Dormant Freeholders service charge demands

by Readers Question

9:30 AM, 15th April 2020
About 6 months ago

Dormant Freeholders service charge demands

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Dormant Freeholders service charge demands

Can anyone offer an opinion please as I  own some leasehold properties and the management company have sent service charge demands naming two Limited companies as freeholders.

I checked both limited companies out via companies house which stated they were dormant and never traded!

Does anyone have an opinion on the service charge demand liability? How can they have a management co demand service charge fees yet they are dormant, or declared dormant. Would the service charge be really liable?

And how the hell can you have 2 landlords with different company names?

Many thanks

Paul


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Comments

Neil Patterson

9:36 AM, 15th April 2020
About 6 months ago

Hi Paul,
The Leasehold Adgvisory Service are the government reference site for leasehold issues >> https://www.lease-advice.org/

You can have shares of leasehold so I am not sure if that is an issue normally or how being a dormant company would affect it.

However, on a practical level you do need a management company in place collecting funds so that ongoing maintenance and repairs can be kept up.

Ian Narbeth

10:00 AM, 15th April 2020
About 6 months ago

Hi Paul
You can have up to four legal co-owners of a property named on the title.
If there is no ground rent but just a service charge the freeholders/managing agent will spend all that it receives in service charge. The freeholders won't make a profit and are not really carrying on a trade with a view to making one.

terry sullivan

13:10 PM, 15th April 2020
About 6 months ago

i own freehold of 12 flats in 3 blocks

there is no service charge arrangement and lessees do own maintenance--i just collect ground rent

can i put a service charge agreement in place?

blair

2:04 AM, 16th April 2020
About 6 months ago

Interesting but if they are only demanding SC monies then the management company is just holding the funds in trust and yes the companies could be dormant.
I would look into checking if whoever demanded the sc is comping with the Act. They need to serve a form dealing how to query review actual charges, unless they doing a cash bases if they are demanding monies in advance they need to issue a budget for the year and actual signed off accounts for last year plus the funds must be paid into a trust account. I would be interested to read more expert opinions on the issue

BernieW

10:25 AM, 16th April 2020
About 6 months ago

Paul - Without seeing the service charge demands and reading the fine print any answer provided here is assuming a lot. Therefore be careful and undertake more research before taking action.

You say "the management company have sent service charge demands naming two Limited companies as freeholders". I would question that assertion - and I'd guess they have named two "landlords". A landlord is someone, or a company, to whom you are required to pay ground rent and/or service charges under the terms of a lease. I don't know the property you're referring to - but it could be Landlord#1 is the landlord for the block of flats, to whom you are required to pay service charges (for maintenance of the block etc etc) ... and it could be Landlord#2 is the landlord for the estate of blocks of flats, within which your specific block sits, to whom you are required to pay an estate charge or service charge (for maintenance of the landscaped gardens, the communal estate roads, etc).

You should "RTBL" ... read the bloody lease, to see if it specifies two such landlords and two such service charges. Then you should look at the current HM Land Registry Title Deed for your 'leasehold' flat ... and the same document for the 'freehold' of the block ... and the same document for the 'freehold' of the estate. These documents will confirm the names and registered addresses of the current companies/persons in those roles.

Now, if those two roles are currently companies - and if those companies have no income other than the service charges - then it is entirely possible for those companies to be "dormant" from a Companies House viewpoint. Service charges are held in trust, often by the landlord's managing agent, and therefore the landlord company does not have the service charges as "income". Therefore the company could easily be "dormant". (Don't confuse dormant with inactive.) Most commonly this occurs where the landlord company is own by leaseholders at the property; e.g. a Residents' Freehold Company ... or a Right To Manage Company.

Turning now to "the service charge liability".

Again, the starting point for clarifying "liability" is your lease. RTBL again to see 1) what services are to be provided, 2) when are service charges to be demanded, and 3) how are those service charges to be demanded; e.g. two half yearly interim charges, followed by an excess charge/credit following the annual service charge audit. IF the two demands you've received fit within the criteria described in your lease, the service charge might be payable.

However ... for a service charge "demand" to be legally payable it has to overcome a number of legal hurdles. There are too many to detail all here, but the obvious one is ... the demand must be accompanied by a "Summary of Rights and Obligations" ... which in short is a whole list of reasons why you shouldn't pay. And there are two types of summary (in England) and the right one needs to be attached to the right demand. In my assumed scenario, you might have one summary for the service charge demand ... and a slightly different summary for the estate charge or administration charge. The wording of the summary is "prescribed" in law and therefore if it does not 100% comply, it is invalid and the demand is not payable. But if each demand has a summary attached, the service charge might be payable.

We could then look at "reasonableness" of the service charge and a number of other factors which affect payability ... but you've probably fallen asleep already. When you wake up, you could look at the free downloads here > https://berniewales.co.uk/free-downloads/


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