Share of feehold/shared service charges?

[Stu1020]

Hi there,

I'm new to the forum and looking for advice on a sticky freehold situation.

I own a two-bed flat in a converted building with two one-beds. The lease states that a fair proportion is payable towards the service charge. However, there has been a running agreement of 38/31/31, my flat paying the more significant amount but with no written documentation to support the contribution.

Recently we bought the freehold of the building equally, and I'm questioning the split and suggesting maintenance from now on should be in line with the freehold purchase. Which, to me, makes sense. I'm being told by my colleagues the purchase of the freehold (33.33%) has no relevance and that I need to continue on the undocumented terms.

Does anyone here have any light to shed on this?

Many thanks

Stuart

[Section20z]

It's a question that comes up frequently, considered opinion from experienced freeholders is that flat size makes little or no difference to maintenance costs which should be split equally . As your lease doesn't specify a percentage you should stick to your offer of one third but you would have to get the FTT to settle it if you can't agree, which would probably not be worthwhile

[Stu1020]

Section20z thank you for the response.

[Gordon999]

If your flat has "two bedrooms" whilst the other two flats have one bedroom , a slightly higher service charge is expected for the 2 bed unit.

[Macromia]

I'm being told by my colleagues the purchase of the freehold (33.33%) has no relevance and that I need to continue on the undocumented terms.

They are correct that the purchase of the freehold has no relevance (although it would allow the three of you to alter the leases if you are all in agreement).

Unless you alter the leases you continue to split service charge costs according to what the terms of your leases say - sharing ownership of the freehold doesn't mean that any of you can ignore the terms of the lease, and if you do all agree that something that is contrary to the lease terms can go ahead (e.g. if the others agree that. you can alter the lay out of you flat), you should ensure that this is properly documented.

As Section20z has said though, the fact that your lease doesn't specify a percentage means that you don't have to stick to the split that has previously been used. If the other two won't agree, you would have to convince a tribunal that your suggestion of an equal split was more reasonable that the split that has previously been used though, which wouldn't necessarily be easy.
Challenging your co-freeholders in a tribunal also wouldn't be the best start to your 'partnership'.!

[Stu1020]

As Section20z has said though, the fact that your lease doesn't specify a percentage means that you don't have to stick to the split that has previously been used. If the other two won't agree, you would have to convince a tribunal that your suggestion of an equal split was more reasonable that the split that has previously been used though, which wouldn't necessarily be easy.
Challenging your co-freeholders in a tribunal also wouldn't be the best start to your 'partnership'.!

Macromia The lease doesn't state a split but the other two flats have dictated terms with their own document 'lease obligations' that was not agreed, or voted upon and co-signed with ground floor (me). Does this still constitute a split that has been previously used though?

[Macromia]

In your first post you said the following:

The lease states that a fair proportion is payable towards the service charge. However, there has been a running agreement of 38/31/31, my flat paying the more significant amount but with no written documentation to support the contribution.

There is a lot of leeway regarding what constitutes a "fair proportion", and you paying 38% while the two smaller flats pay 31% each could potentially be justified as reasonable - it would mostly come down to how both sides argue their position.
The fact that you have apparently been paying service charges in these proportions previously (you don't say how long for) can potentially be argued to demonstrate your acceptance that this split is reasonable. The fact that there is no written documentation specifically agreeing to this split is irrelevant, simply having paid according to this split without previously challenging it could be taken as acceptance.

[Stu1020]

Thank you for the response Macromia this is a useful conversation.

I can see why the current proportion might be justified, I have been paying 38% towards the buildings insurance the last 4/5 years. However, my dispute is now arising because we are unable to move forward with existing covenants, and the refusal to move forward with maintenance which over time increases my proportion. The other flats are demanding I pay 38% of costs to extend leases when the freehold itself, a very comparable legal procedure, was calculated on an equal third share. The management company is dormant and suggestions to create a sinking fund to more efficiently and effectively programme works is being stymied continually. Lastly, ignoring existing covenants (due) but tried to force the removal of a learning chimney by way of letter demanding funds, not complying with landlord and tenant act section 20. It's a bit messy but the current ratio means the other two flats vote (their financial interest) to not complete and block works.

Final thoughts?

[eagle2]

I suggest that you ask the other 2 leaseholders to explain why they consider that the current allocation is fair. The freeholder has the right to review the allocation from time to time. Unfortunately, a "fair proportion" means that several alternatives would be considered reasonable to a Tribunal.

[Stu1020]

eagle2,

Thank you for the response.

[Flashback1966]

The other flats are demanding I pay 38% of costs to extend leases when the freehold itself, a very comparable legal procedure, was calculated on an equal third share.

Confused. Did you extend the lease or buy the Frehold?

In my opinion, if the Freehold was purchased, it should have been on the basis of property values. Generally people divide by the number of flats. However, it is n't always so. If one flat has 90 years lease remaing and the other 70 years, then it is n't equal. The the party with the shorter lease pays a larger portion. It depends on the parties involved. Property value can be a factor. Most would keep it simple and divide by the number of flats. Assuming all things generally equal.

In terms of service charge. What does the lease say for the other flats? I am confused. You can challenge the Freehold company for the previous service charges. They can go back previous years.

[CStevens]

You dont have to proceed on the existing agreement nor do you have to proceed on the share paid for the freehold. If the lease's state that it has to be a fair and reasonable amount then that's what it should be - whether you calculate that based on use, sq ft of the flats is really down to debate unless detailed in the lease.

I guess the one slight problem you have here, if you really pushed this point all the way (by the way dont!) if i were the other tenants i would say that you have agreed that a fair and reaonable share is the 38/31/31 as you have been paying it for years...unless thats completely out of kilter with the flats sizes i dont see why thats not a reasonable argument.

The alternative approach is just refuse pay anything next time and it will become a case of who blinks first. They may threaten forfeiture and you wont be invited to any more tea parties at their flats so you need to ask yourself is that 5% really that much of a problem

[eagle2]

The cost of extending a lease is not a service charge expense so there is no reason to allocate it on the 38/31/31 basis, your offer to split those costs equally seems to be reasonable. It is up to the freeholder to decide what is fair and reasonable for the service charges and it is up to the other two joint owners to provide a reasonable explanation for the split. I do not recommend a voluntary reserve fund, it would need to be held outside the service charge funds and you would have little protection over the fund, you would be better saving monies yourselves. An alternative would be to suggest amending the terms of the lease but it does not look like the joint freeholders would agree.

[sgclacy]

You appear to have bought into the flat knowing at the time your share is 38% and having owned the flat feel that this is unjust.

Did you raise any concerns questions at the time of purchase that in a three flat split you would be paying more than 33.33% . Could it be argued that the unfairness in the service charge percentage was reflected in the price you paid ?

All three of you are collectively looking to vary your leases and I wonder if this is really not the best time to open up a potential dispute ?

[Gordon999]

Since your flat has 2 bedrooms and other flats have one bedroom, you should keep the existing 38:31:31 split as fair contribution to the annual service charge account.

For lease extension, the cost is mainly solicitors charges plus registration charge at Land Registry and Mortgage Lender.( if any mortgage )

So I suggest that each leasehold pays one third towards legal cost + registration charge ( at Land Registry ) plus each leaseholder pays for own Mortgage Lender charges