Will a leaseholder be entitled to challenge the service charge expenditure

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    Will a leaseholder be entitled to challenge the service charge expenditure

    Hello,

    in our lease contract, the second schedule, the service charge expenditure. 5.1;

    Without prejudice to the generality of the Tenant’s covenant to pay the service charge on account of anticipated expenditure the meaning of the Service Charge Expenditure shall be deemed to include reasonable provision for the future in respect of:

    (1) periodically recurring items whether recurring at regular or irregular intervals and
    (2) the replacement or renewal of items

    the expenditure on which items would fall within the Service Charge Expenditure such reasonable provision to be determined by a surveyor appointed by the Management company (“the surveyor”) on the assumption that the cost of such items is calculated in such life expectancy as the Surveyor may reasonably determine (acting as expert and not as arbitrator) and that each year the Tenant will be required to pay the Tenant’s proportion towards the anticipated cost to the intent that a fund or funds be accumulated sufficient to cover such costs by the end of the anticipated life of each such item.

    The management company has considered to include reasonable provision within the Service charge Expenditure but the reasonable provision has been determined by the managing agent and not by a surveyor as stated in the lease contract.

    My question is, Will a leaseholder be entitled to challenge the service charge expenditure if the reasonable provision is not determined by a Surveyor as stated in the lease contract? What other consequences can be derived by a breach of this lease clause, if any?

    Thank you in advance!

    #2
    I think that a leaseholder would only be able to challenge the charge if he/she is able to demonstrate that the charge is unreasonable, he/she is unlikely to succeed only on the amount being determined by a managing agent rather than a surveyor.

    Comment


      #3
      You state it's a Management company.
      We assume there are a number of flats, and a few leaseholders are Directors, and the Directors have decided not to get a survey done as it costs between £ 600 and £ 1000.
      Who told you they were not going to get a survey done ? The Directors of the in house company. or managing agents that the directors farmed out to.

      Often, cash strapped leasholders who are Directors, often flout the lease and the law to save themselves money.

      Often Directors are competant in viewing the place and deciding the maintenence schedule for the next year to 5 years ( irrespective if lease says a surveyor must b engaged.)
      i did it for 20 years without a surveyor.
      I only got a surveyor in because the directors ( more in number than the number of flats ) refused to O.K. my anticipated service charges, which leads to directors being charged with failing to enforce the lease to properly maintain the place.
      I was a director, which ment I would be sued with all the others. I was not having any of that, so suryeyor was appointed, much to the discust of the directors.

      They had a choice, maintain the place or i would resign and sue them for breach of the lease. They took the cost of the surveyor over being sued.




      Comment


        #4
        You have the right to challenge service charges for ANY reason you like.
        What you need to consider is whether it might achieve anything worthwhile, and whether you have any reasonable chance of success.

        What exactly is it that you expect to achieve?
        Do you think that too much is being asked for for a reserve fund? Or too little?

        If a surveyor is appointed you will have to pay a share of the cost of their fees in addition to other charges.
        Do you expect a surveyor to come to a very difficult conclusion regarding how much needs to be collected for a reserve fund?

        Comment


          #5
          Forgetting a reserve fund, and as explained in post number 3, if the directors are skinflints, you will find a surveyors anticipated costs will be more then the strapped cahed directors have allowed for.

          Provided the place is maintained properly, with telephoto lenses for the roof area, and someone with the most common sence looks over the property, it is not always cost efective to engage a surveyor at such an on cost.

          Last time i had a surveyor, he missed completly two items and I had to make him alter his draft survey ...

          Comment


            #6
            Just to clarify #2, the FTT has limited jurisdiction and your question was whether or not a reserve fund being part of service charge expenditure could be challenged by a leaseholder. The FTT can only consider whether or not the amount of service charge expenditure is payable, the amount which is payable, when it is payable by whom and to whom.

            In your case, I do not believe that a leaseholder could argue that a reserve fund is not payable simply because it has been calculated by directors instead of a surveyor. He/she would need to demonstrate that it was unreasonable eg it had been incorrectly calculated or that a surveyor would have arrived at a lower charge, which is extremely unlikely. Even if the leaseholder found a surveyor who would have calculated a lower charge, it is by no means certain that the FTT would accept that alternative figure.

            Comment


              #7
              So the consensus is yes, but probably pointless.
              I can see no reference to "directors" in the OP's post and feel that any experienced managing agent ought to be confident in setting a service charge budget. Why waste your hard earned money on a surveyor ¿??

              Comment


                #8
                If the lease contract states the reserve fund provision must be determined by a Surveyor, understand the reasonable thing is to comply and appoint a Surveyor. If the directors decide to save money by having the managing agent to do the job, is the management company entitled to breach the lease at the same time is enforcing other articles to their fellow leaseholders? How do we know the calculation is reasonable anyway? A wrong reserve fund calculation can mean we are paying more than necessary and we all want that money in our pockets, but in the other way, paying less services charges reducing the reserve fund could mean paying future big amount of levies as well. Bad management can ruin your life, I have the general impression leaseholders are very unprotected under the law, Than you all for your replies, cheers!

                Comment


                  #9
                  You are raising several questions.

                  1 Does it matter if the directors or the managing agent or a surveyor calculates the charge for the reserve fund ?- probably not, your lease is unusual to specify that a surveyor is required and if the directors are saving you money, you are benefitting

                  2 Is the charge for the reserve fund reasonable? - that is entirely different, you are entitled to challenge the charge. If you consider it too high, you can obtain evidence and apply to the FTT. If you consider it too low, you can explain your reasons to the directors and you can save the additional monies yourself. Consider that a calculation for the reserve fund takes into account projections for costs which may be incurred up to 50 years ahead and that requires forecasts of dates when items will be renewed, inflation and interest rates during that period, so no two calculations are likely to be the same or regarded as accurate.

                  3 Bad management - you can apply to the FTT to appoint a manager or challenge the management charges within the service charge,

                  Comment

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