Extortion to pay their own management company!

by Readers Question

8:17 AM, 10th January 2018
About 11 months ago

Extortion to pay their own management company!

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Extortion to pay their own management company!

I had to review the service charge breakdown for two apartments in one development this year, as this and last year service charges have risen to almost double from all previous years.

What I found is interesting and these are the biggest items;

  • Management fee 70k
  • Building insurance 128k
  • Fire door audit 34526 (an audit costing 35k)

They obviously depend on what actual repairs and work to be done, but having management fee at 70k and a building insurance costing 128k is astonishing.

As a comparison, another leasehold building where I own in one of the most expensive borough in London, only has management fee at 25k and building insurance at 26k.

Mostly importantly, the freeholder and the management company is own by the same people. Clearly they have been paying themselves with all leaseholder money.

This is only one of the ways freeholder and their management company bullying leaseholders across the country.

Are they allowed to do so? What rights are on leaseholder side to challenge this?

Many thanks

Mike



Comments

Neil Patterson

8:21 AM, 10th January 2018
About 11 months ago

Hi Mike,

This is obviously why many mortgage lenders do not accept you being the Freeholder and management agent.

Please try checking at THE reference - Leasehold Advisory Service >> https://www.lease-advice.org/

Mike Wang

10:13 AM, 10th January 2018
About 11 months ago

Hi Neil,
Sorry if I made it misunderstood and I couldn't amend any wordings now. I'm the leaseholder here, and questioning how can the management company which in face is the freeholder, charge such themselves such high management fee with leaseholder money, as well as other astronomical fees.
Thanks

Douglas Barley

10:53 AM, 10th January 2018
About 11 months ago

Hi Mike, I am both a B2L landlord and managing agent - firstly how big is your development? the insurance sounds way over the top. My suggestion however would be to form a RTM (Right to Manage Company) you can then choose your own agent and undertake your own insurance once formed. It does not usually cost a lot, but it is a case of getting most of the leaseholders on board. There are quite a few details about how to go about this on various web sites. The alternative which is the expensive way and not usually cost effective is to once again with a number of other freeholders, from memory a minimum of 60% buy the freehold. This as said can be expensive but does put you fully in charge of everything including giving everyone a 999 year lease without paying any ground rent.
Hope this helps
Doug.

Richard Adams

14:43 PM, 10th January 2018
About 11 months ago

Getting other leaseholders "on board" is easier said than done. No leaseholder will normally have the contact details of others. Only the freeholder/Man Company will have them and won't divulge due to the absurd Data Protection restrictions that apply these days. If you ask them to contact leaseholders on your behalf to get their consent to what Doug suggests, no prizes for guessing they won't help.

Douglas Barley

16:02 PM, 10th January 2018
About 11 months ago

Hi Richard, agreed but it can be done, I have managed to make contact with other leaseholders on at least four occasions. A card under the door of each flat is the first step or notice in the common hallway - yes it will be removed by the Man agent but you put it back again and again they are very unlikely to be there all the time. The biggest problem is if the landlord/leaseholder is out of the country and the flat is let but there are ways and means - apply to the land registry and they will very probably have the owners details, (its on the public record so it is perfectly legal) it does cost - £3 per flat the last time I did this and there is no certainty that the details will be up to date or indeed even there, it also does depend how many flats there are in a block 10 or 20 and its do-able 60 odd much harder. If let find out from the tenant to whom they pay their rent - if it is a local agent ask them to contact the owner and see if there is a way that the owner will speak with you. Just a bit of persistence!! I have acquired the right to manage on 4 occasions now by simply doing this even with a very nasty (and I have to say clever) managing agent on one occasion. It was however worth it and on each occasion saved a small fortune. Best regards Doug.

Tim Rogers

16:57 PM, 10th January 2018
About 11 months ago

On a much smaller scale we had similar problems. It took 18 months but we eventually forced the sale of the freehold to our own company.

However during the course of this I came across a tribunal process that may help you. As I understand it costs allocated by the freeholders and/or their agents must be reasonable. In the even this is not so then under the 2007 Tribunals, Courts & enforcement act you can apply to the First-Tier Tribunal and if necessary the Upper Tribunal for independent assessment.

We did not need to pursue this course as we were able to force the freehold sale, so I know little more I'm afraid.

T

silversurfer2017

18:02 PM, 10th January 2018
About 11 months ago

2 years ago we took our case to the FTT. We prepared our own Scott schedule and took the management group which was a housing association to a hearing. We appealed against the costs of cleaning, the costs of ground maintenance and the costs of security lighting and signage. The tribunal did not think the cleaning was excessive, but agreed with us on the grounds maintenance and the security lighting. Although 20 leaseholders were involved only 5 of us participated in the preparation for the hearing and attending the hearing. All 20 benefited by having a refund of overpaid charges and reduced charges going forward. We did it on a DIY basis so no professional fees were involved, just our time.

David Price

20:57 PM, 10th January 2018
About 11 months ago

Reply to the comment left by Richard Adams at 10/01/2018 - 14:43
Richard if you consider that Data Protection regulations are absurd now just wait until 25 May when GDPR comes into effect. Start saving the 20 million Euros fine right now.
One immediate effect will be an effective ban on Dropbox, which I use extensively for data transfer within my company, because the data is stored in the US.

Richard Adams

22:51 PM, 10th January 2018
About 11 months ago

Reply to the comment left by at 10/01/2018 - 18:02
Fair comment Silver Surfer where just 20 odd leaseholders are involved. Where 100's of leaseholders are the case though and all are BTL landlords so living all over the UK the "time" which will be required even contacting them will be enormous so unless the hoped for cost reductions are massive it it worthwhile?

Richard Adams

22:58 PM, 10th January 2018
About 11 months ago

Reply to the comment left by David Price at 10/01/2018 - 20:57
David, the matters you refer to are above my head. My reference to absurdity of Data Protection regs centre round the following in apartment blocks where occupants are mainly tenants. Say my tenant reports to me a leak from flat above. I request details of flat owner from the Man Co so I can converse with him/her about fixing it. I live many miles away so can't knock on doors etc. Man Co tells me they cannot provide name and contact details due to DP. How absurd is that? Answer - utterly!

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