 and 2018?
    2. I am intending to apply to the FTT in just my name. If successful, what would that mean for the other leaseholders? Could the FTT force the management company to reduce the costs to all leaseholders or would they need to make their own individual or combined FTT applications, knowing that the facts will already have been established.

    #2
    Firstly, even though charges like these might seem unreasonably high to you, there is no guarantee that a tribunal will agree.
    In fact, even when charges are clearly too high, or provide no benefit whatsoever for any leaseholders, they can be considered 'reasonable' if the freeholder justifies them somehow and the tribunal accepts their reasoning.

    It's not clear what you mean when you refer to "the management company".
    Is this a company that owns the freehold, or is it a managing agent managing the property on behalf of the freeholder?
    If it is a managing agent, you don't take them to the FTT, your case is against the freeholder.
    If the "management company" is the freeholder, whether taking them to a tribunal is the best course of action might depend on whether it is a leaseholder owned company or not (and whether you are a shareholder/member if it is).


    As for your questions...
    1. Any decision will apply only to the years that the tribunal is asked to consider. If you are confident that you have a good case, and that this applies to the earlier years as well, you should include all the years in your application.
    2. If the application is in your name only, the decision will apply only to the service charges for your property.
    The freeholder could choose to give any discount that you win to other leaseholders but they are under no obligation to do so. The other leaseholders will be able to use your case if they make an application of their own though.

    You also need to consider exactly how much it is that you think that you are likely to be 'awarded' as a reduction to what you are required to pay, and to weigh this up against the time and money that an application would cost you.
    If you make an application you will need to pay an initial application fee and, if the case goes to a hearing, a fee for that as well. You will also need to produce at least 6 'hearing bundles' (which can add up in paper/printing, or photocopying costs) and get these delivered to both the freeholder and the tribunal.
    Don't underestimate the time that you may have to devote to this, or overestimate the potential outcome.

    Comment


      #3
      Originally posted by Macromia View Post
      If you make an application you will need to pay an initial application fee and, if the case goes to a hearing, a fee for that as well. You will also need to produce at least 6 'hearing bundles' (which can add up in paper/printing, or photocopying costs) and get these delivered to both the freeholder and the tribunal.
      Don't underestimate the time that you may have to devote to this, or overestimate the potential outcome.
      One of the good things to come out of Covid 19 is that many legal hearings are being conducted using teams/zoom and most likely in the future

      The bundles can be sent electronically and only 1 paper bundle is required based on a recent case I was involved in

      Comment


        #4
        Macromia,

        Thank you so much for your advice. The management company manages on behalf of the freeholder (though they are both owned by the same people). These are historic charges - the block has since been acquired as a 'right to manage', so the situation won't continue. But £60 an hour for a cleaner cannot be considered reasonable, when the same company charges other people £30 and the going rate is £20.

        As for 'how much time' versus the 'potential outcome' this is a very good question. There will of course be significant time on the part of the freeholder in preparing their evidence too. I might put that to them and see if an agreement/settlement could be made 'out of court' - though I suspect it will meet with a refusal.

        Comment


          #5
          You should ask the other leaseholders in the block to join your application to the FTT. The FTT may reduce the service charges for every leaseholder going back up to 6 years.

          Comment


            #6
            Thanks - I presume the 'up to 6 years' applies even though charges have been paid/'agreed'?

            Comment


              #7
              I have to echo #macromia here I'm afraid having gone through a similar situation and won - but we only got our money because we had withheld payment, those lessees who had paid were unable to get their money back. Enforcement of FTT rulings is difficult and as you have had a great result in getting your RTM it may be prudent to move on and just accept you've been ripped off in the past.
              Don't forget you may still require the cooperation of the freeholder in future (lease extension, structural alterations, keeping a gold fish etc ??) .
              Good luck with the negotiations.....maybe that will work.

              Comment


                #8
                The rogue freeholders and managing agents will try to explain that there is no point in objecting to their outrageous charges because if you do not pay under the lease, you will have to pay as a member under the Companies Act. It is untrue, excess payments should be recovered from those who profited from the overcharging or from the directors.
                £60 per hour for cleaning appears to be too high but you should ask to see the cleaning contract to see what exactly is included in the charge. It should not be difficult to obtain a lower quote. I agree with others that the freeholder does not need to accept the lowest quote, but it must be reasonable and £60 ph appears to be unreasonable.
                Firstly, you should take it up with the freeholder on a without prejudice basis and explain what is unreasonable and try to agree a reduction in the charges. It will look better if you have made an attempt to avoid going to a Tribunal.
                I agree that you should challenge all the years. I have known Tribunals go back more than 6 years even though the official line is that 6 years is the limit.
                It is better if you ask other leaseholders to join your application. The more leaseholders who object to the charge, the better and Tribunals do not appreciate multiple applications from leaseholders on the same subject. A 2nd application by another leaseholder would start afresh, with the parties being able to supply and rely on different evidence, a 2nd Tribunal would not necessarily reach the same decision.
                I also agree with others that current Tribunal hearings are being held virtually, so you do not need to leave your home, but they tend to last longer. It is a step forward that documents may now be served electronically.

                Comment


                  #9
                  Originally posted by impreza280 View Post

                  Thanks - I presume the 'up to 6 years' applies even though charges have been paid/'agreed'?
                  If charges have been agreed you can't later challenge them. The law says that paying doesn't mean that charges can't be challenged, so technically paying doesn't mean that you have agreed that demands for payment were valid, but it will be far more difficult to contest previous charges if you aren't able to produce evidence that you challenged them at the time (or give a good reason why you didn't).

                  While £60 per hour for cleaning would almost certainly be considered unreasonable, you would need to know exactly what was being charged for. I doubt that your service charge accounts state anything like "cleaning at £60 per hour", so you might find that you get told that the hourly rate being paid is only £30 and the cleaners do twice the amount of cleaning that you think they do.
                  It may also be that £60 is considered reasonable for a visit where a cleaner is only present for about an hour (a tribunal concluded that a monthly visit to pick up rubbish from external parts of my block was reasonable to charge £50 for, despite the fact that the work that is actually done takes no more than between 30 minutes and 1 hour - their justification seemed to be that they would expect this to be a typical amount charged for similar once monthly work).

                  I still wonder how much you are hoping to get back in total - and whether that would actually make the effort involved with a tribunal case worthwhile. Perhaps it would if other leaseholders would agree to share the costs, even if they don't share the work?

                  Comment


                    #10
                    Originally posted by sgclacy View Post

                    One of the good things to come out of Covid 19 is that many legal hearings are being conducted using teams/zoom and most likely in the future

                    The bundles can be sent electronically and only 1 paper bundle is required based on a recent case I was involved in
                    That's good to hear.
                    Hopefully they'll be willing to stick with this sort of arrangement in the future.

                    Currently some Freeholders seem to rely on the expense involved with a tribunal application to limit the number of leaseholders willing to challenge costs - and tribunals still seem unwilling to award costs (even tribunal fees) even when a leaseholder wins a large majority of the costs they challenge).

                    Comment


                      #11
                      The Tribunals appear to accept all documents by email now, which is a major step forward, hopefully that will become permanent instead of having to send multiple hard copies to them. The problem is that they do not appear to print the documents and the Tribunal members refer to electronic versions which significantly slows down proceedings especially when there are hundreds of documents involved, the page numbers are not always clear and there is no logical order to the documents.

                      Comment


                        #12
                        The Tribunals are experiencing teething problems as you can imagine, it can take a while for all parties to join the hearings, 30 minutes is not unusual, there seems to be a problem using Microsoft Edge whereas Google Chrome works better.

                        Comment


                          #13
                          Originally posted by eagle2 View Post
                          The Tribunals appear to accept all documents by email now, which is a major step forward, hopefully that will become permanent instead of having to send multiple hard copies to them
                          All documents were accepted by email last time I was at a tribunal, as long as they were below a certain number of pages (I don't remember how many).
                          The complete 'bundles' for the hearing had to be prepared, and sent as hard copies, by the applicant though (1 copy to the defendant, 4 copies to the tribunal). If this remains something that can be sent by email it will make it a lot easier, and cheaper, for applicants.

                          Comment


                            #14
                            Originally posted by impreza280 View Post

                            Thanks - I presume the 'up to 6 years' applies even though charges have been paid/'agreed'?
                            Here is a sample decision for case where application was made to the FTT :

                            https://decisions.lease-advice.org//...1000/10574.pdf

                            You can search for other past decisions at the LEASE website : www.lease-advice.org

                            Comment

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