Service charges

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    Service charges

    A freehold company normally charges a very high amount (relatively speaking and considering location) of nearly £3k per annum for service charges. Suddenly it decides to charge an additional £5k for the year, ie total £8k (equivalent £670 per month) Flats in the block range from £160k to £200k. The management company say the entire roof needs replacement hence the additional £5k. Can this be challenged and on what grounds. I believe there is a sinking funds and insurance is paid annually. I know insurance is not for natural wear and tear and replacement, but wonder if insurance and sinking funds could have been tapped sooner to prevent this. In any case can a freeholder charge whatever they like for service charge. Surely the word reasonable comes into play here, otherwise they could charge, whatever they like and create a seemingly valid basis?

    #2
    £3k is very high by any standard and you are right to challenge it.
    If there is reserve fund or sinking fund, it should be used, that is the purpose of such funds.
    We would need a breakdown of the costs to help you further. You should start by requesting to inspect the supporting documents for the last service charge year.
    Unfortunately freeholders do charge whatever they like and increase the charges until someone objects.

    Comment


      #3
      Thanks for your reply. The £3k was always questionable but an additional £5k tips everything. The sinking fund seems a good thought.

      Comment


        #4
        I'm afraid that there is nothing to prevent large sums being demanded for service charges and sometimes it might be both necessary and reasonable.

        Without more detail it isn't possible to say whether or not the amounts you are being required to pay are reasonable, even though £3000 per year sounds high.

        If the block has been poorly maintained in the past, and the freeholder or management agent (one or both of which could be fairly new to the block) is now working to bring the building up to a decent standard, all costs might be considered reasonable.
        You will have to ask why so much is being demanded, why work hasn't been carried out in the past (if this is what has happened), and look into whether the claimed work is actually being carried out, whether it is necessary, whether it is to a good standard, etc.

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          #5
          Ask for the accounts, you are entitled to them

          Comment


            #6
            Originally posted by Sarah B View Post
            Ask for the accounts, you are entitled to them
            And what can you really do if they're not issued, I've been asking for mine for over 7 months now!

            Comment


              #7
              Originally posted by fos333 View Post
              And what can you really do if they're not issued, I've been asking for mine for over 7 months now!
              It is an offence not to allow you sight of the accounts and invoices, - probably going to the agents, and they must allow you to inspect and take copies, otherwise they are committing an offence -- look it up.

              Comment


                #8
                A new roof can be a very costly item and if due process has been followed under s20 and the time for consultation elapsed, and nomination of an alternative contractor there is no real alternative but to find the money

                Comment


                  #9
                  The alternative is to ask the freeholder to charge the reserve fund or sinking fund

                  Comment


                    #10
                    Originally posted by ram View Post
                    It is an offence not to allow you sight of the accounts and invoices, - probably going to the agents, and they must allow you to inspect and take copies, otherwise they are committing an offence -- look it up.
                    Thank you for the reply.

                    Serving a S21 and S22 is fine, however, the agents have refused to answer emails asking why the accounts have not been received that under the terms of the lease should have been received by June 2020 (2019 accounts).

                    The directors of the RMC have also been asked why the accounts have not been received, the same directors that showed little interest in the service charge arrears that the MA had failed to collect.

                    My understanding is that S21 has to be submitted before a S22, unless you have received the summary as covenanted in the lease, you are then able to submit a S22 request. On serving the S21 the summary would be certified by a qualified accountant.

                    Our lease is slightly different that it refers to appointing a qualified accountant for the purpose of auditing the accounts in respect of the maintenance expenses and certifying their total amount for the period to which the account relates.

                    Other issues are that refusal of allowing inspection of accounts, receipts, etc may be an offence, but falls under the local authority to enforce.

                    Comment


                      #11
                      Originally posted by fos333 View Post
                      Serving a S21 and S22 is fine, however, the agents have refused to answer emails asking why the accounts have not been received that under the terms of the lease should have been received by June 2020 (2019 accounts).

                      ...

                      Other issues are that refusal of allowing inspection of accounts, receipts, etc may be an offence, but falls under the local authority to enforce.
                      It is true that there is relatively little that you can do to get accounts and/or invoices if the freeholder/managing agent don't want to produce these. Technically it can be an offence, but in reality it is one that is unlikely to be prosecuted.

                      Service charge accounts being provided late is definitely not something that I would worry about (that can potentially work in your favour if the accounts aren't produced.

                      You do not need to have made a section 21 request before asking to see invoices, and freeholders (or their managing agents) should be willing to provide sight of invoices, if this is requested, even if they have no legal obligation to do so.
                      If requests for accounts and to see invoices are ignored, make sure that you keep copies of letters, emails, etc. that you send (and proof of posting certificates for letters) because this can potentially help prevent the likelihood of a freeholder being allowed to recover their costs if either side starts court or tribunal proceedings - even if you lose. Your argument would be that the court/tribunal could potentially have been avoided if they were willing to provide these when they were requested and had been willing to engage in discussion.

                      Comment


                        #12
                        Thanks Macromia I'll be sure to save all correspondence for future use.

                        Also wasn't aware you could ask to see invoices, etc even if you hadn't received accounts or made the S21 request. Thank you.

                        Comment


                          #13
                          Originally posted by fos333 View Post
                          Thanks Macromia I'll be sure to save all correspondence for future use.

                          Also wasn't aware you could ask to see invoices, etc even if you hadn't received accounts or made the S21 request. Thank you.
                          You can always ask anyone who you need to pay money to to provide evidence supporting the amount they are asking for!

                          The RICS Service Charge Residential Management Code says that it is 'best practice' for managing agents (and freeholders) to be open about costs and to provide access to invoices whenever it is reasonably requested (not in those words though).

                          This doesn't mean that you'll get what you are asking for, although quoting the RICS code at them can sometimes help and tribunals will expect them to be able to provide good justification for not following the code if they haven't done so.

                          Comment


                            #14
                            The RICS code states
                            7.5 the purpose of a reserve fund or sinking fund is to spread the costs of “use and occupation” as evenly as possible throughout the life of the lease to prevent penalising leaseholders who happen to be in occupation at a particular moment when major expenditure occurs
                            13.1 where reasonable information and/or copies of documents are requested, the agent should provide them within reasonable timescales

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