Refund of service charge credit on selling a leasehold flat

by Readers Question

22:01 PM, 26th May 2014
About 5 years ago

Refund of service charge credit on selling a leasehold flat

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Refund of service charge credit on selling a leasehold flat

Refund of service charge credit on selling a leasehold flat

Does anyone know the legal position on my dilemma?

I was paying a reasonable service charge of £60 per month for a number of years on a flat I was letting. The freeholder is a Housing Association. Over time, a small credit built up of approximately £600 and I have a statement that confirms this in writing. However, the statement mentions that any credit surplus will be carried over to offset any future major works. This seems quite reasonable if I was going to continue as landlord (not losing much interest these days!).

The whole building is up-together and nothing major looks likely for a few years and the block is insured. I decided to sell-up last year, but was not refunded the surplus. I queried this on the grounds that I will no longer receive the benefit of this ”rainy day” pot for notional work that may or may not need doing in the future.

The HA disagree and will not return the overpayments.

Anyone had similar situation or know of a precedent?

Thanks

Jack Jamieson



Comments

Mark Alexander

22:10 PM, 26th May 2014
About 5 years ago

Let's look at this one from a slightly different perspective Jack.

Just suppose you wanted to keep your property but all the other leaseholders chose to sell and got a refund of their share of the maintenance pot.

A few years down the line a new pot has built up from the new owners but it is by no means large enough to fund the cost of the works now required to the property.

How would you feel about all those people who had taken their money out of the pot and effectively paid nothing towards the upkeep of the building whilst they were there. Now add to this that they all took a nice profit when they sold but property values have fallen back since.

Hopefully this scenario will help you to see why it is unlikely that you have a leg to stand on. That's because you lease is highly likely to have been drafted on a basis to cover for such eventualities.

To be certain of your rights you need to read a lease or have a professional read it for you. Please take a look at the following, it could be a cost effective way forward for you but I have to be honest and say that I don't fancy your chances on this one.

Link >>> http://www.property118.com/barristers-opinion-fraction-cost-2/65841/
.

John Perry

17:16 PM, 27th May 2014
About 5 years ago

Mark's explanation is pretty comprehensive. I'd just like to add that the usual process is for your solicitor to obtain the information about the surplus and for the new owner to pay it to you as part of the purchase.

The landlord still has the potential liability to repair and maintain the property so they are collecting money so they can fulfil their responsibility. It isn't up to the landlord to ask the ingoing owner for money to pay you out.

Vanessa Barlow

17:45 PM, 27th May 2014
About 5 years ago

I think this is normal practice - yes, it may be surplus now, but in 1 year's time the roof may need repairing, and the repair is down to wear and tear over the last 10 years perhaps. That is why the money is collected ongoing, so that people who have just moved in don't have to pay out thousands for damage incurred over years when they did not own it. Seemed the fairest way of all the options.

My last leasehold flat I lived in, collected sinking fund for major repairs separately from service charge. Thus when I sold, the remainder of the current 3 month service charge post completion date was paid to me by the buyers. The solicitors got an up to date calculation of this before preparing the final completion statement for the buyers. Any sinking fund credit stayed with the freeholder. If there was nothing in place to recoup your service charge in the completion statement I doubt it can be applied retrospectively.

Industry Observer

14:57 PM, 30th May 2014
About 5 years ago

Yup money is lost to you I'm afraid

Chris Amis

11:56 AM, 6th June 2014
About 5 years ago

The idea of having to build up a fund just idling in an account is wrong.

Should the place need a new roof then the FH can demand the cash, it is fully enforceable against forfeiture of the leased property.

It often seems to be phrased as it is somehow doing the LH a favor; forcing them to save for a rainy day by funding an account that pays no interest, allows no withdrawals and does not have anything like the govt 85K compensation in place should it go missing.

The FH/MA guess at a figure is enforceable, so supposing the LH could just afford the service charge they could be bankrupted by the sinking fund.

Bonkers...

Has anyone on here who ever bought a repossession at auction from a mortgagee ever been told by the FH/MA that the flats is in credit, bearing in mind the FH/MA should have made a full recovery of outstanding charges (including demanded sinking funds) from the sale proceeds - just my cynical curiosity?


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