Freeholder demanding extortionate fees for notice of remortgage

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    Freeholder demanding extortionate fees for notice of remortgage

    Hi,

    I know similar issues have been posted before but thought it best to start a new thread with all specifics as every case/lease is different. Forgive the long post; I thought it best to include as much relevant info as possible.

    I recently remortgaged my leasehold flat with a new lender. The lender's conveyancer sent their "standard fee" of £30 + VAT to the freeholder (which I have paid the conveyancer) but I have received a letter from the conveyancer saying that the freeholder is asking for an additional £84 (i.e. total of £120) and will not receipt the notice of mortgage without it. Unhelpfully the conveyancer did not actually enclose the letter they received from the freeholder and are not responding to my requests to send it. My remortgage has completed and it seems the conveyancer is washing their hands of the situation.

    My freeholder, Freehold Managers PLC have an online portal which is showing an amount owed of £36 for "PropTran: Notice of Mortgage" (interestingly, the same amount already paid by the conveyancer and less than the amount asked in the letter) and I have received an automated arrears notice for the same amount. Their automated payment system does not allow any amount to be paid other than the balance showed.

    According to my lease I need to pay a "reasonable fee being not less than Thirty Five Pounds (£35) (plus VAT) in respect of each document or instrument so produced."

    The only way of contacting the freeholder is through their online contact form, which I have done, stating that according to my lease the balance owed is only £5 + VAT (since the conveyancer already paid (£30 + VAT) and requesting that the account is updated so I can pay the correct amount, but I have not received a response over 1 week on.

    I have also contacted the Leasehold Advisory Service and their response is as follows:

    "Having reviewed your lease....My interpretation is that this means that your landlord cannot charge you anything less than £35+ VAT, but they can charge more than this.

    You can make a complaint to your landlord about the amount of registration fee that they have requested and try to negotiate a lower fee. It may be advisable to find out how much other Landlord’s charge for registration fees.

    In Proxima GR Properties Ltd v McGhee - [2014] 2 EGLR 27, it was held that this fee was a registration fee and not an administration charge as it does not fall within the definition of administration charge under Paragraph 1(1) of Schedule 11 to the Commonhold and Leasehold Reform Act 2002.

    As it is not an administration charge, it is not possible to challenge the registration fee at the First-Tier Tribunal (Property Chamber); however, it may be possible to challenge through the County Court. I would advise seeking advice from a litigation solicitor on the merits of taking any legal action."


    I find this unhelpful as the case quoted refers to the LVT which no longer exists and I have read on here similar cases where the First Tier Tribunal did deal with this kind of case so I don't feel it is entirely correct. I also fail to see the merit of finding out how much other landlords charge for registration fees as they are notorious for demanding extortionate fees way in excess of what is in the lease, so this would not be an accurate way to determine what is "reasonable."

    My questions are:
    • Does the phrase "Not less than" mean the freeholder can indeed increase this charge or is this just legal jargon? Even is they can increase this charge, it must still be "reasonable" and in my opinion, £120 is clearly not reasonable
    • What should be my next steps? I have no intention of sucking up extortionate fees every time I remortgage. Given my remortgage has completed, can I ignore this, given I have made every effort to engage the freeholder and pay what I believe is owed by my lease? I assume eventually that they would issue late payment fees and interest, possibly legal fees. Could these be ignored too?
    • If don't ignore it and go to FTT there is a £100 fee which is not refundable. Are there any other charges I need to be aware of? e.g. freeholder's legal fees etc?

    Thanks in advance,

    #2
    It looks like by accepting the terms of the lease, you have agreed to pay a minimum charge of £35 plus VAT and a higher fee as long as it is reasonable. What is the date of the lease? What was the inflation adjusted equivalent at the time of your remortgage?

    I do not recommend ignoring a balance recorded as owing according to the freeholder. Firstly it will be carried forward and shown as arrears until you try to sell. Also if you make future payments, the chances are that they will be allocated to this balance no matter how clearly you specify your intentions at the time. Finally, as you state, there are likely to be additional charges imposed by the freeholder.

    The freeholder should have a complaints procedure which you may wish to follow. Alternatively, the lease may state how disputes should be resolved. You could also suggest some form of mediation. For the amount involved, it is not worth applying to court or to the FTT and if you do not succeed, you could be ordered to pay the freeholder's costs which would exceed the amount of your claim.

    I suggest that you make an offer to pay an amount to the freeholder "wiithout prejudice subject to costs" in order to demonstrate reasonableness on your part and protect yourself in case the freeholder takes legal action against you, which is unlikely,.

    Comment


      #3
      If you and other leaseholders are willing to set up RTM company to take over administer of the service charge account, the RTM company replaces the landlord's agents and the £35 fee goes to the RTM .

      Comment


        #4
        I agree with Gordon999, if 50% of the leaseholders, including yourself, wish to form a RTM Company, it could take over all the management duties of the freeholder including the right to collect the fees. In that case, the RTM Company would decide whether to collect the £35 or increase that sum to a reasonable level.

        Comment


          #5
          Thanks for your responses.

          What is the date of the lease?
          2001

          What was the inflation adjusted equivalent at the time of your remortgage?
          About £60, although the lease does not mention inflation as a tool for calculation what is reasonable. Nevertheless the freeholder is demanding much more than this.

          For the amount involved, it is not worth applying to court or to the FTT
          For a court, perhaps, but £120 every time I remortgage will soon add up making FTT potentially more attractive?

          I suggest that you make an offer to pay an amount to the freeholder "wiithout prejudice subject to costs" in order to demonstrate reasonableness on your part and protect yourself in case the freeholder takes legal action against you, which is unlikely,.
          What kind of sum would be "reasonable" in these cases? The problem is they literally do not respond to any communication and from experience and anecdotal evidence I suspect they will not accept anything less what's been demanded. My last option (and what I think I will do) would be to make a formal written complaint, enclosing a cheque. However assuming they don't budge, I'd still be left with a choice of whether to:

          a) Ignore their demands, interest, legal fees etc, perhaps go to FTT later if it becomes an issue (e.g. want to sell)
          b) Got to FTT right away before they pile any more fees onto my account

          RTM Company is a nice idea but for the size of development and amount of time I have to resolve this, it's not going to be a feasible solution this time unfortunately. I should point out, I have no issue paying the £35 or a reasonably higher amount to the freeholder as per the terms of my lease. I just don't want to get fleeced every time I change mortgage providers.




          Comment


            #6
            You could easily argue that £35 is more than reasonable at the present time, there is a solicitor who posts on this forum who has indicated elsewhere that £20 would be an appropriate amount for an office junior to deal with a notice, Tribunals have decided in the past that £40 is reasonable.

            I enquired about the inflation adjusted amount because a freeholder is likely to argue that £35 was considered to be a reasonable sum in 2001 and that it should at least be adjusted in line with inflation. It was only to prepare you for what to expect. It is always useful to anticipate any response from the other side.

            If you decide to send a cheque in full and final settlement of all monies claimed, I suggest that you retain a copy of the cheque and obtain proof of posting from the Post Office.

            If you decide to apply to the FTT, I suggest that you are able to demonstrate that you have attempted to deal with the dispute in accordance with the lease and that you have suggested alternative ways of resolving the dispute.

            Comment


              #7
              Its not worth applying to Tribunal over such an amount. Solicitors don't usually bother doing it, but their standing instructions when dealing with a mortgage or re-mortgage is to quote a motrgage roll number ( ie an account number). This is so that if the landlord has to write in because the borrower has failed to pay ground rent/service charge, the lender can readily trace the file. But most solicitors, as I say dont bother. Many a time I have written to an arrears department of a lender about a leaseholder in arrears and they have that they cant trace the account without a mortgage account number. So, nine times out of ten, we return Notice of Mortgage to the solicitor serving Notice, telling the solicitor that they are in breach of their own retainer as the Mortgage account number is required. Hence I would maintain that forty quid is a perfectly reasonable fee, and possibly a bit more; but not for the reasons that might be supposed.

              Comment


                #8
                Originally posted by Gordon999 View Post
                If you and other leaseholders are willing to set up RTM company to take over administer of the service charge account, the RTM company replaces the landlord's agents and the £35 fee goes to the RTM .
                the fee goes to the freeholder with a copy to the RTM as the RTM does not collect the ground rent and the notices need to be served on the freeholder as the freeholder is the only one who can give a receipt for ground rent. Further if there were breaches under the lease the RTM could inadvertently waiver the landlords rights by accepting the notices

                Comment


                  #9
                  My understanding is that a RTM Company would set and retain the fee but would need to inform the freeholder. It is agreed that a RTM Company would not collect ground rent.

                  Comment


                    #10
                    The following is an extract from the Leasehold Advice Centre:

                    "Most leases contain provisions requiring the consent of the landlord to which can include sub-letting, assigning the lease and making alterations to the flat. Such approvals passes to the RTM company, although the company must keep the landlord informed and give notice to the landlord"

                    Comment


                      #11
                      Thanks very much again for your responses.

                      If you decide to send a cheque in full and final settlement of all monies claimed, I suggest that you retain a copy of the cheque and obtain proof of posting from the Post Office.

                      If you decide to apply to the FTT, I suggest that you are able to demonstrate that you have attempted to deal with the dispute in accordance with the lease and that you have suggested alternative ways of resolving the dispute.
                      Certainly, I would make this clear and send by recorded delivery.

                      Hence I would maintain that forty quid is a perfectly reasonable fee, and possibly a bit more;
                      By this I assume you mean asserting to the freeholder that this is a reasonable fee, and perhaps enclosing a cheque for the balance stating that I consider the matter settled?

                      Its not worth applying to Tribunal over such an amount
                      Fair enough, but if (as expected) the freeholder does not accept that my payment settles the matter, my account will remain in arrears and increasingly so assuming interest etc. is applied. Therefore the question remains whether to ignore the fact that my account is in arrears, and I may well receive ever more threatening demands for payment, or attempt to resolve it through the FTT.

                      Comment


                        #12
                        The courts and the FTT do not take too kindly to claims for what they consider to be trivial amounts, they expect the parties to compromise and reach agreement. They would most likely suggest mediation. I would wait until there are other charges to challenge before applying to the FTT but if you decide to make an application, it is important that you are able to provide evidence that you have acted reasonably at all times by offering payment and suggesting ways of settling the dispute,

                        Comment


                          #13
                          You decide in post #1 to ignore the advice of the Leasehold Advisory Service as you believe the FTT have looked at such matters.
                          In which case that should be your first port of call to ascertain a "reasonable fee".
                          All FTT findings are available online.

                          Comment


                            #14
                            Originally posted by sgclacy View Post

                            the fee goes to the freeholder with a copy to the RTM as the RTM does not collect the ground rent and the notices need to be served on the freeholder as the freeholder is the only one who can give a receipt for ground rent. Further if there were breaches under the lease the RTM could inadvertently waiver the landlords rights by accepting the notices
                            Yes, all true but in some cases RTMs do collect ground rent on behalf of the freeholder and is permitted under the Act

                            Comment


                              #15
                              If the RTM Company collects ground rent, presumably it may charge the freeholder a reasonable fee for charging, collecting monies and paying the freeholder.

                              Comment

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