Can I charge a Management Fee for my essential services as a Freeholder?

Can I charge a Management Fee for my essential services as a Freeholder?

8:56 AM, 20th December 2021, About 4 weeks ago 7

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I own the Freehold of a block of three tenanted flats. I own two of the flats. I have been performing my Freeholder ‘duties’ – arranging for a new roof, communal hallway decorations, front garden maintenance etc for the last 6 years.

However, this is becoming onerous, especially as there is impending licensing for communal areas and other fire regulatory upgrades which I need to arrange. Managing Agents are charging me a lot for their Freehold Management of other flats I own, and I am wondering if I can become the Managing Agent for that Freehold so at least I can be paid for my work?

Would I need to set up a registered company, or can I just add a management fee (the amount is guided by the Lease) on the next fee account to the lessee?

I may sell one of the flats next year, and then I would certainly want something for my pains running the building when I own only one of the flats.

Many thanks

Helen



Comments

by Paul McCarthy

9:56 AM, 20th December 2021, About 4 weeks ago

Having just gone thru this exact same issue I can say this; you cannot if the lease does not state it is allowed to appoint yourself as the managing agent.

My landlord charged me several hundred pounds over several years for his management fees, however the lease stated he could appoint a managing agent, not that he could manage it himself and charge...

So at the recent FTT hearing he lost.

Check the lease

by Aljfox

10:06 AM, 20th December 2021, About 4 weeks ago

I am in the same position with a block of 10 (2 are privately owned). You don't need to set up a Management Company but I find it best to send leaseholders invoices from my MC partnership. You need to be careful and check your lease agreement in case you have any restrictions (ie. you may have to produce formal audited accounts). However the most you can normally charge is the cost of the actual services provided plus a Management Company fee that is normally 10% which is what I am now doing. Leaseholders can challenge if they believe they are excessive so it is best to quantify and itemise all service charges.

by BernieWales

11:37 AM, 20th December 2021, About 4 weeks ago

The starting point, as always, is Read The Bl***y Lease. See what it says about management fees and/or employing a managing agent and/or charging a fee if an agent is not used. The answer will be within the service charge provisions.

You don't need a limited company. "The Freeholder" is a legal entity in itself, even if owned personally.

Make sure you have insurance to cover your activities if you're managing the building. Managing agents have Professional Indemnity cover. Do you?

More info via my website.

by Judith Wordsworth

12:07 PM, 20th December 2021, About 4 weeks ago

Read your leasehold lease and head lease if there is one. You cannot if the lease does not state it is allowed to appoint yourself as the managing agent.
If you can, you will need to charge your self and pay for the 2 flats you own

by Nigel Parry

14:28 PM, 20th December 2021, About 4 weeks ago

I think that because you do not want to leave yourself open to appeal to FTT as Paul has already mentioned, you might want to consider creating a Freehold Management (ownership) Company and selling the freehold (under collective enfranchisement) to the newly formed company. You may need to check on the rules of enfranchisement as you have more than 50% of the entitled leases.If you can get the other flat to 'buy-in' then you all leaseholders will have one share each in the new 'Freehold' company, and any work undertaken by you can be charges at a reasonable rate to the freeholder and then split between 'three shareholders.
It will also make your flat that you intend to sell more attractive on the open market as you will sell it with a 'share of the freehold'. It may also increase the retail value of all flats as a result. Hope that helps

by Ron H-W

18:35 PM, 20th December 2021, About 4 weeks ago

TAX !!!
You CANNOT simply charge the lessee of the other flat, even if their lease allows it.
You must handle it like various other things such as insurance of the building - service-charge fund covers it, and the 3 flats contribute equally.
Your contributions are legitimate business expenses, BUT the total of this management fee is a source of income, which you'd be expected to declare.
So, after all that, it might not be worthwhile ... especially if the work is "is becoming onerous".

by Puzzler

10:45 AM, 22nd December 2021, About 4 weeks ago

Unless specifically permitted in the lease, you can't. Also there is a conflict of interest as you act as trustee for leaseholder funds and you are not allowed to profit from that (unless you are a professional)


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