Advice needed on the allocation of residential service charges

Advice needed on the allocation of residential service charges

9:36 AM, 26th August 2022, About a month ago 4

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Hello everyone, I am a leaseholder in a small block of 6 flats that is self-managed through a limited company in which each leaseholder has an equal share (the Management Company).

The flats were created in 1989 by converting a 5-storey Victorian house. The leases for each flat, drawn up in 1989, specify a fixed proportion of the total costs of servicing, maintenance etc of the block to be paid by each flat; these proportions are 12.5% for 2 of the flats, 15% for one (the basement flat) and 20% for each of the remaining 3 flats.

The basis for these proportions is not documented but it is clear that it is not based on floor area – the basement flat has the largest floor area.

Some leaseholders have questioned whether these allocations are fair and reasonable and are suggesting that floor area would be a fairer basis.

If this course of action was taken it is likely that there would be more ‘winners’ than ‘losers’, with the main loser being the basement flat. Decisions by the Management Company are made by majority vote, so the ‘winners’ are likely to prevail in any vote.

Any advice on the following would be useful:

• Can the Management Company legally override the fixed percentages specified in the leases?
• Why is floor area often used as the basis for apportionment of service charges between flats? Is it for convenience or is it in some way considered ‘fair’?
• What examples of a ‘fair’ basis of service charge apportionment do members have experience of?

Thank you,

John



Comments

Laura Delow

10:11 AM, 26th August 2022, About a month ago

You need to fall back on the strict legal wording of your lease. The right to manage company cannot vote to override this in favour of a different apportionment method. Some leases simply state a fixed percentage. Other leases may state simply the apportionment method and no other figures. Some leases state no way of sharing the costs between properties whereby the normal practice is simply to apportion the costs equally between all the properties.
If you don't agree with the apportionment method stated in your lease & you feel that you pay more than your fair share, you might be able to apply to a First Tier Tribunal for a lease variation which is a process by which a Tribunal formally changes the terms of a lease, and this can include the apportionment method.
The most common apportionment methods (but not limited to) are:
Floor space, Bed space, Rateable value
or Equal apportionment.

Ian Cognito

11:37 AM, 26th August 2022, About a month ago

Reply to the comment left by Laura Delow at 26/08/2022 - 10:11
In blocks that have a lift, there may also be an increased service charge for non ground floor flats.

Puzzler

11:04 AM, 27th August 2022, About a month ago

No you can't vary a lease by a vote within the management company. When there are fewer than 9 all but one must agree and you will need possibly a surveyor to revalue the apportionment, a solicitor to draw up the new variation, application to the FTT if it is not unanimous and compensation would need to be paid to any losers. All of the above will cost far more than any savings made to those who might gain which will be tiny.
How many believe it to be unfair and what is the layout? It looks as though one floor has two smaller flats?
Floor area is not necessarily a good criterion, the basement may be less because either it has lower market value being a basement or because it makes less use of communal areas. It is more usual for the costs to be spread equally as they relate to the communal areas. You wouldn't get that agreed as three flats would lose out.

Also all lenders and any other stakeholders have to be notified

Graham Bowcock View Profile

12:05 PM, 27th August 2022, About a month ago

As said by others, the lease cannot be easily over ridden. It would be very complicated and costly to do so. The leaseholders signed up to the leases so it's fait accompli really.

We managed a property with a really bad lease requiring four houses on a development to contribute to the roof of the flats on the site, but without the reverse. It was debated for many years as to changing the leases but the flat owners (of course) would have been stupid to agree and never did.

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