Service Charge Increase Justified?

by Readers Question

13:36 PM, 17th December 2013
About 7 years ago

Service Charge Increase Justified?

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Service Charge Increase Justified?

Our management company has just increased the service charge for our flats by 23% starting January 2014 (excluding ground rent which is a separate charge.) Just 6 months ago, they sent us a bill of £2,000.00 each for redecorating, to be paid upfront in full.

The property comprises of 6 flats in a block with no lift, no hall heaters, no fire alarm system, no CCTV, in fact no luxuries at all. When asked why, they said electricity cost etc. The lights in the block are on timer and not permanently switched on. I know these prices are way beyond what they say and it could be greed on their part.

Are these sort of high increases allowed? Service Charge Increase Justified?

Is there a way we can get rid of them and get another management company?

Is there a governing body we can write to justify these increases as their accompanying letter says we can with a first-tier tribunal at a cost of £500 for the application.

They hardly come to the property to see the problems.

What would you do?

Thanks

Peter



Comments

Richard Player

14:03 PM, 17th December 2013
About 7 years ago

Hi.
I had a similar problem.you can contest these types of charges without cost. go to http://www.lease-advice.org/ There are all sorts of small notices which the managing agents probably forgot to serve on you, for instance, they are not allowed to arrange works that would cost any individual leaseholder more than £250. without arranging a section 20 consultation.
Have a really good look around before you do anything, and good luck

Shakeel Ahmad

14:15 PM, 17th December 2013
About 7 years ago

There are many ways to get rid of them etc. One thing I would not do is go to the LVT. they are incompetent & blatantly side with the Managing agents/Freeholders.

Instead of sorting out the issue they further complicate them.

Richard Adams

14:25 PM, 17th December 2013
About 7 years ago

Reply to the comment left by "Richard Player" at "17/12/2013 - 14:03":

You say your Management "Company" has sprung these costs on you? Sometimes there is confusion between Management Cos and Managing Agents? Normally it is the agents who carry out the work including correspondence, serving notices, collecting service charges acting as Agents of the Man Co. . As one of the 6 leaseholders at your property you should be a shareholder in the Man Co, entitled to attend AGM's etc. You could be a director also? Who are the directors now?

I have got myself on the board of two Man Cos of developments where I am a leaseholder to stop just this sort of thing happening. It's a pain but gives me some control. It is Man Cos that hire and fire Man Agents.

Richard Player is right about Sec 20 consultations.

Adam Lewczynski

14:49 PM, 17th December 2013
About 7 years ago

Hi Peter, if the Section 20 notice procedures were not followed properly you may be able to recover your costs. Were you given 3 quotes and offered the opportunity to comment and get your own contractor to quote? Similarly, with the new charges, ask to see copies of the quotes from various contractors for the maintenance, cleaning etc.

It could be that a previous managing agent had done such a poor job that the new agents are now playing catch up with Health & Safety etc hence the increase in costs. Also check if a sinking fund has now been introduced which wasn't previously there. Does your lease allow for this?

If the insurance has been hiked up ask for evidence of competitive quotes

If there are any similar blocks near you try and find out who is head of the residents committee in those blocks and compare running costs and fees.

Challenging a service charge, appointing a new agent etc can be very time consuming and a can of worms, but worth it if the savings justify it.

Good luck! Adam Lewczynski B.Sc. MRICS

Graeme

15:53 PM, 17th December 2013
About 7 years ago

Richard Player is right about Sec. 20 consultations. No costs of works can be imposed on you for more than £250 without a full consultation process. With regard to the £2000 for decorating, was this for internal communal areas and/or external redecoration.??? Whichever it was, you should have seen the quotations etc. and been able to comment/approve accordingly.

If the existing managing agents are not doing their job correctly - yes, you can get rid of them.

Although this won't help immediately, with regard to the future, who is your freeholder?? From your post it sounds like it is an absent person/company. If you can, consult with your fellow leaseholders and see if you can get together a core who would be prepared to purchase the freehold. You only need 4 out of 6 to agree. Assuming availability of funds, and all the criteria are met as per the Leasehold Reform Act, the existing freeholder cannot refuse to sell the freehold to you.

Once you have the freehold, you can either leave it with agents to manage as agreed with your fellow directors or, if some of the flats are owner occupied, self manage, and reduce your costs enormously.

I write with almost 12 years first hand experience. I live in a small block of 6 flats. We own our freehold jointly between all 6 flats and we completely self-manage. 4 are owner occupied, 2 are let, but the owners are local and interested. I am the secretary of the Residents Association and someone from another flat is the Chairman. We have extensive facilities including large gardens, lift, communal central heating and hot water etc. All leaseholders are directors and everyone has a vote. We all pay monthly fees into the Residents Association bank account which pays all the routine bills and routine maintenance but not the 5-yearly external redecoration. For this we do have to do a cash-call. We have an AGM once a year where all works are discussed/planned. 95% of the time everyone is in agreement. This means that everyone has up to a year's notice of any additional funds that may be required for planned maintenance works.

I know that we are very lucky and have a group of leaseholders who all basically tick along very nicely together and all is generally harmonious. My time, and the chairman's time are free - so no costs there except D+O insurance. Other blocks of flats could be / are a nightmare. We only do it because we are a small block. A larger block I would always leave to agents - it's a much bigger job and easier to get it wrong legally speaking - but there are more flats to share their costs between.

I hope this might help you form a "bigger picture" and where it might all work out for you in the not-too-far-distant-future. Good Luck.!!

Puzzler

16:05 PM, 17th December 2013
About 7 years ago

Ask to see the accounts, you should be given these annually anyway, then get back to this thread and let us know.

Shakeel Ahmad

16:57 PM, 17th December 2013
About 7 years ago

reply to Puzzler. The problem with accounts is that it will list the expenditure it does not look at

a) value for money.
b) in built kick backs.
c) Commission on Insurance made by the agents/F/H.

Remember accounts are historical.

Shakeel Ahmad

17:29 PM, 17th December 2013
About 7 years ago

Reply to the comment left by "Graeme " at "17/12/2013 - 15:53":

I respond in block capital for ease & I am not shouting at any one.

Richard Player is right about Sec. 20 consultations. No costs of works can be imposed on you for more than £250 without a full consultation process.

THE FREEHOLDER/MANAGING AGENTS BREAKS THEM INTO A FEW QUOTES TO AVOID THIS PROCESS.,

If the existing managing agents are not doing their job correctly – yes, you can get rid of them.

YOU CANNOT DO IT WITHOUT THE CONSENT OF FREEHOLDERS. IN MANY CASES THEY ARE CONNECTED. E.G A LARGE BLOCK'S F/H IS BOUGHT BY THE MANAGING AGENTS GROUP OF COMPANIES.

If you can, consult with your fellow leaseholders and see if you can get together a core who would be prepared to purchase the freehold.

PURCHASING THE F/H CAN ONLY BE A SOLUTION IF THE F/H COOPERATES AND IS A COSTLY PROCESS WITH THE F/H LEGAL & VALUATION IS TO BE PAID. IN ADDITION NOT EVERYONE WILL BE INTERESTED IN BUYING WOULD HAVE FUNDS AVAILABLE. THE BANKS IN THE PRESENT CLIMATE WILL NOT LEND EVEN THOUGH IT WOULD IMPROVE THEIR SECURITY.

the existing freeholder cannot refuse to sell the freehold to you.

HE CANNOT REFUSE BUT CAN MAKE IT EXTREMELY HARD & COSTLY.

II live in a small block of 6 flats......

ALL THIS WORKS WHERE THEIR HONESTY. SINCERITY, TRANSPARENCY HOWEVER WHERE THE PROCESS IS USED TO EXTORT MONEY WITH NO ACCOUNTABILITY OR ACCOUNTABILITY AT A COST & YEARS LATER THE POSITION IS DIFFERENT.

I know that we are very lucky and have a group of leaseholders who all basically tick along very nicely together.
LONG MAY IT LAST.

IT SHOULD NOT BE FORGOTTEN THAT, PEOPLE BUY PROPERTIES/HOME FOR QUITE & PEACEFUL OCCUPATION & A VERY LARGE NUMBER OF PEOPLE DO NOT UNDERSTAND THE PROCESS, THE GAMES THE F/H, MANAGING AGENTS, LAWYERS PLAY. THIS IS DUE TO IGNORANCE & THE LACK OF TIME/MOTIVATION ON THE PART OF THE LEASEHOLDERS THAT THE F/H & MANAGING AGENTS EXPLOIT.

Graeme

17:53 PM, 17th December 2013
About 7 years ago

Reply to the comment left by "shakeel ahmad" at "17/12/2013 - 17:29":

Hi Shakeel,

I agree with almost all your comments in your reply.
I did not intend to make it sound as though it was an easy process - it's certainly not.
I have been through the freehold purchase process twice and on one occasion was within a few days of an LVT hearing before a greedy and unhelpful freeholder backed down.
However, it is only by trying to go through this process that we will ever manage to get rid of freeholders/landlords/agents who make life difficult and unnecessarily expensive for people in their own homes.

Annette Stone

19:27 PM, 17th December 2013
About 7 years ago

Peter, some of what has been said here is correct; some is not. Leasehold management is not an easy subject to discuss as it provokes a great deal of anger amongst some lessees, sometimes justifiably; sometimes not.

If you would like some advice on your particular situation from an established firm of managing agents who manage many small blocks such as yours then Mark can give you my e mail and you are welcome to contact me.

In the few weeks we have been contacted by people who have read my comments on 118 and have been able to assist them and if it leads to management work for us all the better as we do not advertise as the majority of our work comes from recommendation.

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