Service charge deficit

by Readers Question

10:22 AM, 30th June 2014
About 4 years ago

Service charge deficit

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Service charge deficit

Hi, wondered if anyone has ever encountered this problem with a management company.

I have received a letter from my management company with a section S20B notice saying they is a deficit amount of £3324 for the whole development and we will all be invoiced accordingly for this.

Do I have to pay this, surely that’s the management’s fault not ours? Has anyone else ever had such a problem?

Many thanks

RobFreehold



Comments

Neil Patterson

10:24 AM, 30th June 2014
About 4 years ago

Hi Rob,

Out of interest can I ask how much this relates to per leaseholder and what your normal services charges are?

10:57 AM, 30th June 2014
About 4 years ago

Hi Rob,

Each year your management company makes a prediction of how much it will cost to run your development. They divide this by the number of leaseholders or owners and you pay your share.

At the end of the year, the management company reconcile the predicted costs with the actual costs.

Sometimes they over-estimated the costs and you get a credit to your account of a pro rata share.

Other times, and more commonly, they under-estimated the costs, and you have to pay a pro-rata share of the overage.

They will send a statement showing how this arose.

So unless you disagree very strongly with how the money was spent, then I am afraid that you will have to cough up.

LVW4

12:13 PM, 30th June 2014
About 4 years ago

Hi Rob,

Without knowing your situation, it's impossible to say how the situation has arisen. I think Vanessa is being rather generous in suggesting landlords "under-estimate" charges. My experience is that it is common practice for many unscrupulous landlords to charge what they want and manipulate the service charge for their profit through various underhand means (why else would they own a freehold unless they can make money at the owners' expense!).

You are obliged to pay the service charge, but you and the other owners MUST question it, and you can challenge it through the First Tier Tribunal. However, do your homework first.

You have the legal right under section 22 of the Landlord and Tenant Act 1985 to inspect documents relating to your latest service charge demands. Don't be fobbed off by the landlord/agent offering to send you the information. Arrange with your co-owners to visit their offices. Particular charges to look at closely include the utility bills; are the tariffs higher than they could be? Ask to see how the bills have been calculated and, importantly, paid for by the landlord/agent e.g. have they been paid by monthly direct debit; have they involved estimated bills, check the start and ending readings against the amounts paid, has the landlord/agent received a refund on payments, has that been reflected in the service charge? Also, check your insurance; does the landlord operate its own brokerage, could the premium have been lower? Also, have there been any significant repair works for which you have not been issued with the requisite notice?

Not an exhaustive list, but I and co-owners have been involved in similar ongoing disputes.

Rob

14:18 PM, 30th June 2014
About 4 years ago

Hi, the development consists of 9 private flats 9 housing association flats and 13 freehold houses. The houses pay very little and I don't no what the normal deal is with housing association so I'm assuming probably 90% of this deficit is to be paid by the 9 leasehold private flats. I own 2 of the flats so I'm guessing it's gonna be around £300-350 per flat. Considering the yearly service charge is already ridiculously high at approx £2000 pa this would make a total of say £2300-2350 pa per flat! If I owned 2 flats within the grounds of Windsor castle I could understand the high service charge but there just 2 bed 2 bath gated worth around 300k each. I'm thinking about writing to the directors and asking them to conduct a vote amongst the leaseholders to see how many of us agree that we are paying to much and to get quotes from other management companies.

Chris Amis

14:35 PM, 30th June 2014
About 4 years ago

Does the HA portion mean you cannot RTM?

Is it run by the HA, I would hope they were a little more honest than average, if perhaps not so savy?

Rob

16:19 PM, 30th June 2014
About 4 years ago

My block isn't run by HA I imagine the HA block is a separate identity. I guess we could RTM but I for one haven't the time or patients to arrange that with the other leaseholders unfotunatlly

LVW4

16:50 PM, 30th June 2014
About 4 years ago

We have a few HA tenants in one of our blocks, where we have achieved RTM.

From your comments, it looks like you have a separate block under private ownership. In which case, it really could be worth looking into RTM for that block. I can put you in touch with someone who could do the donkey work for you and your co-owners at relatively little cost.

Chris Amis

16:56 PM, 30th June 2014
About 4 years ago

I am sure RTM would add value and the HA does not block it, you can RTM then appoint a manager, everything is the same except you can sack them!

There was a case this year that said consultation applies to the sum of works not individual charges, look up "Phillips vs Francis", maybe that will help you limit the extras.

IANAL so I could be wrong.


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