Is there a way to escrow service charges?

[paulamis]

I know the idea is that you have to pay whatever they request and fight it afterwards.

I am in a situation where there are few flats, the others are in difficulties and I am the only one paying for the upkeep, in this block the FH is also behind on fees for management/repairs.

There has been some work that the LH wanted doing for several years, a couple of years back it actually got to a S20 intention (because the LH were going to have the work done anyway).

Now it has finally got to quotes and a demand for payment, ludicrous prices etc., for later litigation.

Anyway the idea seems to be for the FH to hold onto the reserves already held, and to demand the full cost of the works now even though the work will no commence until other flats issues/repossessions/sales are sorted out.

So how do I avoid continuing to bankroll this fiasco?

[Gordon999]

The leaseholders ( atleast 50% 0f flat owners in the block ) must set up a RTM company to take over running the building maintenance service charge account from the freeholder or FH's appointed agent .

You can download a free guide on RTM procedure from www.lease-advice.org .

[ram]

If the freeholder and the others cannot afford the service charges, and the freeholder refuses to take the none payers to court, then all the leaseholders are not going to agree to set up an RTM company, to sue themselves for not paying the service charges.

You can sue the freeholder for not observng the lease ( making others pay ) and or go to the LVT to appoint a manager to get the place up and running, and the new manager takes action against those not paying.
see http://www.lease-advice.org/

[leaseholdanswers]

Assuming the s20 and billing is correct, then you have to pay. I would suggest that you ask the freeholder to agree to defer the payment and enter into a written agreement to pay in say 4 months time when most legal proceedings will be complete.

He may insist on payment and without assurances, as RAM suggests you have to keep it as an option that you will in turn sue to force him to do the work, using the disrepir protocol for example. Whether others can pay or that it will take him x months to sute non payers, is another matter, he must carry out the work.

You could ask him that prior to payment can he confirm with a letter from his bank that the service charge money is held on trust under section 42 Landlord and Tenant Act 1987. If he cannot will not or ignores it then you can take proceedings against him.

[paulamis]

For various reasons RTM is out

The S.20 was a fiasco, plenty for a later FTT hearing. If I do it before then I will never get the work done, it has taken several years to get this far.

We tried the S.24 route, but we were unable to find a reputable agent who would be willing to manage such a small block, they said their fees would have to be too high to make it worth their while.

A long story, but there is no goodwill between FH and, well anybody, except the MA, so there will be no negotiated hold-off, it will be solicitors letters/forfeiture as soon as possible, this FH has done that even when an LVT hearing was scheduled.

The money goes into a ring fenced account, but is there some rule that the balance must stay above what I have paid into the reserve - ie can they use my reserve as an interest free loan?

Can they just ignore my existing reserve funds and demand the full amount of major works to add to the reserve?

[leaseholdanswers]

Then you might pay with the qualifier that you do not admit or agree the amounts billed.

I would still offer to pay when they ar ready to proceed, and enter into a notarised agreement.

Short of funds I suspect hat he needs the reserve contribution to keep things going as opposed to doing the work. If he does so then that can be addressed at the FTT in due course.

Forfeiture proceedings are of course unenforceable if the FTT have yet tot determine issues, and any court would suspend a hearing until they do.

How he applies RF depends on what the lease says about reserves being separate from day to day SC, if it even does, and what earlier reserves were demanded for.

On s 24 I have been toying with the idea that an FTT might look on a small simple block being managed by a residents company who have retained a suitable manager to set matters up for them and to do a simple audit each year to ensure compliance. Given that a RMC replaced a manger named ion the lease, they might look favourably on that.

You can also enfranchise and the applicants nominate you or even another freeholders as the buyer. You need to be able to trust that your neighbours will or can pay of course.

[paulamis]

I shall try the notarised agreement idea, but I have little hope of success.

The way I see this going is I hand over several grand, the agent milks that for fees, and for his service company to do endless small repeat maintenance tasks.

All the while, they say another flat has not paid so we cannot do the work, and why would it sell, 2K a year (and climbing) svc charge on an 80K flat will stop any sensible buyer in their tracks (any BTLer will not even get past the rental cover hurdles).

I either live with this or, I spends hundreds (unrecoverable?) dragging them to the FTT, and then what, they get ordered to do it, on pain of what?

And supposing they do have to do it and have to borrow the money, I bet I have to pay for the interest too, so the rate will be as competitive as everything else they do.

If I dump the place at auction the FH will probably pick it up and then do the contested extension works behind all this, tidy the place up with my money, reduce the service charge to a reasonable level and make a nice profit on sales.

I for one will never touch leasehold ever again, flippin' expensive lesson.

[leaseholdanswers]

I think we agree, the chap wants your cash to use for other purposes, and unles the lease makes provision for RF to be seperate in holding and application, you are at their mercy in the short term. If it does, then looking at past years accounts will show the cash balance in the account at year end so it will be clear that monies are not being used as they should. The FTT can then determine that sums are not due, by adjusting your RF contributions as being in credit and therefore in a bill will show as a credit to offset curent demands.

Even if not, if you have paid say £3k in reserves and the works are say £6k, which he has demanded, if there are no reserve type expenses in the accounts, then you can ask the FTT to determine that £3k can be applied to that( as he hasnt spent it on reserve type works) and therefore the only amount due is 6-3= £3K

Your neighbours are in the same boat. If they can accept, as they should, a reasoned budget from you to meet obligations, they might agree to go RTM.

Of course, you can as suggested use the disrepair protocol to force the landlord to do the needed repairs and he is stuck with funding it himself in the meantime, with your contributions as well, under a court order.

If you tell them that this is what you are going to do, they might take the RTM option.

As to your comments about leasehold this highlights the common misapprehension about it- its not just the freeholder causing the problem, its others not paying up!

[paulamis]

The others in this scenario, are repossessions and the FH, who the MA is not going to chase too hard.

The repossessing banks are of the govt bad bank, asset recovery types, so they could not care less, they will eventually just pay whatever I suppose, but for now do not want to talk to me.

It is part (too much) commercial, the FH bit, so we have no chance of RTM.

I might have a chink of light on the RF, lease says; "...shall be held by the Lessor on trust and shall be kept separate from the other monies of the lessor...", so that says it should be seperate from day to day running costs.

However it goes on to say the reserve can only be used for clause x, but clause x is basically everything including FH management fee %age to interest if the block has to borrow. So I could be forced to pay for 2 banks accounts and they could then still take whatever they estimate they need.

Right now the RF is not acknowledged in the accounts, you can be shown as in debt, while you know you are in credit.