Service Charge when changing management companies due to RTM

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

    Service Charge when changing management companies due to RTM

    We have secured a right to manage for our building, the new management company takes over in 6 weeks time. which is halfway through a 6month service charge period which we pay in advance. The current management company is claiming that we need to pay all of the service charge in advance to 3months beyond the date that the new management company will take over. Is this the case?

    We have offered to pay a pro rata amount up until the date of the takeover. Which we think is reasonable as there are many weekly costs that we are currently charged for that will not be continuing with the new management.

    Any thoughts would be appreciated.

    Thanks

    Jazzy

    #2
    I would not pay anything to the old management company unless it can demonstrate that it does not have sufficient funds to pay the regular bills. The problem is that the RTM will need monies from day 1 to pay those same expenses and the old management company may delay or fail to hand over the monies it holds.

    Comment


      #3
      Thanks for the reply. We have already suggested the pro rata approach, but we can always renege on this by not paying, I assume they will always issue a final account?

      Comment


        #4
        I should also mention and I don't know if it's just posturing, but the current managing agent is threatening legal action if we don't pay our current estimate.

        Comment


          #5
          It will not take legal action, by the time it came to court, it would have no authority to act and your defence would be that you have paid the RTM. I would be even more wary of paying anything else to the old management company.

          Comment


            #6
            Because by the time we take over any arrears would be the responsibility of the freeholder. And when the new management company is responsible only for the service charge moving forward from the date it takes over?

            Comment


              #7
              Strictly speaking the management company (regardless of whether you meant managing company or managing agent) is likely to be correct.
              If your leases require you to pay 6 months of service charges in advance at the beginning of that period, you will be in arrears, and in breach of the lease, if you do not do so.

              On the other hand, there is unlikely to be any benefit to leaseholders (except perhaps avoiding potential legal action) from paying the full sum, and there may well be problems with the collection of any balance that should be handed over to the RTM company.

              I think that I would be inclined to write to both the management company/agent and the freeholder to make it clear that no leaseholder is refusing to pay costs that are reasonably due (or that all leaseholders named in the letter aren't refusing this), that you are willing to pay the sum that will need to be paid out within the next six weeks to the existing company and will then pay the remainder ro the RTM company.

              There is no reason at all for an honest management company to insist on being paid sums that will not be spent until after they have ceased to have control of the running of the property (and they should be able to provide invoices for anything that has already been spent, and details of any further payments they expect to be needed in the next six weeks).

              While you would still technically be in breach of the lease (if it does require payment at the beginning of the six month period), this should be enough to demonstrate that your action will not have disadvantaged the freeholder in any way.

              Comment


                #8
                The RTM will be responsible for the current service charge year and the freeholder is only entitled to recover any expenditure which he has paid for this current year, he must hand over any surplus monies which he holds. It depends on what the current bank balance is, if it is sufficient to meet outgoings until the date of the hand over, I would pay nothing more, there is no point in paying the freeholder so that he can hand it over to the RTM. That runs the risk that there may be insufficient funds for the RTM to operate.

                Comment


                  #9
                  eagle2,

                  Thanks that is clear.

                  I have a second question on this. We know that 2 out of the 4 flats in the building are significantly in arrears with the service charge. Which begs the question if the freeholder hasn't been contributing to the costs is it possible that the 2 flats who have been paying have been covering the costs of all 4 flats. If so are we able to get the accounts for the past 5 years or so and claim any money back on this?

                  Jazzy

                  Comment


                    #10
                    I suspect that the freeholder will deduct all expenditure from any monies which he has received, so you will need to collect any arrears, which should be advised to you at the handover.

                    Comment


                      #11
                      I understood that we were not responsible for arrears as per this?

                      https://www.lease-advice.org/faq/is-...-the-building/

                      Comment


                        #12
                        The RTM will need to know the service charge arrears at the time of the handover and receive service charges as and when they are collected. I would recommend that the RTM obtains more information and considers collecting them on behalf of the freeholder so that it is aware of the ongoing position. I accept that it could be complicated if there are other arrears as well as service charges and if recovery proceedings have commenced. You may also wish to contact the 2 leaseholders to enquire if they have any valid reasons for withholding payments and if they would be willing to pay the RTM when it takes over.

                        Comment


                          #13
                          How can we find this out? Or do we just wait to handover?

                          Comment


                            #14
                            I recommend that you ask the freeholder as soon as possible, You are going to have difficulty running the RTM if only 50% of the contributions are being received so you should also contact the other 2 leaseholders and try to get them on board.

                            Comment


                              #15
                              Hence my question earlier. If the management have been relying in the service charge of 2 leaseholders, and the debt is not being paid by the freehold, as there is no sinking fund how has this been working to date?

                              Thanks

                              Jazzy

                              Comment

                              Latest Activity

                              Collapse

                              • Reply to Worth buying flat with 15 years remaining?
                                by ram
                                With 15 years lease remaining, the property is almost valued at nil.

                                And no lender will give you a mortgage because the terms of a lease state that when the leased term ends, you give the property back to the freeholder, and you get no money for it.
                                A lease is a long term rental in
                                ...
                                20-06-2021, 22:40 PM
                              • Worth buying flat with 15 years remaining?
                                by carcarrot94
                                Saw a flat in London for around 460k with 15 years remaining on lease.
                                Central London, prime area.

                                Would this property be unsavable in terms of lease extensions? How come people are wary to buy these?

                                What would it cost?...
                                20-06-2021, 21:58 PM
                              • Title deeds don't match floor plan
                                by carcarrot94
                                Hi everyone!

                                I am a first-time buyer and saw a flat that I was interested in. It has a 999 year old lease. It is on sale through probate as the previous owner died.

                                The problem with it is that there seems to be an extra bedroom added by the leaseholder and that is not reflected...
                                07-06-2021, 18:22 PM
                              • Reply to Title deeds don't match floor plan
                                by carcarrot94
                                No it's in a purpose build flat building. One flat has extended out to the top floor staircase area where there was a window....
                                20-06-2021, 21:59 PM
                              • Reply to Title deeds don't match floor plan
                                by carcarrot94
                                I think around 15 years ago?...
                                20-06-2021, 21:59 PM
                              • Resigning as RTM Director
                                by MrT2014
                                Hi,

                                After several years as a Director handling the admin for our small RTM I've had enough chasing the other two flat owners/directors who contribute very little and endlessly footdrag when stuff needs to be done. 90% of my time is spent sending reminder emails and I'm pretty much done...
                                20-06-2021, 13:28 PM
                              • Reply to Resigning as RTM Director
                                by ram

                                It certainly IS,

                                But once no longer a Director or Company Sec, you can shout at them as much as you like.
                                They can't sack you, can't force you out, can't make you pay more service charges just because you upset them.
                                They won't talk to you or say good morning to you when
                                ...
                                20-06-2021, 21:56 PM
                              • Reply to Resigning as RTM Director
                                by MrSoffit
                                Hi,

                                Of course you can just resign. Write a letter to the registered office saying " I resign as a director of X Limited with immediate effect". No need to get bitter and rowdy. Hand back the keys to the company Rolls Royce and any company documents (insurance documents etc) to...
                                20-06-2021, 20:54 PM
                              • Reply to Resigning as RTM Director
                                by ram
                                Downsides.
                                You wont force their hand to do anything.
                                They will just do nothing, no maintenence, no legal requirements implemented.( Saves them money )

                                Possibility of the company being struck off because the others wont submit accounts to Companies house, ( saves the acountants
                                ...
                                20-06-2021, 20:51 PM
                              • Help understanding wording of lease for alterations covenant
                                by NotTheLastLeaseholder
                                I'm a leaseholder who has been researching all things lease related as to get a better understanding of the terms. I think I'm starting to get there but I am struggling with the phrasing in the covenant concerning alterations.

                                Here is my understanding thus far:

                                THE DEMISE...
                                20-06-2021, 19:50 PM
                              Working...
                              X