Management Company Deficit Charge Letter – can this be legitimate?

by Readers Question

10:30 AM, 7th October 2016
About 2 years ago

Management Company Deficit Charge Letter – can this be legitimate?

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Management Company Deficit Charge Letter – can this be legitimate?

I have recently received a letter from the management company for my flat. This is it:defecit

“AS you are probably aware there was an increase in the service charge payments for this financial year 2015/16.which can be directly attributed to an increase in legal costs.

Unfortunately one of the residents has undertaken legal proceedings against xxxxxxx and two outside parties for various claims.. From xxxxx perspective these claims are strenuously disputed.

xxxxxx is currently going through an appeal process having successfully managed to get the case struck out earlier in the year.

Regrettably the management Company has had to extend significant amount of monies protecting their position, which has led to a deficit on the accounts for the year ending March 2016.
AS such the Management Company will now need to send out a deficit charge letter to each resident to ensure they are made liable to continue with protecting their position whilst carrying out their wider on-going maintenance responsibilities.

We appreciate that you’ve not been given much information up to this point, but unfortunately to ensure their legal position is protected we are restricted in what we can share until this issue has been resolved.”

This seems outrageous to me. They say they are charging me for something that is nothing to do with me or to do with maintaining may flat. Can they do this? I don’t see a valid basis for the charge and I am not aware I gave them any agreement to charge me for anything else but maintenance.

I want to fight this. Any advice would be gratefully received.

Alan



Comments

Neil Patterson

10:32 AM, 7th October 2016
About 2 years ago

Hi Alan,

Do you know what the Legal proceeding are?

Best to start with the Leasehold Advisory Service >> http://www.lease-advice.org/

John Frith

14:04 PM, 7th October 2016
About 2 years ago

From their point of view it is an administrative cost, and admin costs are passed on to the freeholders. Unless you can show that they have been negligent in some way, I can't see how you can challenge it. What would you have done differently if you'd been in their shoes?

Alan McGowan

16:03 PM, 7th October 2016
About 2 years ago

Thank you for the quick reply even though it does not help me much. I do not know yet exactly what this charge relates to so I cannot say what I may have done.

Apparently the case is on-going and they may yet be found negligent. If that happens is spending substantial amounts defending themselves and passing the costs on to us reasonable? Was that action then not in their own interests not ours?

It also occurs to me that they have already said the purpose of the spending was to 'defend their position.' This seems to me at least a partial admission that the expenditure was at least to some degree in their own interest.

I intend to find out more details before I make a decision. But the amount being claimed when multiplied by the number of flats involved is a tidy sum - about £20,000. Surely there must be a limit to what they can reasonably charge us.

David Price

20:28 PM, 7th October 2016
About 2 years ago

Reply to the comment left by "Alan McGowan" at "07/10/2016 - 16:03":

Alan I have had many instances of battle in the LVT, now the First Tier Tribunal. Each one cost more than £20,000 and the leaseholders had to pay for there was no other group that could pay (we have a right to manage company). Leaseholders must realise that challenging service charges in court is a disastrous way of solving a problem but there is always one person who wants to make waves.
I once had a challenge over a bill of two pence and the claimant insisted on taking it all the way to court. Picture two barristers arguing over two pence!

Neal Craven

20:45 PM, 7th October 2016
About 2 years ago

Does the lease help?
Is it an owners management co?

Alan McGowan

21:37 PM, 7th October 2016
About 2 years ago

Reply to the comment left by "Neal Craven" at "07/10/2016 - 20:45":

Thanks for the comments. Both good questions which I will pursue but it is going to take time. I have now talked to some neighbours and it seems the cause of these charges is a long running dispute between my landlord who also lives in one of the flats and the management company. The subject of the dispute has nothing to do with any of the other tenants - just them. And I am told he is a bit 'over the top' in general.

I am now getting concerned that I might get another bill from the landlord to pay for his costs too. This sounds even more unfair to me. It may be the case that they string this out forever while making all the rest of us pay their costs. I am not yet certain that is the case. But I am certainly more worried than I was before.


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