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

Shakeel Ahmad

20:27 PM, 17th December 2013
About 7 years ago

@Annette> You may not advise but you do a good job of self promotion here.

Shakeel Ahmad

20:33 PM, 17th December 2013
About 7 years ago

Hi Graeme,
The sad part is that forum users will not understand the ease or the lack of it. They will assume that it is easy & the law is on their site to facilitate this.
Have a good Christmas.

Sarah Pajger

7:27 AM, 18th December 2013
About 7 years ago

RTM. Have you thought about Right to Manage.... I swear by it and it's far less daunting then you think.
You need half of the flats to agree. you apply legally to take over the management of your block. You can then manage the block yourself or appoint your own management company.

We did this on our block 5 years ago. I googled a RTM solicitor, we paid him individually online and he did everything else including setting the block up as a new company. I then set up the bank account which everyone else can view. We all pay £500 a year. We've got £7k in the bank and all bills and maintenance is up to date. The only costs you should really have per year on a block of 6 are;- (all approx)
Insurance £ 500-£1000
Elec £100-200
Accounts £200
Maintenance. . As and when

Steven Way

8:04 AM, 18th December 2013
About 7 years ago

Lots of useful advice but as far as I can see nobody has suggested the obvious - read the lease and see what it says about service charges, what they include and when they can be charged, i.e in arrears or in advance. This is important because many Freeholders try and charge in advance when they should bill in arrears.

Consider an RTM but make sure that the paperwork is spot on, several cases this year failing because of very minor admin errors. BUt, be careful what you wish for, I have been engaged in some pretty unpleasant disputes between lessees and RTM co's.

The comments re S20 consultation are all correct but FHs cannot break down big contracts into small ones to avoid consultation - plenty of case law on that and a key case - Phillips v Francis CH/2012/0515 this year which seems to suggest that the FHwill have to look at overall expenditure on qualifying works in a year. If the total will mean each leaseholder will have to pay over £250 in total over the year then they will need to serve a s20 Notice for even small work.

Annette Stone

10:22 AM, 18th December 2013
About 7 years ago

Brilliant post Steven. Absolutely spot on about the lease. One of the first things we do when we are asked to manage a new building is read the lease and correct any charging errors moving forward. As you can confirm this can be difficult because, especially in old buildings, each lease can be different and that can cause a nightmare. Especially difficult when a refurbishment is due and it has to be funded and some people pay in advance and some in arrear, sometimes even at different times. I always feel blessed that I don't deal with service charge accounting.

As far as RTMs are concerned again spot on. We have formed rtm companies and we manage buildings where there have been rtms for many years. In a small building where everyone is an owner occupier - paradise!!! In a larger building where you have a large proportion of tenanted flats with the associated comings and goings and the differing requirements of a owner occupiers and buy to let landlords chaos can be created very easily.

As far as the Section 20 stuff is concerned could I point out two things. Firstly,as you know, not all work is known about at the start of the year so it is not possible to serve one Section 20 Notice. If someone wanted to challenge work which was clearly needed half way through a year and which would take the charge to each lessee over the £250 per limit that the case you referred to suggests do you not think Tribunal would look at what was reasonable. I assume that there is some consultation going on regarding this issue which will be made clear to everyone in due course!!! I wonder if one way round it would be to serve a blanket Section 20 Notice on 1 January covering "all possible minor works to be carried out during the year with additional specific consultation documents being served on each lessee in respect of individual items of work costing more than £250 per flat". It backfires a bit because it will just cause more work and I am not sure what purpose it serves

Puzzler

11:42 AM, 19th December 2013
About 7 years ago

Reply to the comment left by "shakeel ahmad" at "17/12/2013 - 16:57":

The accounts will give you that information, if you know how to read them

Shakeel Ahmad

17:35 PM, 19th December 2013
About 7 years ago

As I said in past that the accounts are historical mostly prepared late fines for late annual returns & accounts are paid to avoid issues raised.

The accountants/committee members when challenged on certain heading to avoid the subject promises to supply the answers. This never happens.

a) The accountants will simply allow four quarter electricity bill. He/She will not be concerned if the lights were on all day or adjusted to summer/winter times.

b) They will simply see that an a payment for insurance is made bit will not see how much commission had been made.

c) They will not get involved if the any reserve funds have not been earning interest while at the same time banks charges are being incurred

While the accounts have there place in the bigger scheme of things. It is no reflection of the quality, integrity of the managing agents and why a particular managing agent is always handed out the management of a blocks by the freeholders. This cosy relationship exist as invariably Freeholders & managing agents are within the same group of companies.

Robert

20:40 PM, 12th February 2019
About 2 years ago

Hi guys,
I just would like to ask you about Right To Manage. I'm planning to send Notice of Claim to my landlord to change the management agent. I'm just not sure how to fill up this form Notice of Claim. Any help will be appreciated.

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