Service Charge Supplement – Advice Needed

by Readers Question

11:54 AM, 8th April 2013
About 6 years ago

Service Charge Supplement – Advice Needed

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Service Charge Supplement – Advice Needed

Service Charge Supplement - Advice NeededI have recently purchased a one bed flat and have a professional couple renting it.

The property consists of 7 flats, we all own a share of the freehold and we self manage the property.

Shortly after purchasing the property I was sent the demand for my share of the service charge on the property, no problem with that and I paid it straight away, however it came with a demand for a supplement of £16.50 PCM on top of the normal service charge for rented flats.

I did not pay the supplement and I queried the “rental” charge supplement with the company secretary. I was informed that “renters” have no respect for the communal areas and cause more damage (there is one flight of stairs and a small garden area to walk through) so the management committee decided that flat’s rented should pay more service charge.

I am a professional landlord, I look after all my properties and make sure I only have professional tenants who I know will look after the property (my investment) as if it was there own.

I currently have put off paying the supplement charge as I do not agree with it and I have informed this to our company secretary.

I have spoken to the other landlord/owner of the flat next to mine and he has also refused to pay the supplement with the same reply as mine.

The company AGM is at the end of April and I see that one of the points is this supplement charge. There is no provision or clauses in the property lease that say this charge must be paid so I am wondering where I stand if I don’t pay it and can the management company force us to pay?

Thanks

Russell carty



Comments

14:34 PM, 8th April 2013
About 6 years ago

Hi Russell,

This all depends on the leasehold contract.

If there is no mention of rental tenants in the leasehold contract, then I would ask the management company to highlight where in the leasehold contract that allows them to charge different rates due to occupancy type. And I would definitely raise this at the AGM.

Regards, Simon.

Freda Blogs

22:46 PM, 8th April 2013
About 6 years ago

The additional charge seems entirely random, and if it is not provided for under the lease, Memorandum and Articles of the Company or any other formal documentation - you should establish whether the Management Company Directors have the authority and have Minuted the resolution to impose such a charge - if they can, how is it assessed and justified?

Be careful in your enquiries not to shoot yourself in the foot - the Directors could realise from your queries that they are exceeding their powers and promptly try to regularise the charge at the AGM. If I were you I would check who the Officers of the company are - owner occupiers or landlords - you will know where the balance of power lies or who you can lobby. Maybe you can get yourslef elected as an officer of the Mgt company?

If the charge is found to be legitimate, and you still do not pay, the Mgt Co can approach your mortgagee for payment, which you should aim to avoid.

It is unfortunate that many self-managed Management companies mean well but do not always appreciate the legal framework within which they should act, which can be quite complex.
.
Good luck.

10:33 AM, 9th April 2013
About 6 years ago

Thanks for replies, I have checked the leasehold contract and there is nothing that refers to rental at all so I will bring this up at the AGM.

14:34 PM, 9th April 2013
About 6 years ago

@Freda

Hmm, my opinion is that the leasehold contract takes precedence. A management company is not allowed to invent charges out of thin air (even by changing the management company articles or making an AGM decision).

A few years ago, we forced a block landlord to refund most of our fees at tribunal. The fundamental reason that we could do this was that the leasehold agreement was so defective that the management company could NOT charge management fees at all! The management company was also a con company and we also successfully actioned an RTM against them. I became a director of the new management company and helped the other owners run the company till I sold out last year.

- Our biggest issue with the new management company was that we fully depended on the solidarity of the owners to pay their fair share. If they did not pay, then we could not enforce payment. This was due to the defective leasehold contract.

- In conclusion, if the leasehold agreement allows selective fees, then the owner has to pay. If the leasehold agreement does not have selective fees, then the management company could be found liable at an LVT.

- Note - I'm not a lawyer (and property law is full of quirks), but it was definitely interesting chasing down the dodgy management company and making them pay...

Freda Blogs

19:15 PM, 9th April 2013
About 6 years ago

@SimonBB

I don't disagree. I am not a lawyer either but I believe the lease(s) and any Deeds of Variation are the priority documents, and there may be other provisions in the Mgt Co documents.

My point is that Russell should establish under what authority if any the charge has been levied; hopefully there is none, and he should find out before the meeting that he has support and the necessary facts to argue against the charge.

Gary Nock

19:47 PM, 10th April 2013
About 6 years ago

Hi. Any management company can only ever charge what is allowed for in the lease. If the management company are trying to enforce something that is not in the lease then you can take it to the Leasehold Valuation Tribunal (LVT) for a determination - or threaten to do so. If it aint in the lease they cannot charge it. If you all own a part of the freehold then there is probably either an RTM Company or Residents Management Company in existence, or there are mechanisms in place for electing Directors at AGMs. If you have more landlords than resident owners then get all the landlords on board and get yourselves on as Directors and quash the motion.

Annette Stone

9:23 AM, 11th April 2013
About 6 years ago

Quite a lot of reaction here. If I can I will explain why, in all probability, there is a plan to levy this charge and to explain some of the problems which can arise where there are tenants in leasehold property. Many of you will be aware of what I am going to say but it may prove useful to others

Most specialist block management companies - especially the smaller ones that offer a more personal service - are not out to make unreasonable charges although they do need, as all professional firms need, to ensure that their business is profitable. Most of the problems arise when estate agents do a bit of management to bump up their income or from very large firms where service is impersonal, staff leave frequently without conducting a proper handover and problems are not dealt with. We all make mistakes but the issue is how quickly and satisfactorily they are dealt with. Our firm are not surveyors but we abide by all the management codes of the RICS which are the most stringent. This is really much more important that what trade associations firms belong to. Also we never advertise and all our business comes from recommendation.

Good managing agents always abide by the lease clauses and their management contract with the freeholder will set out exactly what they can charge for based on the lease providing for service charges and management. If there is no management fee provided for in the lease you cannot use a managing agent unless all of the lessees agree to vary the lease to provide for their fees and for service charges to be collected. Most sensible buildings would do this as self management sounds wonderful in theory but it practise it is not so great

In your case it is a self managed building which means everything has to be done by agreement between the lessees/joint freeholders which may save some money in management fees but clearly causes headaches.

As far as the reasoning behind the charge the bottom line is, that having been a managing agent for 21 years now, there is no doubt that the majority of specific incidents of damage, carelessness and lack of consideration in the way a building is kept come from tenanted flats. That is a fact; the majority of tenants in flats are reasonably short term and they take little care when moving in, moving out, making noise generally not being as neighbourly as resident owners. Sometimes one difficult tenant can cause havoc in a block.

It is also a fact that many people who consider themselves to be professional landlords actually mean that they wish to maximise their income from a tenanted flat whilst minimising their service charges expenditure on the communal areas irrespective of how this affects resident lessees and their peaceful enjoyment of what is their home and probably their pride and joy.

when problems arise and there is no management the lessees have to deal with this themselves. That may be what your co owners are trying to do and if the majority of owners wish to pass a resolution saying that buy to let owners have to pay a little extra to deal with more frequent decorating or cleaning that is really not unreasonable, providing the money is used for the benefit of the building

Where we have a block that is fully managed we have a tenant's registration scheme offered to buy to let landlords whereby, for a fixed fee, we deal with all issues which can arise from a tenancy causing problems from notifying the owner and his letting agent of a problem, to following up the matter and reassuring other lessees up to the point of forcing an eviction if there is a tenant causing very serious problems which does happen. In the past few years in very good areas of London I have had to deal with, amongst other things, two cannabis factories in flats, a brothel and several tenancies where one person has rented the flat and is clearly sub-letting to six or more people. There have also been instances of people moving into buildings where pets are not allowed and suddenly a pit bull terrier is living in the flat. In several of these cases there was no letting agent involved but the owner of the flat was a "professional landlord". If you lived in this building would you like to know that a dog like this left its calling card down the staircase and there were no available funds to get the carpets cleaned "as they were cleaned a few months ago". It may be obvious to say that the owner of the flat should pay but what happens to the building whilst you are getting the funds from him, particularly if he is no co-operative.

If lessees do not wish to sign up to our scheme they are made fully aware that if we have to become involved in issues regarding their tenants we charge on a time basis as dealing with this sort of stuff is not day to day management covered by the annual fee.

I hope this goes some way to explaining what may be the reasoning behind the plan.


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