Landlord taking tenant to county court for reserve fund contribution not paid

[Starlane]

Hello
The landlord is not operating the "reserve fund" in accordance with the lease and will not state on the budget what the monies demanded are for? This has culminated in a tenant - me questioning the expense and asking them to explain and justify what the monies are for? Instead of doing this a director has commenced Count County action for the recovery of £30.00 and asked the judge to consider the future reserve contributions which again have not been itemised. The court fee is £25.00 it all seems a bit over the top to me? I am basically asking what the monies are for and to show me a receipt/estimate/invoice and bank statement however this has been ignored. I am happy to comply with the lease just want clarification otherwise monies are being demanded with no explanation. The service charge just states an amount and no item of expenditure or explanation?

[Jon66]

What does the lease say? Please post the exact wording.

[Starlane]

Services to be provided by the lessor..such sums of money as the Lessors reasonably require to incur in replacing maintaining renewing and decorating those items which the lessor hereby covenants to replace maintain renew or decorate ( such sums set aside to be a sinking fund)
The landlord has not done any of theses works.

[Macromia]

The landlord has not done any of theses works.

The landlord doesn't have to have done any of the type of work listed.
Sinking funds are funds collected in advance so that money is already available when expenditure is needed (to help spread the cost evenly).

Decorating will usually be expected every 5 to 10 years (the lease may state how often), and other maintenance may be necessary less often (e.g. replacement of a flat roof after 20 to 30 years).
No invoice or receipt would be available until after work had been carried out, and estimates would usually only be valid for 6 months or so. Sinking funds aim to collect roughly the amount that will be required for future work without knowing the actual amount.

You don't say how often you are expected to pay this £30 sum, or how many others are expected to pay the same, but it may well be an entirely reasonable amount for the landlord to "reasonably require to incur" in the future for the work mentioned.
Unless it is stated elsewhere in the lease that the landlord is required to provide budgets detailing forecast future expenditure, I suspect that you may lose if this actually goes to county court.

Having said that, I think that the director's actions are unreasonable, and they should definitely have given you an explanation regarding what they are collecting the reserve fund for rather than going straight to legal action - this would be considered 'best practice', even if not actually required by the lease.
If they don't know what they expect to spend the money on, and when, it is not money that that expect to "reasonably require to incur", although it may be reasonable for at least some money to be held for the 'unexpected' repairs that all buildings require occasionally - especially if the building is old.

[Macromia]

... I suspect that you may lose if this actually goes to county court.

It does depend very much on who ends up hearing the case though.
It may be that it gets thrown out for being frivolous - I can't imagine many judges being particularly impressed with this being put before them when it should really be sorted out between the two parties (or by the directors seeking legal advice regarding how the lease applies) rather than at tax payer's expense by taking it to court.

[jpkeates]

A county court claim for £30?
It's a stupid abuse of process, I'd expect the court to award costs against the "landlord".

Although I'd guess they'll win, £30 is hardly unreasonable.

[Starlane]

It does depend very much on who ends up hearing the case though.
It may be that it gets thrown out for being frivolous - I can't imagine many judges being particularly impressed with this being put before them when it should really be sorted out between the two parties (or by the directors seeking legal advice regarding how the lease applies) rather than at tax payer's expense by taking it to court.

Thank you so much Macromia and JP that is what I thought..it is crazy to not say at least what it is for?

[Starlane]

Macromia they demanded £30 and now the next years budget states they want £1600.00

[Macromia]

Macromia they demanded £30 and now the next years budget states they want £1600.00

That might be reasonable expenditure, especially if it includes a contribution towards future expenditure - but it does depend on what maintenance the building requires.

[Starlane]

Yes Macromia but I have a hunch it will be used for everyday expenses and not anything major hence that is why I have asked for clarification.

[Jon66]

£1600 a year for service charges is not unreasonable in the south east. They cannot produce receipts invoices etc for costs that have yet to be incurred. You are asking for something that does not exist.

[eagle2]

You may be able to get the claim struck out on the grounds that it is frivolous and vexatious.
Where are the monies being held? The RICS code 7.6 states that funds held for longer terms should be held in an interest earning account. You may be able to argue that monies are not payable until an adequate account is open to receive the monies.
The ARMA guideline states “if necessary, ask the landlord how the level of reserve fund contributions has been calculated”. So you are entitled to ask for information and by implication you are entitled to receive a reply. The landlord should be able to let you have a planned maintenance or a Capex (capital expenditure) report.

[Starlane]

Jon66,

This is a contribution to the reserve fund I have been sent additional demands for more monies for the service charges meaning my service charge plus this contribution is looking high!

[Starlane]

eagle2,

I don't know where the funds are kept , I have asked and they wont let me see the books so I am assuming it is mixed in with the service charge and company expenses account. They set up a reserve fund before and used the money for annual expenses and no BIG expenditure, they have failed to repair in previous years and not done any decorating according to the lease since 2013

[flyingfreehold]

Even the best organised freeholder is likely to find that contractors have so much work on that even when they finally collect in moneys for major works that there will be a few months delay before work can start on site.