Ground rent arrears administration and "legal" charges

[Natterjak]

I have, through my own oversight, become in arrears with ground rent payment on my leasehold flat. However I believe my landlord (Freehold Managers (Nominees) Ltd) is now seeking to profit out of the situation with unreasonable administration and unspecified "legal" costs. I would therefore like to outline the circumstances below and ask for opinions on how to deal with the landlord.

My ground rent of £62.50 fell due on 01 Mar '09 and is in arrears. I received from Freehold Managers at the end of July a demand for the rent with a £28.75 administration fee added. No breakdown of this fee has been included. Unfortunately I omitted to give this the attention is deserved and haven't paid them.

Yesterday I have received a "Notice before action" from the Property Legal Dept of Freehold Managers Plc advising that they have been instructed by Freehold Managers (Nominees) Ltd to recover the amount due from me. They make a somewhat vague reference to "ground rent arrears including interest and legal costs" but the attached schedule lists only the overdue rent (£62.50) plus an Administration charge of £86.25. It is unclear to me how the £86.25 is calculated and what the component of interest or legal cost is. Furthermore I doubt the validity of the so called legal costs as surely Freehold Managers Plc and Freehold Managers (Nominees) Ltd are different names for the same people? It's not as if they've paid a solicitor to send me a letter.

So, I understand I am at fault and should have paid them and I wish to make amends, but equally I do not wish to submit to charges which may be unfair and I would welcome advice on how to proceed. Unfortunately I do not have a copy of my lease and cannot check what it says with regard to administration charges.

The letter I have received says in big scary block capital letters that if I do not contact them in 7 days from the date of the letter (dated 27th Aug but received yesterday!! ) then proceedings will be issued against me and I may end up with a CCJ.

How should I proceed?

[jeffrey]

1. The ground rent demand is invalid unless compliant with s.166 of the Commonhold and Leasehold Reform Act 2002.
2. Even if that demand is valid as to form, the variable Administation Fee demand is invalid unless compliant with s.158 of that Act.
3. Do not pay freehold reversioners such as yours who fail to jump through the statutory hoops; find a solicitor sufficiently able to advise you.

[Natterjak]

Thank you Jeffrey. I've read the relevant sections but find no definition of what is reasonable. Engaging the services of a solicitor over an £86 admin charge is possibly not going to be cost effective, unless said solicitor recovers his costs from Freehold Managers and I have no reason to think he could do so.

I would welcome any further advice on how to proceed, right now I'm thinking of writing them a letter asking for a breakdown of the admin charges and stating that I believe them to be unreasonable, but I'm concerned this will open me up to further charges being whacked on by Freehold Managers for each letter they send.

[jeffrey]

Why not simply tell the company that it has not complied with s.166 or s.158 (whichever is the case, if so)?

[Gordon999]

Natterjack,

1. When dealing with companies like Freehold Managers with known record of making excessive rip-off demands, you really need to get a copy of your lease and keep it for reference as long as you have your leasehold flat.
You may be able to buy a copy from land Registry.

2. Often the lease will state the charge for arrears of ground rent is calculated on payment of interest at 5% above bank rate for a certain high street Bank . So if you calculate the interest at say 5.5 % on 62.50 pds for 7.5 months arrears comes to about 2.15 pds.

So write a covering letter and send a cheque for 62.50 ground rent plus 2.15 interest for arrears ( post by recorded delivery ) . Also say that you do not agree to pay the admin charge of 86.25 until you have received a breakdown of the costs and can accept it as compliant with s.158 or will apply to LVT for judgement on its reasonableness.

[Natterjak]

But I'm not sure that they haven't? Will I not end up with a greater liability if I tell them they haven't complied with those sections and it turns out they have?

[jeffrey]

But I'm not sure that they haven't? Will I not end up with a greater liability if I tell them they haven't complied with those sections and it turns out they have?

So get sure. Never claim something's true if it isn't; that's exactly what some companies try to do, so don't be like them.

[Natterjak]

Thanks Jeffrey, I have no intention of misleading anyone, I just want to deal with them fairly and be dealt with fairly in return.

Natterjack,
<snip>
So write a covering letter and send a cheque for 62.50 ground rent plus 2.15 interest for arrears ( post by recorded delivery ) . Also say that you do not agree to pay the admin charge of 86.25 until you have received a breakdown of the costs and can accept it as compliant with s.158 or will apply to LVT for judgement on its reasonableness.

Thanks Gordon, this appears to be an appropriate way to approach the situation. I'll wait until tomorrow before I write my letter in case anyone else has something to add.

[Rallysally]

Natter

To see what your management company should have done go to:

http://www.lease-advice.org/

then click on 'Publications' - top right hand corner. Then click on 'Service charges and other issues'.

This explains the steps that they should have taken in notifying you. This is how you ‘get sure’!!

I do not think it would harm sending the amount you are not contesting in the mean time – as suggested by Gordon.

[jeffrey]

To see what your management company should have done go to:

http://www.lease-advice.org/

then click on 'Publications' - top right hand corner. Then click on 'Service charges and other issues'.

This explains the steps that they should have taken in notifying you. This is how you ‘get sure’!!

I do not think it would harm sending the amount you are not contesting in the mean time – as suggested by Gordon.

I agree; but, in making that payment, OP must explicitly reserve the right to challenge the validity of L's demands.

[Natterjak]

Natterjack,

1. When dealing with companies like Freehold Managers with known record of making excessive rip-off demands, you really need to get a copy of your lease and keep it for reference as long as you have your leasehold flat.
You may be able to buy a copy from land Registry.

Gordon, do you know if this (obtaining a copy of my lease) is something I can do via Land Registry Direct: http://www.landregistry.gov.uk/ ?

[jeffrey]

Gordon, do you know if this (obtaining a copy of my lease) is something I can do via Land Registry Direct: http://www.landregistry.gov.uk/ ?

No. HMLR does not now allow that. The reason is scammers who downloaded copies to access T's signatures, practice forgery skills, and then attempt to masquerade as T in fraudulent sales or remortgages. As a result, only solicitors and other approved key/creditaccount-holders can download leases. The rest of the world has to lodge hard-copy form OC2 applications and prove ID before obtaining copies that way.

[Natterjak]

I believe the interest rate specified in the lease is "4% above the Barclays base rate" and this rate appears to currently be 0.5% Can anyone please verify that the correct way for me to calculate the interest payable on the overdue amount (which fell due on 1st Mar 09) is as follows:

£62.50 (rent) * 4.5/100 (4.5%) * 6.5 / 12 (6.5 months out of 12 months) = £1.52

If this is correct, I propose to write them a letter stating the following:

- without a breakdown of the £86.25 they have demanded I am unable to establish that they are in compliance with s158 of the Commonhold and Leasehold reform act 2002.
- that in the absence of this information I believe their demand to be unreasonable and therefore unenforceable
- that I enclose a payment of the overdue rent including the sum of £1.52 calculated as interest payable in accordance with the terms of the lease but that this payment is not made in respect of the administration charges which I dispute at this time.
- that if I do not receive full details from them within the next 21 days of the calculation of the sum £86.25 such that I can determine whether it is reasonable I intend to apply to LVT for a determination of reasonableness.

I realise some of you sell your advice in a professional capacity but in this case the sum involved is small and I'm hoping to successfully deal with this without paying fees. I would be grateful of any further corrections to the above before I send it.

[jeffrey]

Yes, if BB base rate was 0.5% for the whole 6.5 months.

[Natterjak]

Just to update this thread, I sent FM my letter outlining a request for further details of how their administration charge is calculated and stating that if unable to determine the reasonableness of the charge I would have to apply to the leasehold valuation tribunal. I enclosed a cheque for the outstanding rent plus interest at 4% above Barclays base rate (as per the lease) and said that if I didn't hear back from them in 21 days I would assume the matter was dropped.

That was about a month ago and I've heard nothing so I'm assuming they've deleted the charge from their system, although until I get the next statement of account I won't know for sure.