Non compliant service charge regime since 1993?

Hi, my daughter is a newcomer in a block of flats. A young NHS carer and a first-time buyer the lease is for 999 years. A company (let’s call them X) holds the freehold via a share in the company she has a 1/35th share in the freehold.

The leaseholders (most of whom take little interest in the property) may elect directors there are 3 directors. Born 1939, 1942 and 1950. Appointed in 1996, 2010 and 2021 respectively.

The X company appointed a “new” managing agent in 2006. That agent is a sole trader and is regulated by RICS. The managing agent has produced year-end accounts for company X to 30th June each year in accordance with the Accounting Reference recorded for company X at Companies House. These accounts purport to be an account for both company and service charge purposes.

Service charge “requests” are however issued for the year commencing 1st January each year – not 1st July. These requests do not purport to be “interim” or payments on account. There is no balancing charge raised at the year’s end.

I have seen the Service Charge Requests issued in December 2022 and 2023. Neither carries the usual statutory notice. In both “requests” there is an estimate of £10k PA for the water however the bill is presently running at £18 to 19K – clearly a case for a balancing charge or payments coming out of “unspent service charge” from years past. This seems very wrong to me.

There are other miscalculations and indeed omissions which make the debit balance much worse. It all seems so wrong. The situation could be improved if there were to be a final year account and balancing charge. Is there a mechanism? YES!

The 1982 lease provides that proper books shall be kept with a year end of 31st March each year. An accountant is to certify the total and proportionate service charge costs. Within 3 months of the account (31st March I presume) the company is to serve a written notice confirming the total and proportionate amounts so certified.

The leaseholder is to pay within 21 days of service of the notice (or receive credit for) the balance by which the proportionate amount exceeds or falls short of the total sums paid by the Lessee to the company X. Clearly this is not happening. Why not?

At the last AGM with reference to the service charge liability the Chairman who has been 10 years in post said he was not going to require payment of service charges which people could not pay!

I have asked whether there has been a change to the lease either in the form of a deed of variation signed by all the leaseholders (in which case it has neither been disclosed to my daughter or registered at HM Land Registry) or a pursuant to a tribunal hearing (but why would there be a need to seek a variation to the lease where there is already what appears to be a perfectly good structure in place?).

I have not received a reply to written or verbal requests the last being at the company AGM on 25th November 2022. (Yes – we have not had notice of one since and still await the accounts for the year end 30th June 2023!)

The Board refused to speak at the last AGM. The Board appointed the Managing Agent to chair the meeting. Table A Regs 55 & 56 were not followed. The question raised at the AGM is not reported in the Minutes. Neither is the managing agent’s failure to respond.

The Board now seek to exclude me from further meetings. They say that my daughter cannot appoint me as her proxy. Since the last AGM the board has again sent out a service charge request for the year commencing 1st January 2024 without the statutory notice on the reverse.

The history
Companies House records show that no accounts have been filed with a year end 31st March since 1993. I understand that one can have an accounting reference date other than 31st March for company X and still maintain a service charge accounting period ending 31st March.

The chances of this happening are remote to non existent given the extensive accounting paperwork I have and recent accounts and service charge accounts issued to my daughter consistent with the abandonment of the 31 March accounting date. I therefore believe that the service charge accounting process has been non-compliant since 31st March 1993.

Am I alone in smelling a rat? Any thoughts as to how to address the issue at modest cost?

Thanks,

Paul

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