Agent demanding service charge reconciliation for period before purchase

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    Agent demanding service charge reconciliation for period before purchase

    I have been asked by my (London) property's managing agent to pay an additional £500+ (my share of the total c. £5.5k minus funds held on the SC account) to reconcile the charges for period 24/06/2012 to 23/06/2013.

    A few key points:

    - I became the owner of the property in mid July 2013, after the period in question;

    - On 26/06/2013, my lawyer was assured by the MA that the seller’s service charge account was clear. The seller confirmed that his account had to be cleared before the exchange took place and necessary documents would be produced by the MA. Hence, no retention has been agreed by our lawyers;

    - Given I didn’t own the property at the time, it’s very difficult for me to establish the viability of the charges. However, I do not understand how c. £5.5k of charges can suddenly appear after the seller was told his account was clear;

    - The service charge reconciliation includes items, such as:
    -- Internal cleaning: £542
    -- Internal repairs & maintenance: £540
    -- Risk assessment, audit & review: £732
    -- Life safety systems maintenance: £192
    -- External repairs & maintenance: £3,118.18

    - The owner of the other flat (there are two in the building), does not know what the external repairs & maintenance charge refers to, and the MA has not elaborated yet;

    - The building consists of two flats and an office. The common space consists basically of a staircase;

    - Ever since my move in mid-July, I have seen no evidence of any cleaning or maintenance done on the property. I take occasional photos and videos to monitor the situation;

    - I kept up to date with the current service charge payments but I have queried the invoice with the MA, writing up the above.

    My questions:

    1) Do I have the right to withhold the payment for the service charge reconciliation until the situation is resolved?

    2) I have already asked for a written summary of the costs, which make up the service charge I am currently paying, as well as a summary of the insurance policy. Is there anything else I can/should do?

    3) Based on the time I lived at the property, I feel that the MA is not fulfilling its role properly. Should we, the flat owners, consider applying for the right to manage? The problem is that the office may be taking up slightly more than 25% of the building’s area. How strict is this criterion?

    Many thanks for your help and advice

    #2
    Originally posted by tusio View Post
    1) Do I have the right to withhold the payment for the service charge reconciliation until the situation is resolved?
    Never withhold service charges demanded, as you can have your flat forfeited ( pack your bags and leave, and no money reveived for the flat )
    You pay, then thash it out later.


    2) All you can do is wait for the costs summary then decide how to proceed after that. They have 28 days to give you the costs summary. After that, they are commiting a crime if not received within 28 days

    3) Do not go the route of right to manage for a while, as you will be out of your depth with offices attached.

    NOTE that the costs are "reconciliation", which means that although the previous leasholder had paid his "Estimated / anticipated" service charge and probably paid in advance, it would seem that the service charges were more than the "Estimated", therefore whoever owns the flat now, is responsible for these extra costs, which may not have been calulated when you bought flat.

    Comment


      #3
      Thank you. How fast can they start the process for lease forfeiture?
      How can I contest those charges if I haven't owned/lived at the property during this period?

      Comment


        #4
        How fast can they start the process for lease forfeiture?
        The next day after your service charges were due, if they wish. But there will be a 10 week wait if going through the LVT ( Now FTT ), or they can go straight to court.

        I doubt they will start proceedings when while you are contesting the costs.

        You bought your flat 22 days after the year end accounts, and 21 days is not enough time to reconcile accounts, get them audited ( if required in the lease ) so that you would know how much extra the costs were, over and above the "estimates".

        You can "Try" and get the extra money from the previous leaseholder.

        But whoever owns the flat at the time of charges due, would have to pay those charges.

        Ignoring your complaints as to if jobs were done, you have benefited from the 5 items shown ( repairs & maintenance etc, etc ) and you state you are being asked to pay £ 500 extra to what you envisaged.
        If that is all it is, I would not waste my time, as it would cost that much to legaly dispute it.

        You are entitled to see the revised costs / total costs for the last financial year.
        You are entitled to make an appointment to go through all the receipts for your building at the MA's office.
        But there will be a charge for this as they wil have someone with you ( to make sure you dont steal any receipts/ invoices, but it is your right, for which they cannot deny you.

        Expect £ 30 to £ 50 charge, either direct to yourself, or taken out of the service charges, as an extra management function..
        [/SIZE]

        Comment


          #5
          The whole point of having a conveyancer/solicitor is (amongst other things) to check theat there are no outstanduing service charges so it appeares that someone cocked up here or lied , have you got proof that the MA said there were no service charges due ?, it is dubious that they suddenly claim later that there are indeed amounts owing.
          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


            #6
            The MA claims it takes 3-4 months to balance the accounts after the year end (they sent the invoice end of November).

            The seller's solicitor has forwarded a screenshot response from the MA that as of 26/06/2013, the SC account was clear.

            Comment


              #7
              Originally posted by tusio View Post
              The MA claims it takes 3-4 months to balance the accounts after the year end (they sent the invoice end of November).
              I reconcile the service charges here, and yes, it takes a few months to compile and end up with what we spent in addition to the estimated charges, and collate, type out and isssue.
              As I said, you can go back to the previous leaseholder and ask for that extra money, but don't expect to get any money out of them.

              If I am correct in seeing that you bought the flat 22 days after the financial year end , then no one would know, after only 22 days, how much the extra expenditure was, or even if a refund was due.
              The information would have been correct at the time, "The seller has paid all service charges due to date" ( That would have been the "Demanded, in advance" estimate for the year 24/06/2012 to 23/06/2013", and probably paid on or about 24/06/2012. )

              If you sell your flat on the 15/7/2014, then the same situation will occur. The service charges reconciliation will not be available, and can be more than the estimate, or less than the estimate, and it's up to the buyers solicitor to ASK "Do you have any idea, at the present date, how much extra the service charges will be on completion of the service charge account, or, do you envisage a refund on the current service charges.

              The solicitors should have asked these questions, and a retainer sought until such time as the service charges were reconciled.

              Comment


                #8
                I would of thought someone was negligent here.

                I think it may turn on what exactly was asked and what the response was.
                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


                  #9
                  Thanks both. All informative and (unfortunately) sounds sensible. It's frustrating that the purchase process is so convoluted. I tried keeping an eye on everything but I missed this bit. I'll know for my second one. My options are then:

                  1) Contact the seller and hope he'll feel morally obliged to cover his bill...

                  2) Pay the SC under protest, contest the charges and ask for financial audit. Based on their performance so far, I guess they'll still find a way to make me pay. I feel rather helpless in this relationship.

                  3) Complain to the solicitor for not agreeing a retainer. Probably wouldn't achieve anything.

                  Any other ideas?

                  Thanks

                  Comment


                    #10
                    1. Unlikely. Although you may be able to pursue legal action, did he have involvement in the sale ?, was he asked about service charges ?

                    2. You arnt helpless, there is a raft of LH legislation..there maybe valid reasons to withold (if demands are non-compliant with lease and/or law). The amounts listed do appear to be quite high, is it a large property, was there a S20 consulation process done, etc

                    3. I would of thought this is your strongest point, you could say you only bought the house on the condition there was no outstanding cahrges, but there were .maybe the solicitor was negligent (they are insured against such things) or that the management company was plain wrong or at least misleading when they said there were no outstanding charges.
                    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


                      #11
                      Just subscribing really.

                      I am pretty much in the same situation, mad charges and no way to RTM out of them due to commercial percentage, love to hear if you make any progress.

                      Comment


                        #12
                        Originally posted by andydd View Post
                        I would of thought someone was negligent here.

                        I think it may turn on what exactly was asked and what the response was.
                        C'mon Andydd you know better than that. it is likely that the service charges paid up are estimated for the year and this is the balancing charge, the actual cost exceeded the estimate.

                        The screw up in any was the conveyancer who declined to get a retention or undertaking.

                        If the lease was granted after the 1-1-96, then the OP is not liable for those charges anyway, unless of course the contract makes alternative provision ie he undertook to pay any charges prior to ownership- " sold as seen" if you prefer, typical in repossession sales.
                        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


                          #13
                          Originally posted by tusio View Post
                          Thanks both. All informative and (unfortunately) sounds sensible. It's frustrating that the purchase process is so convoluted. I tried keeping an eye on everything but I missed this bit. I'll know for my second one. My options are then:

                          1) Contact the seller and hope he'll feel morally obliged to cover his bill...

                          2) Pay the SC under protest, contest the charges and ask for financial audit. Based on their performance so far, I guess they'll still find a way to make me pay. I feel rather helpless in this relationship.

                          3) Complain to the solicitor for not agreeing a retainer. Probably wouldn't achieve anything.

                          Any other ideas?

                          Thanks
                          1 See my earlier post its a matter of first checking the contract and then looking at 3. if the lease is pre 1-1-96 its down to you.

                          2 No such thing and not relevant. The accounts that have been created to calculate the balancing charge are in most cases certified as the lease requires, are certified under the Landlord and tenant Act 1985, or are company accounts of the residents group. If not then see my sticky on rights at the top of the leasehold subforum.

                          There is no right to a financial audit in the sense that you expect, that will likely have been done, above, and if you expect a comprehensive audit in its proper sense, then there is not right to that.

                          You can however if certified under the LTA 1985 ask to inspect the receipts, and it may be that you can see issues where work charged for in that period has not been done, done badly or incorrectly, or assessing the cost argue that it was unreasonable in some way( that its more than you think it should be is not a valid basis )

                          On current issues you need to complain to the managers about these bearing in mind block’s are not always regularly inspected and the issue of cleaning might be a current one. As hinted to as above, some issues that you might expect to be cleaning aren't part of the cleaners spec eg why aren’t walls washed down where scuffed or carpets are stained etc. This is something that by discussion you can establish.
                          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

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