Section 20 fee

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    Section 20 fee

    Leaseholders issued with a section 20 notice a few months ago for anticipated works following FRA done a year ago.

    A `fee` of £100 + VAT has been added to each leaseholders share of the total by the Managing agents .

    There is only one Section 20, but when asked, the Managing agents said that they can charge for both the initial section 20 issued, which gave notice that a section 20 was raised (but no details of costs) and also for the actual section 20 detailing the total costs per flat.(£50+VAT each).....this sounds like daylight robbery, are they allowed to do this?

    #2
    A managing agent is not entitled to charge leaseholders directly because there is no legal contract between them,

    The managing agent must be appointed by either a freeholder or a management company, you do not say which exists in your case. Whether or not it is entitled to charge depends on the legal contract that exists, so I recommend that you ask for a copy of the management agreement,

    The freeholder or the management company may be seeking to recover the charges from the leaseholders and whether or not that is possible depends on the terms of your lease. If the lease permits the charge, it must then be reasonable. How many leaseholders are there? The more leaseholders, the more unreasonable the charge appears to be,

    Comment


      #3
      As eagle2's comments above point out it will depend on the lease BUT its is a bit unusual, normally leaseholders would be expected to pay an annual management fee this would cover all admin work undertaken during the year, it is unusual to charge for one offs during the year unless they are 'extras' asked for by a LH, such as permission to sublet, this would be an 'administration' charge charged to individual LHs

      In any event, the sums mentioned are high for a bit of minimal work, an FTT could decide on this, further S20 works usually include an extra 10% or so this is for the management/admin of the works as a whole
      Advice given is based on my experience representing myself as a leaseholder both in the County Court and at Leasehold Valuation Tribunals.

      I do not accept any liability to you in relation to the advice given.

      It is always recommended you seek further advice from a solicitor or legal expert.

      Always read your lease first, it is the legally binding contract between leaseholder and freeholder.

      Comment


        #4
        The RICS code 3.5 states that the agent "should have a "menu" of charges for duties outside the scope of the annual fee".
        ... it should also provide a summary of those charges "to leaseholders upon request".

        Comment


          #5
          Hello again.
          Thank you for the informative replies.
          Up until a year ago, the Freeholders sister company was the managing agent (useless). (going back 15 years)

          Last year we were informed that the Managing of our block of PB flats had been given to a new company.(no discussion or prior announcement)
          The `managing agent` part of our service charges immediately increased by 100% to over £300/flat (properties worth max £100k).

          I was amazed at this increase, and contacted the new managing agent, and Freeholder, to ask on what grounds they had increased the charge for that part by so much.......their answer was that it is a `Private contract` between them and the Freeholder, and I had no right to view it at all, or any of the terms.

          During the year(2020) a FRA was done, which highlighted certain failings (these had apparently been put right 2 years previously following a FRA at that time, at high cost to us) but clearly the work was not up to standard?? And many other failings were now noted that had never been noted before.

          A section 20 was issued in October 2020.
          It has now taken 12 months before we have finally been given note of the `damage` to effect these repairs. In the meantime it would appear that certain elements (communal corridor doors) of the Fire code has changed, so now we have been issued with yet another final amount.
          But this £100 fee (£50 x 2) is included within the final figure for each flat.(but is a flat fee for each flat, not a % as normal depending on flat)
          They mention the fee at the bottom of the total amount payable for each flat in the following way:
          * Each section 20 notice has a £50.00 plus VAT fee applicable

          That is as far as I know at the moment, but interesting that we were never given a copy of the original tenders sent out, nor any Fully costed copies of the quotations received (only 2, on quotes in excess of £30K). Merely the total amount quoted by the 2 companies. (significant difference in the 2 quotes (25%) which surprised me, so I have now asked for full disclosure of the tender sent and detailed fully costed copies of the quotes received) although I am nit sure if they are obliged to give me that information. But I would like to know if the quotes are based on a like for like tender, and materials quoted for all being up to same standards. (to avoid another issue when the next FRA is done).
          So any help much appreciated so I can discuss with other leaseholders.(34 leaseholders), so extra £3400

          Comment


            #6
            The management agreement is not a private contract, you are being asked to pay for the cost and you are entitled to know what you are being charged for and what service the agent is supposed to provide in return. The RICS code 3.2 states “a basic summary of your terms and duties, including all fees, should be made available to leaseholders on request”. The agent also has a duty “to ensure that it is made clear, to all parties with whom (it) is dealing, the scope of (its) obligations to each party” (RICS code 2.2).

            If previous work was not carried out satisfactorily, at least part of the cost of that work was unreasonable and was not payable in full.

            The s20 notices should explain where the relevant documents may be inspected.

            The charge for issuing the notices is unreasonable. If it is £100 plus VAT, the total charge is £4,080, which as you say is daylight robbery.

            As there is just a freeholder who is charging you service charges and there is no management company involved, I suggest that you pay the reasonable charges and let the freeholder take action if it wishes to pursue the unreasonable element, that way the burden of proof lies with the freeholder. From what you describe, a Tribunal is unlikely to find that the charges are reasonable.

            Comment


              #7
              Originally posted by eagle2 View Post

              The charge for issuing the notices is unreasonable. If it is £100 plus VAT, the total charge is £4,080, which as you say is daylight robbery.

              As there is just a freeholder who is charging you service charges and there is no management company involved, I suggest that you pay the reasonable charges and let the freeholder take action if it wishes to pursue the unreasonable element, that way the burden of proof lies with the freeholder. From what you describe, a Tribunal is unlikely to find that the charges are reasonable.
              thanks your reply, just one final thought:

              The section 20 has been issued by the Managing agents, appointed by the Freeholder (by way of the `Private Contract` of 12 months).
              Does that make a difference as to whether or not the `fee of £100/flat +VAT` is justifiable, and will have to be paid?
              (have not yet seen a copy of the contract/agreement between FH and MA)

              Comment


                #8
                The s20 notices will have been issued by the managing agent on behalf of the freeholder. It does not matter what fee has been agreed between the freeholder and the managing agent, the freeholder may only recover a reasonable sum from the leaseholders.

                Comment


                  #9
                  I am guessing that the Managing Agents, feel that somehow they have the right to add this fee for themselves, as if £300/flat pa, is insufficient for the work they are doing.
                  So I will ask them, again, on what basis they are adding this `fee` , and watch for thier reply Unless you feel there is some other way of wording it. Clearly I need to get a copy of this agreement/contract they have with the FH,,,,,,, as for all I know they may have agreed between themselves that they will charge us £12000 for their managing services next year, as it sounds as if they have agreed what to charge us for the annual Managing fee between them and the FH

                  Comment


                    #10
                    Is there any connection between the current managing agent and the freeholder of which you are aware? Have you carried out a search at Companies House? You may ask the freeholder why it chose this particular agent and whether or not it obtained alternative quotes before it appointed the agent. The chances are that part of the management fee is being paid directly or indirectly to the freeholder.

                    Your building is obviously not within the London area where charges are higher, so I suggest that you contact local agents and ask what they would charge or contact other leaseholders in the area and compare their charges. At that stage, I suggest that you reduce your payments to a reasonable amount.

                    Comment


                      #11
                      Well now you are asking !! The freeholder gave themselves the Managing agents job when they bought the Freehold a decade ago. Now bearing in mind that the Freeholder is 130 miles away that was never gonna be a good situation. So after a decade it was suddenly announced that the managing agent job had been transferred to this new company, also 130 miles away.....
                      So when we received the first budget (the first time the new annual managing agent charge was announced) at over double the previous, and me asking for explanation, without any reply, I had my own thoughts.
                      If it was the case that some of our service payments being made are in fact finding their way to the Freeholder under some sort of contract/agreement, would that in fact be allowable??

                      Comment


                        #12
                        It is not unusual for managing agents to show their gratitude to those appointing them and there is no limit to their imagination when devising schemes.

                        Are you able to obtain support from 16 other similar minded leaseholders? If so, you may be able to form a RTM Company to take over the management duties of the freeholder.

                        Failing that your best option is to pay a reasonable sum and wait and see if the freeholder attempts to recover the difference.

                        Comment


                          #13
                          I guess the first question is.........Are we, as leaseholders, acting within our rights to request to see the details of this FH/MA agreement/contract?
                          Or can they, as they have already suggested, refuse us any sight of that agreement/contract?
                          In these circumstances is it likely that they DO have the power to charge a fee per flat for issuing a Section 20 (or 2 as they are claiming), or would we need to have view of their contract/agreement with the FH.

                          The total of 34 flats is in fact split into 3 blocks. On the outside it looks like one building in a U shape, but in fact it is 3 blocks each with their own entrance and exits. So totally different layouts, do not share stairs (each block has its own staircase). We share car park (each flat has dedicated space), but apart from that they could be different blocks. All share same FH and MA.
                          So I would think as has been said before it could be possible for my block to take action to form a RTM just for this block.
                          But of course that would put pressure on the other 2 blocks that would see their share of the MA fees increasing to cover the loss.
                          In addition I doubt very much that other LHs would want to bother (and that is the biggest problem.....lethargy)

                          Comment


                            #14
                            Your main question should be whether or not the service charges are reasonable, if not, they are not payable.

                            An agent should comply with the RICS code and at #6 the references were quoted which entitle you to request information from the agent/freeholder. Normally, the response would be to supply a copy of the management agreement but the agent/freeholder is entitled to summarise the main terms of the agreement if it prefers.

                            If you are able to obtain support from sufficient leaseholders, you may be able to form a RTM Company to take over the management responsibilities of the freeholder.

                            Comment


                              #15
                              I have just received a reply from the managing agents after my request to have sight of the agreement/contract with the FH.
                              It reads......
                              " Unfortunately, our contract would not be available for leaseholders to view as is private and confidential with the freeholder but we cannot charge for items that the lease or legislation does not allow for."
                              So clearly they believe that, we, the leaseholders have no right to see anything.
                              So we have no idea how long this deal will last, or anything to do with charges that have been agreed between the parties.

                              Comment

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