Unfair service charges - RTM or tribunal?

[strondy]

Hi there,

I bought a flat in Lewisham in May 2016. It's a converted victorian house with four flats in the building, and a small communal garden which no one uses and is in pretty bad condition.

When I originally viewed I thought the service charge was pretty high (we pay £1,800 a year each, working out at about £150 a month per flat), and since I've moved in I've started gathering information and contacted the other leaseholders in the block with a view to getting it reduced.

I've tried to mediate with the managing agent, but they don't want to know. Our buildings insurance is £2,500 a year (this doesn't include contents insurance) and I've had quotes based on exactly the same conditions as the premium we currently have which have come in at about £500.

However, the managing agent has stated that they cannot change the policy, because 'The insurance is required to be arranged on a large portfolio basis and in accordance with the demands and needs of the policyholder (freeholder). This basis of arranging adequate insurance cover for a large portfolio was established in the case decision of Berrycroft Management Co Limited – v – Sinclair Gardens.'

Does anyone know whether we would have a case if we took them to a tribunal, or has the above case set a precedent? We have a number of other things on the service charge we could dispute, but the insurance is by far the most costly.

Furthermore, we've been chatting about undertaking an RTM. The initial costs are palatable, but my concern is that the freeholder will contest the claim and we'll be liable to pay their 'reasonable legal fees'.

Has anyone got any experience of this? What sort of cost would we be looking at?

Thanks,

Tom

[Tipper]

You seem on good terms with your fellow lessees, why don't you collectively enfranchise the freehold? You will then have full control, albeit collectively, of your building and its costs.

[strondy]

Hi @Tipper,

It's a cost issue primarily. Our lease has 99 years left and from what limited information I have, it'd be at least £5,000 per flat to purchase the freehold.

If I was in it for the long haul I'd consider it, but it's my first property and I can't imagine I'll keep hold of it for more than another 18 months when the mortgage term finishes.

I just want to find a way to avoid paying the £1,800 service charge and various S20 works which have been undertaken and have been overpriced and done to an appalling standard.

If you've got any other advice I'd be really keen to hear it!

Thanks,

Tom

[MrSoffit]

If not minded to CE, I would suggest RTM preferable option if enough on board and willing to be directors not just for Christmas (biggest hurdle). Arguing the reasonableness of service charges costs at a tribunal is a complete lottery and the cost of the case can outweigh any reduction - especially if the LL can apply their costs back to the service charge as happened to us - don't just expect a successful s20C bar on costs.

As for the landlord's costs of dealing with your RTM claim...

If you are absolutely pedantic and research everything in advance and be sure you strictly follow every step to the letter and make not even an elementary mistake, the LL cannot stop you if your qualify and can only apply reasonable costs. The meaning of 'reasonable' would in the end need a tribunal application if your LL proved costly.

I studied endless tribunal decisions about disputed claims and also studied as many costs disputed cases as I could stomach. Go here:

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

and search tribunal decisions under 'Right-To-Manage decisions' - and filter as wanted.

What are reasonable costs? The LL needs a solicitor to confirm your claim is valid. Watch out for an attempt to add a managing agent cost that probably will not be allowable as they have little to do with RTM claims other than routine agent work.

Here were some helpful reasonings of general principles (as at 2012 rates) in, first, CHI/00HXJLCP/2007/0001 (an uncontested claim) where legal time of a couple of hours for one claim was OK, but this is not case law:

"the Tribunal in its collective experience concluded that ... it was not unreasonable overall for a partner to have conduct of the case. The {hourly} rate ... implied a Grade A fee earner, meaning a solicitor with considerable post-qualification experience, knowledge and learning.

The Tribunal took the view that as a general principle no additional time should be chargeable, as a Grade A fee earner in a firm of solicitors should be expected to know the legal provisions relevant to RTM, or at least not to pass on research time to their clients.
...
The Tribunal took the view that no additional time should be allowed merely because this was the first time the fee earner had been involved in a RTM transaction. Even if in some circumstances research time might be chargeable to a landlord client under Section 88, the Tribunal was not persuaded that this was a case where such time should be allowed having regard to the relatively straightforward circumstances of this case.

Turning to the question of {the managing agents} fees ... the Tribunal found no evidence to show any liability for the landlord to incur these professional costs in addition to legal advice in connection with the RTM transaction."

Costs allowed: "£466.66 (inclusive of disbursements) to which must be added such VAT as may be payable and supported by an appropriate VAT invoice"

Second, in CHI/00HXILCP/2007/0001 (also an uncontested claim) the tribunal allowed:

"The tribunal allowed 30 minutes in total at senior solicitor rate (... for preparing the counter-notice"

" no additional time for research was allowed. The tribunal took the view that as a general principle a senior solicitor should be expected to know the legal provisions relevant to RTM, or at least not to pass on research time to their clients."

Costs allowed: £714.60 inclusive of VAT and disbursements.

Of course, if the claim is contested you can end up with higher costs and fail in the claim.

Do your homework. Mine is over four years out of date.

Search for your landlord in the above tribunal decisions.


RTM tribunal cost cases (as of 2012):
BIR_41UF_LCP_2006_0001
LON/OOAL/LRM/2010/0002
CHI/00HN/LCP/2010/0005
CHI/43UD/LCP/2006/0001
CHI_00HX_LCP_2007_0001
CHI_00ML_LCP_2009_0004
CHI_00ML_LRM_2009_0006
CH1_29UN_LCP_2010_0003
CHI_00HN_LCP_2010_0005
CHI_00LC_LCP_2011_0003
LON_00BB_LCP_ 2011_0002
LON_00BA_LCP_2011_0004
CAM_38UC_LAM_2011_0001
CAM_00KF_LCP_2011_0004
LON_00AY_LCP_2011_000
BIR_00FK_LCP_2011_0001
CHI_00HN_LCP_2011_0006


RTM tribunal cases (as of 2012):
LON_00AG_LEE_2005_00012
BIR_00CR_LRM_2005_0002
LVT_LON_00AM_LEE_2006_0003
LVT_LON_00BK_LRM2005_0011
LVT_LON_00AM_LRM_2007_007
LON_00AZ_LRM_2008_0013
BIR_00GF_LSC_2008_0026
LVT_Cove RTM
CAM/26UK/LRM/2010/0004
LVT_CAM_22UF_LRM_2010_0005
LON/00BG/LRM/2010/0015
LON/00BG/LRM/2010/0016
CAM/00KF/LRM/201010006
CHI/24UJ/LRM/2011/0001
LON/00AZ/LRM/2010/0026
CHI/24UL/LRM/2006/0005
CHI/29UG/LRRM/2006/0002
CHI/43UKJLRM/2006/0004
CH1/40UE/LRM/2007/0001
CHI/00HN/LRM/2007/0005
CHI/43UB/LRM/2007/0004
CH1/00HB/LRM/2008/0001
CHI/00MS/LRM/2009/0002
CHI/21UF/LRM/2008/0005
CHI/00HX/LRM/2009/0002
CHI/18UH/LRM/2009/0001
CHI/15/UE/LRM/2009/0003
CHI/29UN/LRM/2009/0004
CHI/00Fy/LRM/2016/0002
CHI_24UJ_LRM_2011_0001 (copies 161)
CAM_38UC_LAM_2011_0001
BIR_00CR_LRM_2010_0005-0011
00CR_LRM_2010_0011-0012
BIR_00FN_LRM_2011_0005
CAM_00KB_LRM_2011_0002
MAN_00CJ_LRM_2011_0004
MAN_00CJ_LRM_2010_0005
LON_00AZ_LRM_2011_0014
LON_00BG_LRM_2011_0032
LVT_LON_00AP_LRM_2009_0006
CHI_158UK_LRM_2010_004
CHI_18UD_LRM_2010_0005
CHI_00HY_LRM_2010_0007
LON_00BK_LRM_2011_0021
LON_00AY_LOA_2011_0001
LON_00AY_LRM_2011_0009
CAM_00MD_LRM_2011_0001
CAM_11UF_LCP_2011_0006
LON_00BK_LRM_2011_0027
BIR_00FN_LRM_2011_0005
LON_00AY_LRM_2011_0012
LON_00BJ_LRM_2011_0019
LON_00AG_LRM_2010_0025
LON_00AM_LRM_2011_1
LON_008G_LCP_2011_0009
LON_00BB_LCP_2011_0008
LON_00BE_LCP_2011_0011
CAM_26UD_LOA_2011_0001
LON_00AY_LCP_2011_0005
LON_00AU_LRM_2011_0017
LON_00BE_LRM_2011_0022
CHI_00HN_LCP_2011_0006

[andydd]

Service charges are only to re-imburse actual costs the FH has spent no more, no less.

If the FH chooses an item that costs £x but its available for a lot less he has to give a reasonable explanation as to why he didnt choose the cheaper item

As for insurance, decisions about this are all over the place, there isnt one single piece of case law that everyone should follow.

The management is talking crap if he says he cant change the policy, he maybe allowed to use a block policy BUT he must still make some effort to shop around and not get just one quote, in addition its usually thought that block policies should be cheaper than insuring individually so thats an odd argument.

There are plenty of insurance cases available to view on Lease Advisory Site and through the Upper Tribunal database, have a search for my Freeholder, Forcelux as they pop up quite a bit, its also worth searching for local properties, my local FTT tribunal has been quote tough on FHs who charge excessive amounts but FTTs are notoriously inconsistent and contradictory.

Its also worth questioning if there are any commissions or claims handing fees involved.

As for costs (for disputing SCs) does your lease allow your FH to recover legal costs ?, iof not then this shouldnt be a worry as the FTT is a no-costs forum. Your lease should have a S146 costs clause but this shouldn't be relevant here)