management fee's on service charge

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    management fee's on service charge

    can management fee's be added to service charge demand? major works following correct s20 protocol, (approx £2000 per leaseholder) but have been informed that there will be an additional 15% added to the final demand for the shared cost of the works (4 leasehold flats in converted victorian building). does this charge have to be paid? & is 15% considered reasonable (as per lease states)

    #2
    This is the norm, you could argue that it should lower, say 10%, also the RICS code strongly advises against using percentage based management fees in general..but for major works it is the norm for a 10-15% fee to be added.

    Andy
    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


      #3
      The RICs code suggests a fixed fee for management work, major works projects are normally charged at a percentage.

      If the lease says 15 % then you are stuck with it, but if it just says reasonable, or anything in the specific wording, then for a small project 10% not involving work enquiring detailed attention or planning supervision, is a good figure.

      Note: if the lease says 15% then the fees must include VAT, not 15% plus VAT
      Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

      Comment


        #4
        Originally posted by bandontherun
        It is reasonable for an admin charge to be added; you cant expect the freeholder to donate his time to be donated free of charge to the service charge account. 15% of £2000 is £300; whereas expenditure of £250 or less per leaseholder does not need s20 consultation. You could try writing back and saying you want to charge £300 admin but have not gone through consultation for that £300; however I will agree £250 without consultation, ie 12.5%. If I were the landlord I would hasten to agree!
        Thanks for the help, i think £250 per leaseholder is enough for this work, it states in the lease 'reasonable' & i think this charge is reasonable for the work involved & if a further section 20 notice for the charges was not followed then the landlord will be only too happy to know about this clause!..

        Comment


          #5
          cant thank you enough for this! regarding the VAT issue, the demand itself should read, 1, service charge share £xxxx replacement roof-including VAT
          + 2, £250 management charge (this added after total repairs inc luding VAT)

          Comment


            #6
            Originally posted by bandontherun
            whereas expenditure of £250 or less per leaseholder does not need s20 consultation.

            You could try writing back and saying you want to charge £300 admin but have not gone through consultation for that £300; however I will agree £250 without consultation, ie 12.5%. If I were the landlord I would hasten to agree!
            The wording is that any one flat will pay £250 not per flat.

            £300 admin for the works whether that is professional fees or management fees, are not qualifying works and NOT subject to consultation.
            Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

            Comment


              #7
              Originally posted by snickers22 View Post
              cant thank you enough for this! regarding the VAT issue, the demand itself should read, 1, service charge share £xxxx replacement roof-including VAT
              + 2, £250 management charge (this added after total repairs inc luding VAT)
              No see post 6, but yes the management fee is 15% which must be inclusive of VAT eg £3000(inc vat) works = 15% at £450. Any vat they pay has to be taken out of the £450 they bill.

              As to the bill this can only be raised if the lease allows a one off bill for this work, very few do, restricting billing to either
              -the annual estimate with periodic payments eg equal quarterly statements or
              -annual cost incurred at the end of the financial year.
              Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

              Comment


                #8
                Any vat they pay has to be taken out of the £450 they bill.??? where does VAT go then? why cant the VAT be NOT added to start with ie cost of work + 15% charge -15% charge +VAT costs of work =total invoice bill .. oh im confusing myself here, but i have to get this right, we have a new freeholder here, after 6 years of neglect of the building, the work is starting at the roof & working its way down, the freeholder has limited funding & also owns 1 of the 4 flats, i own another flat & can fund work, another leaseholder is going to have difficulty raising funds & the last owner is new & picks on everything, he wants everything done to exact specification & wont help towards the costs if there are ANY mistakes on the demand, The freeholder is at work most of the time & I am left to sort out the letters .. the main thing I don't want to do is rip us all off by a refund being given to one of the leaseholders from the LVT due to a mistake .. its in my best interests as a flat owner here to help with the freehold .. we have managed to sort the insurance (we had none) & also the ground rent demand (in correct format) we have followed the correct procedure for s20 works, work is due to start after christmas, but i have not managed to work out how much fee's to charge, the organising of the work has been extensive (days off, letter writting, legal advice etc) we need to charge as 'reasonably' as possible but why should this work be done for free, if this is the case then why do people even buy freeholds?? ground rent per year is £25 (wow)!

                Comment


                  #9
                  let's say its works costing £10000 plus VAT at 20%, so the actual cost of the works is £12000. VAT is not an add on as the contractor has to charge VAT- it's £12k.

                  If the lease allows the fees to be charged at 15% then

                  15% of £12000 is £1800.

                  if the company charging £1800 is Vat registered then out of that £1800 they must pay VAT, not add it on, as their total charge under the lease is 15% not 15% plus VAT.

                  You example assumes the 15% would be charged on the net cost, £10000, but it is not, it is always calculated on the gross cost £12k.
                  Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

                  Comment


                    #10
                    My lease allows 20% on management fees on cost. see extract of the lease below

                    Clause 7 of the Fourth Schedule “The fees and disbursement paid to any managing agents appointed by the council in respect of the Building Provided that so long as the council do not employ managing agents, they shall be entitled to add the sum of twenty per cent to any of the above items for administration”.

                    Clause 10 of the fourth scheduleAny value added or other tax payable in respect of any costs expenses outgoings or matters falling within any paragraph of this schedule”.

                    For example, my proportion of the service charge is £1,000 and with VAT added is £1,200.

                    According to the lease, VAT is in clause 10 of the fourth schedule of the lease, is the landlord allowed to charge 20% management fee on £1,000 or £1,200? Should the management fee be £200 or £240?

                    Comment


                      #11
                      If only 4 flats why do you have a management company?

                      Comment


                        #12
                        Originally posted by Milly26 View Post
                        If only 4 flats why do you have a management company?
                        The 4 flats is a post from 2011 that Ijbuode has tagged onto (and a managing agent is not mentioned - the 15% fee may be allowed for in the lease for management by the freeholder.

                        Comment


                          #13
                          Originally posted by Ijebuode View Post
                          According to the lease, VAT is in clause 10 of the fourth schedule of the lease, is the landlord allowed to charge 20% management fee on £1,000 or £1,200? Should the management fee be £200 or £240?
                          It sounds like the council can add 20% to any charges if they don't employ a managing agent, so if your contribution without these fees is £1200 including VAT, your contribution for management could be £240 (perhaps less because they don't have to charge management fees for all items - although they probably will).

                          If a managing agent is employed you will pay a share of whatever the managing agents fees are - which could be more, or less, than £240.

                          Comment


                            #14
                            Macromia, the lease said they can only charge management fee on any cost above clause 7. But the Vat is on clause 10. I believe the management fees should be £200 and not £240.

                            Comment


                              #15
                              There is no VAT on service charges, so your service charge is either £1,000 or £1,200.

                              The management charge would be 20% of the total service charge plus VAT if the landlord is VAT registered.

                              So if your service charge is £1,000, the management fee would be £200 plus any VAT.

                              If your service charge is £1,200, the management fee would be £240 plus any VAT.

                              Comment

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