S146

[Guest]

Hello, I shall try to keep this as brief as possible...

I own a property, have done for 10 years. Always paid the mortgage and services charges on time. However, due to an illness which has led to disability I was quite sure, around the beginning of this year, that I would most likely have difficulty in paying the services charges due this year, which were billed in June 2014.

I contacted my lender, on several occasions, to discuss the ramifications of this potential problem. I was extremely precise with these conversations, insisting that I be told the entire process with regard to my lender paying this shortfall on my behalf and adding it to my mortgage. I made it clear that if the process would ever involve potential legal fees piled on top I would just sell up straight away (early Spring), go into rented, and then buy a new property next April when I received my pension. They always maintained that it would "never reach that point", that all they would require would be a final notice from my agents, at which point my lender would simply write to me, ask me to confirm that the service charges were not in dispute, and that I was unable to pay them, and then "sign on the dotted line", and they would pay it to protect their interest. This would allow me to remain in the property until next April when I get my pension, which would be beneficial to me as I would only have to move once, instead of twice. They maintained that as long as I did not fall into any mortgage arrears, this additional sum would be added to the balance, and that they would take no action to repossess. I reiterate, that I had this conversation with them a number of times over the telephone, forewarning them of this imminent service charge, and re-confirming with them the process that would be involved with getting them to pay these service charges and adding them to my mortgage. They often repeated that the situation need never involve solicitors, as long as I did not contest the charges, which I am not.

NOW, goal posts moved. Final notice from my managing agents has been served to me, and to my mortgage company. My mortgage company are now telling me that they can only pay the overdue fees once an S146 has been served. According to both my managing agents AND my mortgage company, this will involve solicitors. My managing agents have confirmed to me that it will cost in the region of an additional £600. This is for a £2,000 debt.

I've been speaking to my mortgage company for ages about it this morning. It's a case of "computer says no". "We cannot pay this amount without an S146." They have admitted that I was given limited or even incorrect information on previous phone calls (they listened to them)... tough luck. All I got was "Sorry." I tell them that had I been given the correct information back in early Spring I would've sold and moved straight away (it's a property in quite a desirable area and would sell in a week). I tell them that this misinformation is going to cost me something around £600. I tell them that they can have their S146 if they insist, and ask them whether or not they feel as though they should be liable for any costs I incur down to their misinformation. They ignore that question, and just basically say, "Sorry, that's just the way it is."

Do I have ANY recourse here? The only 'proof' I have of these conversations I had with various employees of Santander is, well, I have no proof. THEY have the recordings of the phone calls. And who knows how long they keep these recordings of phone calls? However, I do expect that they will have the phone call I had today with them (Complaints Dept), where they admitted that I was given 'incorrect information', so that has to count for something?

Obviously tenants and leaseholders that bury their heads in the sand and ignore correspondence from their mortgage companies and landlords and managing agents have only their selves to blame for the consequences. But I have been contacting and discussing this issue with them for the past six months or so, and making big decisions based on the information that they were giving me!

Thanks in advance for any opinions and suggestions...

[Guest]

Just wondering, if anyone might have any views on this dilemma perhaps? Thanks!

[Gordon999]

Its difficult to fight back without any written proof of what was said /advised by your mortgage lender. You could contact one of the reporters in the money section of sunday national papers and ask for their advice.

Your other options are to borrow the money to pay the service charge arrears from relatives or sell the property whilst the current market is favourable for sellers.

[siva]

£600 does seem high for a 146 notice, that is presuming you have admitted the breach.

You could dispute this amount if it is demanded. I will have a look to see if there are any tribunal decisions on what a reasonable charge might be.

Have you discussed your situation with the agent? Perhaps they will allow you an agreed payment plan? Are they actually threatening forfeiture? Have you admitted the amount demanded?

[Guest]

Basically the service charge is overdue, I am on good terms with my managing agent and they know that I do not dispute the service charge, it is fair and normal. It's just that for some months now due to illness/disability I was pretty certain that I would not be able to contend with the service charge this year. Had I realised that this situation could potentially escalate to involve solicitors I would have sold this property in spring and moved, but I was assured by lender that it would never reach that point. MA have been quite patient, and have postponed any action for as long as possible, but now they can wait no longer. I think it unfair that I would now have to play solicitor's fees on top (MA's estimate of £600) to facilitate an S145, as my lender has maintained all along that it would never reach that stage. I can't afford a payment plan with MA at the moment, I'm barely surviving on disability benefit, however in April next year I will have my pension and will be selling this property. I will be more than able to pay it then, but MA cannot want until then. It seems that it can be added to the mortgage but that I would have to pay this additional £600 that I am disputing.

[Guest]

One more thing - this is some info I found when I was researching S145's in relation to a leaseholder's failure or inability to contend with service charges. I think what it's implying is that an S146 isn't necessary strictly speaking, but it's the lenders just being bloody-minded. Anyway that's my interpretation. Even IF it is my lender's policy to insist on this S146, I still think I've been placed at an unfair disadvantage by being misinformed by my lender for some months about what the process would involve.

"A Section 146 Notice is a legal prerequisite before a landlord can seek forfeiture for breach of lease (other than rent arrears). Currently lenders are increasingly calling the landlords' bluff and forcing them to take this extra step to prove they are serious about potentially forfeiting the lease for non-payment of charges.

Ultimately, the additional costs incurred in this process will be added to the costs of preparing and serving the Section 146 Notice, which will in turn be added to the mortgage arrears balance. The banks simply delay the inevitable, the landlord still gets paid in full, but the ultimate loser is the leaseholder who has another chunk of equity taken away which could have been avoided."

Sorry, I think I may have mistakenly referred to this document as an "S145" instead of "S146" in previous posts...

[siva]

You are unlikely to get anywhere with the mortgage company. If the MA is going to start incurring legal costs then the sensible approach would be minimising them. If you admit the breach then all a solicitor has to do is produce a s146 notice. I'd be surprised if this took them more than half an hour @ £200 per hour + VAT.

Technically speaking, if the agent has done anything that suggests they are happy to continue with the lease then they cannot seek forfeiture.

But then again, the £600 costs the agent refers to might not be related to seeking forfeiture, it may be debt recovery which they may be able to pass on to you depending on what the lease says.

If I were you I'd ask the MA why they think it will be £600.

[Guest]

I queried the £600, they said that there is the cost of instructing a solicitor, the solicitor then has to write to me, I then write back, their time billed at something like £200 per hour + VAT, lots of legalise I didn't quite understand, the entire process was estimated at £600. This is despite the fact that I admit that the service charges are acceptable. So attending a court hearing to dispute the costs would even be more. I understand that I am unlikely to get anywhere with the lender, but surely there should be some recourse given that with every single phone call I had with them over the past several months they always maintained that solicitors need never be involved, no mention of an S146, and that it would simply be a case of them sending me a letter, signing it and returning it to them, following the "7-day final notice/threat to forward to solicitors" from the MA?

[Guest]

Incidentally I've just spoken to the solicitor who did my conveyancing and lease extension some years ago and he confirms that £600 is not unreasonable, and pretty much what they would charge, despite me not contesting the service charge. I think my main grievance is being led to believe for so long by my lender that it would 'never escalate to the extent of requiring solicitors or a somewhat costly and convoluted S146'. Had I realised this, I'd have sold up back in April of this year.

[siva]

Incidentally I've just spoken to the solicitor who did my conveyancing and lease extension some years ago and he confirms that £600 is not unreasonable

It seems excessive to me. two and a half hours of work to write a letter, read a letter and then produce a notice. Hopefully Leaseholdanswers and others with more experience can advise on reasonable costs. If it was me I'd write a letter admitting the breach and ask them to produce the s146 notice without further correspondence.

I've not been able to find any similar decisions but have seen some cases where fees in the region of £200 have been charged where the breach has not been admitted. I've also seen a case where the tribunal decided that £759.50 was wholly unreasonable in amount. Again different circumstances.

[Guest]

Thanks so much for the comments. There is one thing that I don't understand. Why, if a breach has NOT been admitted, would this make the procedure less involved or less costly? I would've thought that an admission of a breach would make things more straightforward, as presumably if a breach is not admitted then the case has to go to court or tribunal to be determined who is correct... MA or Leaseholder? I just don't get that?

[siva]

Well it's hard to say exactly in this case, but it is certainly less work for everybody if the breach is admitted. This is what I was proposing. Make it clear that you admit the breach. The solicitor's fee will be less this way.

However looking at it a different way, you may have to pay no solicitors costs if you dispute them (not the service charges), represent yourself and win. Quite often, MA's and freeholders charge for things they are not supposed to, especially when it comes to legal costs. It all depends on what the lease says and whether they've gone about things properly.

[Guest]

Oh I see what you're saying, re disputing service charges. I don't think that would be feasible here. Firstly my MA's have always been amazing and conciliatory and responsible. They are the biggest MA in my city, and have always gone out of their way to help out when things were tough. Plus their fees are reasonable, they're pretty much the same each year (unless the building needs re-decorating or there are major repairs), and when we get the Accounts each year they have pretty much spent precisely what they said they intended to spend. Sometimes they've even under-budgeted. I would never want to contest their charges, unless I really felt they were taking the P, which I know they're not. I'm more angry with my mortgage company, who misled me for so long (basically down to me speaking to call centre staff who clearly were not in full possession of all the facts re the procedure with service charge arrears). I strongly feel that if a company misinforms you and this ends up costing you money, they should pick up the bill. Never mind the fact that the market locally was BOOMING in April 2014 and it's questionable whether or not I will be at the same advantage again next Spring. Like I said, the ONLY reason I didn't sell up at the time was because my lender insisted that the process would NEVER involve solicitors and additional fees. I postponed selling because of what they told me. Anyway, I'm getting the feeling that you just cannot take a mortgage company to task, they are untouchable regardless of how poorly informed their customer service staff are. I think I may just end up being at the mercy of my MA's until next April, and hope they are able to allow me a bit of time instead of commencing forfeiture proceedings. Or pray that £2K just falls into my lap from the sky. We'll see! Wish I could just fast-forward to April 2015...

[paulamis]

Can't the MA just issue a claim using the online money claim site, you do not contest, he has a default judgement, the mortgage company pay out, this satisfies the debt and clears the CCJ. No solicitors required, under £100 legal costs for the CCJ, but I am sure your mortgage company will add a few hundred for admin.

Search on here for "buy to let and hide", unscrupulous landlords have been know to do this every year.

It is not entirely risk free, should you lender wish to offload your business, perhaps because they are trying to reduce their loan book, then this could give them an excuse.

[leaseholdanswers]

This is not really just a simple s146 issue.

I am worried that you may have fallen foul of those little demon buggers assumption and inference, i.e. what “final notice “meant to you and them.

If they explained the latter, or that what they did say could be inferred or understood, by a reasonable person, as being well short of a section 146 notice, then there is a basis for complaint and review.

It is common for a whole number of reasons why lenders want to see determination of the amount outstanding, either by agreement or admission, which applies in your case, or by tribunal or arbitration. In the former cases the section 146 is then vital as sufficient to prove or assert, after review by their solicitors* that the claim is not spurious or concocted.

(* Yes we all know that there are plenty of firms that will write anything for some freeholders and agents)

The next question is then that if the agents clients can actually serve a section 146, as unless it is an external freeholder, a party to the lease manager such as a residents owned company or their statutory right to mange company, may not have the power to dos so, nor need the freeholder or superior landlord be the slightest bit inclined to do so, as it is not “their problem”.

If so then the agent’s client has to seek a money judgement, which though suggested, they may be reluctant to do so as the full cost is rarely recoverable and your lease terms on legal costs, if any, or the service charge clauses, might leave the agent’s client out of pocket.


Having checked the lenders website and the CML handbook there is not a lot be found on this and you may have to make a formal complaint requiring them to disclose their procedures.

If selling up is an option I would therefore suggest that you agree to do so as soon as possible and have your lawyer write and agree with the agents client that they (on your instruction of course) , not you, will settle all arrears out of the completion monies. In the meantime leases often allow for interest to be paid and a loan of sorts at, typically, a few % + base is far cheaper than all these legal costs or borrowing the other monies by other means.

This of course then depends if the agents client can agree to this as while it is a pragmatic approach your non payment has to be subsidised either by those that are paying, or the freeholder. If the cash flow can stand your arrears the interest payment goes some way to offsetting, and placating, those that pay up in full and on time ( because they can, I don’t mean this as a go at you : ) )

Good luck.