Service charges.

[Mrs Dingle]

I am the freeholder of a block of six houses/flats.I bought this back in 2004.The lease states that they all must pay one sixth share.The previous freeholder explained that they had all signed a piece of paper agreeing to repair and maintain their individual properties and he would not collect any further money from them for the "sinking fund".I questioned my solicitor before purchase about this and she said that this was ok if we were happy with it.No money was passed to me and the sinking fund remains at £0.00.I noticed that several of them had already replaced their windows and doors and all seemed ok.I have never seen a copy of this agreement.I will still need to collect money in the future for the communal area (carpark and two short stretches of fencing.I have already replaced one fence and repainted the eaves at my cost as a good will gesture to the leaseholders.

Now I have a problem.One of the leasholders is claiming she has water leak and considers it to be my responsbilty to pay for it.

I can see I am in a catch 22 here.I would like to put this situation right but not sure what to do.
The building is insured as a block as per lease and one sixth charged to each leaseholder.
Any suggestions?

[jeffrey]

This supposed "agreement" is not worth the paper it wasn't written on. You have full right to enforce a proper service charge scheme as prescribed in each lease- not just for insurance premium, as is already happening, but also for every other obligation binding the lessor (= you).

[Mrs Dingle]

Should I send them all a letter explaining this and that I intend to collect money for this purpose?I am anticipating a backlash of disapproval.One of the leasholders has just spent £2100 on replacement windows and doors.

Is there a fair way that I could deal with this.Considering that they have all contributed different amounts of money to the building?

[jeffrey]

Should I send them all a letter explaining this and that I intend to collect money for this purpose?I am anticipating a backlash of disapproval.One of the leasholders has just spent £2100 on replacement windows and doors.

Is there a fair way that I could deal with this.Considering that they have all contributed different amounts of money to the building?

As you will be courting considerable unpopularity at the flats, consider taking professional advice. This will:
a. ensure accuracy in notifying them of resurrection of their legal obligations and your proposed enforcement; and
b. be a buffer between the posse (seeking to rip you limb from limb) and you.

[Mrs Dingle]

Also, am I right in thinking that the previous freeholder may still be holding a considerable sum already collected which belongs to leaseholders?

[jeffrey]

Might. Might not. Why do you think so?

[Mrs Dingle]

One of the leaseholders told me a couple of years ago that the former freeholder used to collect £100 per year from each and spent very little.From about 1990 until they signed this mystery paperwork

[jeffrey]

One of the leaseholders told me a couple of years ago that the former freeholder used to collect £100 per year from each and spent very little.From about 1990 until they signed this mystery paperwork

Could that have been ground rent?

[Mrs Dingle]

It was originally £100 per year paid as a service charge for repairs .I have found some paperwork explaining that £100 per year to be paid rising no more than 15% per year to be place into a "sinking fund". The previous freeholder explained this to me when I asked during the time of purchase.I questioned my solicitor about this as i was concerned about the arrangement.She said it was fine if I was happy about it.The ground rent was treated seperatly and I am still collecting this and I give a receipt for all monies stating what the money is for and what time period it covers.

My understanding (please correct me I'm usually wrong) is that the "sinking fund" should have been passed to me and I should have continued collecting it.The interest added to it.For the purpose of repairs and maintenance as stated on the lease and also I should be issuing the leaseholders with an annual account of the money.

I seem to be at the wrong end of the scale.I have incurred approximately £350 worth of repairs so fund is minus.

Could I now pursue the previous landlord or is it for the long leaseholders to persue him?

[jeffrey]

A reserve/sinking fund belongs to the collective lessees, not to the freehold reversioner or management company (even if that's who holds it in trust for them). On a change of reversioner (from V to P), the fund's contents should be handed over by V to P. What happened to it in 2004, when you acquired the f/r?

[Mrs Dingle]

2004

The freehold titles purchased through my solicitor.I asked both my solicitor and the vendor about maintenance and charges.The vendor said that all leaseholder's had signed a paper to say no more money to be collected but they would do their own repairs and pay for anything else as and when(the property was built around 1990).

I have written to one of the original longlease holders today to ask if they could let me have details about passed payments and when they ceased.

The property contains 6 long lease and 6 shortholds.So I accept that i have to pay half whatever.

I originally had difficulty obtaining money paid for rent to the vendor from the shortholds and also their deposits.These eventually were sorted.The vendor paid me direct.

I have printed out "The Service Charges" --"Summary of Rights and Obligations,and Transitional Provision" which I understand is required to accompany any demand for service charge.

From the information I have given .Should I contact a solicitor a.s.a.p. If so should I go to the original one or change?

[jeffrey]

First, insist that your original solicitor provides (free) a full explanation of what was done (or not done) about service charge fund when you bought. The files should not yet have been destroyed- they have to be kept for at least 15 yrs.

[Mrs Dingle]

I have just spoken to the solicitor who remembers that her understanding was that the previous freeholder collected the charge on an ad-hoc basis and had probaly spent it on repairs.I have asked for any deails about the service charge and she is going to have a look at the files and leases and ring me back in a few days.

I have a copy of one counterpart deed which details the £100 cost etc. This I found atached to only one of the leases.I am suspecting that this signed paperwork may be missing from the other leases.Perhaps removed when the freehold was sold to me.

Thank-you for your assistance.I can see that there is a lot wrong here but struggling to be clear what to do.

[jeffrey]

"Understanding" and "probably" are a bit vague!
The Agreement for Sale and Purchase should be specific on the point. There might also be information in V's solicitor's replies to:
a. Enquiries before Contract; and/or
b. Requisitions on Title.

[Mrs Dingle]

pre-contract enquiries

I have search the paperwork that I have been given and found the following:-

May 04 CPSE.1

Question---Please supply a copy of any agreement for the maintenance of any of the boundary features.

Reply----(None.You will see mention of an amenity agreement in the leases of 7 & 9. These agreements dealt with the maintenance of the access way and the boundary fences on the east and west sides of the carpark.The seller ceased to collect payments under these agreements many years ago--believed to be 1993.There is no copy correspondence or other agreement in existence in relation to this.I am told the long Leaseholders and the seller agreed to suspend payment and receipts under these Amenity Agreements and they are now redundant.)

______________________

CPSE.2---Is use and maintenance of the common parts governed by any arrangements other than the terms of the Tenancies of the let units? If so,please provide details.

Reply---Similar reply as above but with (the lessees given to understand that they would have to pay for these items in the future jointly between them.There is no documentation concerning this in existence.)

________________________

An extract from a letter from the sellers solicitors reads:-The lease r.e. No. 9 mentions an Amenities agreement.A copy of this is enclosed but the sellers many years ago stopped collecting payments under the Amenity Agreements and it was agreed with the lessees that if any work referred to in the Amenities Agreement needed doing,then each would pay one twelth of the cost.There is no documentation to support this.


_______________________

The above information was from the period (2004)when I purchased the freehold of one of the blocks(7-12)( 2 blocks both identical in build)

The second block not purchased untill Dec 05 ( because of long delays due to tenants having the right to be offered the freehold.

________________________

In 2005 I asked my solicitor again about this amenity agreement and she wrote the following :-I regret that it will not be possible to restore the sinking fund in circumstances where effectively this has been abandoned and indeed the Lease to you of No.2 ( purchased at the same time as the first block)did not mention at all the amenity agreement.However,the tenants are still responsible for one twelth each of the cost of any works or repairs to the common areas and this can be collected on an ad-hoc basis which we can discuss further in due course.

_________________________


All the long leases state one sixth of the repairs and maintenance of their block and one twelth of the common areas.

I estimate that the carpark surface (tarmac) is going to cost around £3500 to replace.My understanding is that I couldn't in fairness bombard the tenants with a sudden share of this size and I would like to find a way to set up a fund for this and also a seperate fund for the maintenance of the buildings.

Sorry for the long winded post.I would really like to be sure If should return to my original solicitor and ask her to sort this out for me or change to another one .I can see that this a long term problem if I don't get it sorted soon and its not something i want to tackle myself.Too complicated.