Disputing service charge expenditure budget
Discussion
I live in a leasehold flat. Service charge from last year to this year has gone up by over 50%.
Some of the increased costs seem reasonable, eg a new item for a roof replacement fund which was not there last year.
Some don't seem reasonable, such as carpet replacement when the communal carpets are nowhere near being worn out, new entries for electricity costs which have never appeared in previous years, new entry for gardening on top of the existing entry for landscaping. All up there are a number of things which just seem to have appeared on the budget with no explaination.
Is there a specific statutory procedure for moaning to the management company or is a moan by phone and email sufficient?
Some of the increased costs seem reasonable, eg a new item for a roof replacement fund which was not there last year.
Some don't seem reasonable, such as carpet replacement when the communal carpets are nowhere near being worn out, new entries for electricity costs which have never appeared in previous years, new entry for gardening on top of the existing entry for landscaping. All up there are a number of things which just seem to have appeared on the budget with no explaination.
Is there a specific statutory procedure for moaning to the management company or is a moan by phone and email sufficient?
The ultimate statutory procedure is set out at https://www.gov.uk/housing-tribunals/overview and detail is at https://www.lease-advice.org/advice-guide/applicat... but for the issues you flag here you would be expected to at least attempt direct discussion and negotiation with the freeholder before you get to that stage. That will in reality potentially rely on you being able to gather evidence and frankly to be a belligerent PITA to get anywhere. I have an annual battle with my freeholder to get the service charge back to a reasonable level and we have already won at the tribunal once, to the point where the accountable director lost their job as a result of the tribunal’s criticism. PM me if you want to know more.
You can also search the previous decisions via the lease advice website to see whether your freeholder has been challenged before…
You can also search the previous decisions via the lease advice website to see whether your freeholder has been challenged before…
Okey, the property management company is unresponsive so I will have to be a PITA.
I've been reading this:
http://www.lease-advice.org/advice-guide/summaries...
I'm confused about the consultation required if any resident needs to pay more than £250. In the budget thre is a charge for landscaping for which my share is more than £250. Should the property management company have consulted me about it? Or is it considered regular maintenance/not major work on a building and they don't need to consult me?
The budget I have lists anticipated expenditure for 2017 (ie a forecast of this years expenditure). I have a year old anticipated expenditure for 2016 etc going back to when I bought the place. I can't remember if I got actual expenditures or not. What am I entitled to ask for?
I've been reading this:
http://www.lease-advice.org/advice-guide/summaries...
I'm confused about the consultation required if any resident needs to pay more than £250. In the budget thre is a charge for landscaping for which my share is more than £250. Should the property management company have consulted me about it? Or is it considered regular maintenance/not major work on a building and they don't need to consult me?
The budget I have lists anticipated expenditure for 2017 (ie a forecast of this years expenditure). I have a year old anticipated expenditure for 2016 etc going back to when I bought the place. I can't remember if I got actual expenditures or not. What am I entitled to ask for?
Section 21 of the Landlord & Tenants Act 1985 sets out the correct procedure the Management Company needs to take.
In brief any repair works estimated to cost each leaseholder £250 or more, therefore 6 leaseholders costs over £1500, then the Management Company needs to obtain three contractors quotes for the work, and obtain a majority of the leaseholders approval on the contractor to use to carry out the work.
The way a Management Company might attempt to get around this process, is to break down the work into two, three or four smaller separate jobs, so a carpenter would engaged to hang the doors, a painter to paint the doors etc. etc.
There is always power in numbers, and getting other Leaseholders on board, holding a meeting, vetting the accounts, requesting a copy of the building insurance certificate (section 20 of the above Act allows leaseholders access to the same), once you have sight of the same obtain your own insurance quotes, and see how much the management company having been screwing you on the insurance premium.
In brief any repair works estimated to cost each leaseholder £250 or more, therefore 6 leaseholders costs over £1500, then the Management Company needs to obtain three contractors quotes for the work, and obtain a majority of the leaseholders approval on the contractor to use to carry out the work.
The way a Management Company might attempt to get around this process, is to break down the work into two, three or four smaller separate jobs, so a carpenter would engaged to hang the doors, a painter to paint the doors etc. etc.
There is always power in numbers, and getting other Leaseholders on board, holding a meeting, vetting the accounts, requesting a copy of the building insurance certificate (section 20 of the above Act allows leaseholders access to the same), once you have sight of the same obtain your own insurance quotes, and see how much the management company having been screwing you on the insurance premium.
creampuff said:
Okey, the property management company is unresponsive so I will have to be a PITA.
I've been reading this:
http://www.lease-advice.org/advice-guide/summaries...
I'm confused about the consultation required if any resident needs to pay more than £250. In the budget thre is a charge for landscaping for which my share is more than £250. Should the property management company have consulted me about it? Or is it considered regular maintenance/not major work on a building and they don't need to consult me?
The budget I have lists anticipated expenditure for 2017 (ie a forecast of this years expenditure). I have a year old anticipated expenditure for 2016 etc going back to when I bought the place. I can't remember if I got actual expenditures or not. What am I entitled to ask for?
They don't need to consult in respect of a budget but they need to be able to prove costs are reasonable (s.19 landlord tenant act). If you feel costs are unreasonable they can be challenged at the first tier tribunal under that section. I've been reading this:
http://www.lease-advice.org/advice-guide/summaries...
I'm confused about the consultation required if any resident needs to pay more than £250. In the budget thre is a charge for landscaping for which my share is more than £250. Should the property management company have consulted me about it? Or is it considered regular maintenance/not major work on a building and they don't need to consult me?
The budget I have lists anticipated expenditure for 2017 (ie a forecast of this years expenditure). I have a year old anticipated expenditure for 2016 etc going back to when I bought the place. I can't remember if I got actual expenditures or not. What am I entitled to ask for?
I don't know what your lease says but they may no be able to accrue a reserve fund / serve an additional demand for major works which is why they are lumping the costs into the forthcoming years budget.
Qualifying works - any one item of work that will cost any one leaseholder £250 or more requires a s.20 consultation. Almost certainly the carpet and roof projects will need a s.20 consultation. The consultation is required whether the funds are in place or not. The carpet project and roof project are separate and so each project needs its own consultation.
If the statutory consultation isn't followed, and dispensation is not granted by the FTT, each leaseholder's liability for qualifying works is limited to £250
Part of the consultation is to allow leaseholders to raise observations. I would certainly raise your thoughts that the carpets don't need replacing as an observation as they have a duty to hold this in regard. Ask them to explain why the carpets are to be replaced. You can also nominate contractors to carry out the work and there is an obligation to include nominated contractors on the tender list.
You are entitled to a set of accounts for previous service charge years. It should show what was collected. What was spent and any surplus / deficit for the year. How the surplus / deficit is dealt with is prescribed in the lease but generally a deficit is collected / surplus credited to leaseholders. Leaseholders must receive accounts / be advised by s.20b notices of the income / expenditure within 6 months of the year end. I.e if it is a December year end then accounts / s.20b notices must be served by June the following year - this is best practice as I don't want to complicate things! There's all sorts of drama I when it comes to deficits. Let me know if there was a deficit and I can explain more but I do this all day and I'm tired haha.
Lots of useful info and more in depth explainations can be found here http://arma.org.uk/leasehold-library?offset=all
Edited by OMNIO on Thursday 9th March 21:30
creampuff said:
Thanks for that. If there is an item of expenditure- landscaping/gardening in my case, which costs me more than £250, do they need to consult on it? I ask this as gardening isn't one single thing, it's multiple visits by a gardener several times a year on odd jobs.
No.landscaping / gardening as you have described above would be considered a maintenance contract. Provided the contract is for a term of 12 months or less they don't need a consultation.
If the term is for more than 12 months it is considered to be a long term agreement and requires a consultation under s.20 if any one leaseholder contributes £100 or more - note the lower limit to long term agreements!
Edited - having a shocker with my sppeeelingz
Edited by OMNIO on Thursday 9th March 21:54
Wings and OMNIO provide valuable and correct information.
In addition to what may be major works you mention items such as electricity/utility costs. It is not uncommon for landlords to let contracts lapse and fall to "default" rates - the costs are simply passed on to the leaseholder through the service charges so it doesn't cause them any problem. There is no requirement for them to obtain the cheapest rate but as stated above it comes down to reasonableness. When I challenged this particular aspect (when I unfortunately had a leasehold property) I eventually used an expert witness who explained that in a commercial setting the approach taken by the landlord and their associated management company would be viewed as negligent if the costs were passed back to the company.
Is there a reserve fund?
If s.20B notices are involved here then I will be very interested...
In addition to what may be major works you mention items such as electricity/utility costs. It is not uncommon for landlords to let contracts lapse and fall to "default" rates - the costs are simply passed on to the leaseholder through the service charges so it doesn't cause them any problem. There is no requirement for them to obtain the cheapest rate but as stated above it comes down to reasonableness. When I challenged this particular aspect (when I unfortunately had a leasehold property) I eventually used an expert witness who explained that in a commercial setting the approach taken by the landlord and their associated management company would be viewed as negligent if the costs were passed back to the company.
Is there a reserve fund?
If s.20B notices are involved here then I will be very interested...
creampuff said:
I live in a leasehold flat. Service charge from last year to this year has gone up by over 50%.
Some of the increased costs seem reasonable, eg a new item for a roof replacement fund which was not there last year.
Some don't seem reasonable, such as carpet replacement when the communal carpets are nowhere near being worn out, new entries for electricity costs which have never appeared in previous years, new entry for gardening on top of the existing entry for landscaping. All up there are a number of things which just seem to have appeared on the budget with no explaination.
Is there a specific statutory procedure for moaning to the management company or is a moan by phone and email sufficient?
we used to run management companies which owned the freehold of which the leaseholders owned a share in the management company. What is sensible to do is to explain to the leaseholders why the charge is increasing to what its is.Some of the increased costs seem reasonable, eg a new item for a roof replacement fund which was not there last year.
Some don't seem reasonable, such as carpet replacement when the communal carpets are nowhere near being worn out, new entries for electricity costs which have never appeared in previous years, new entry for gardening on top of the existing entry for landscaping. All up there are a number of things which just seem to have appeared on the budget with no explaination.
Is there a specific statutory procedure for moaning to the management company or is a moan by phone and email sufficient?
Carpets you mention - although not needing replacing now they will in say 5 years thus you get a cost now divide by 5 and divide by the leaseholders
and so on with roofs/ carpark resurfing etc and then to also build up a reserve. We never had to surcharge and leaseholders as we kept a steady flow of funds.
The issues we came across was that some leaseholders didn't want to 'save' and for us to put away money for future maintenance. So yes you can run a man co like that but you will then be surcharging leaseholders as and when large maintenance comes up and it pretty much a pass the time bomb as some leaseholders who are only living there a short time don't want to pay into the a future maintenance where long terms ones will as it spreads the cost over all leaseholders over many years.
That's the approach we took and the directors agreed to keep a steady program and to build up the reserves for anticipated maintenance. The £250 can be a pain but as mentioned there are a number of exceptions and way around. Perhaps we were different as the freehold company was owned by the leaseholders.
^ I'm happy with paying into reserve funds, so long as the amount is reasonable.
The reason I'm not happy now though is that my share of the reserve fund has gone from zero in the past few years to about £500 this year.
Of the itemised list for the reserve funds, only the roof replacement looks reasonable (About £1000 in total for everybody in the building; if it happens every 15 years that's about right). The other reserve fund amounts for carpet and interior decoration, you could pretty much replace/repaint the entire thing every two years with the size of the reserve fund if that reserve fund stayed the same year on year.
The reason I'm not happy now though is that my share of the reserve fund has gone from zero in the past few years to about £500 this year.
Of the itemised list for the reserve funds, only the roof replacement looks reasonable (About £1000 in total for everybody in the building; if it happens every 15 years that's about right). The other reserve fund amounts for carpet and interior decoration, you could pretty much replace/repaint the entire thing every two years with the size of the reserve fund if that reserve fund stayed the same year on year.
Having been in dispute with my service charge & management company (laughable considering how little they did for the money being paid to them), I wish you luck in turning the screw on these people.
It's worth bearing in mind, they are hoping they can stealthily increase charges whilst doing the bare minimum to reply, take action or frankly, do anything. In my case I was paying more than my mortgage in service charges, and over the course of the year for my £5000+ got nothing more than the grass mown outside and a white hallway whitewashed in... white. So, not a lot of bang for the buck.
Try to list the items you've identified and offer a rational comparison against them, for example, point out the excessive sums they're requesting for minor work and demonstrate the same task could be carried out by a local handyman for probably <10% of what they're asking for.
My experience with these blood sucking leeches was that I was priced out of my first home (I'm 27 now, was 25 when I moved in). I had to let out my 2nd bedroom to cancel out the money they were demanding. How young single people manage to pay mortgage, all bills, AND an insane service charge is beyond me. Shared ownership sounds great on paper to those looking to get on the ladder, in reality, it is signing up to long term unsustainable costs, IMO.
Best of luck holding these guys to account.
It's worth bearing in mind, they are hoping they can stealthily increase charges whilst doing the bare minimum to reply, take action or frankly, do anything. In my case I was paying more than my mortgage in service charges, and over the course of the year for my £5000+ got nothing more than the grass mown outside and a white hallway whitewashed in... white. So, not a lot of bang for the buck.
Try to list the items you've identified and offer a rational comparison against them, for example, point out the excessive sums they're requesting for minor work and demonstrate the same task could be carried out by a local handyman for probably <10% of what they're asking for.
My experience with these blood sucking leeches was that I was priced out of my first home (I'm 27 now, was 25 when I moved in). I had to let out my 2nd bedroom to cancel out the money they were demanding. How young single people manage to pay mortgage, all bills, AND an insane service charge is beyond me. Shared ownership sounds great on paper to those looking to get on the ladder, in reality, it is signing up to long term unsustainable costs, IMO.
Best of luck holding these guys to account.
Yeah, I'm looking to sell my Shared Ownership flat at the moment and service charge has just gone up 10% again for this year, the whole thing is a professional scam run by big property companies and the charges are eye watering.
This year's projection: £13/month/flat for communal electricity. I mean, it's a big block with a lift but just that and lighting... FFS!
This year's projection: £13/month/flat for communal electricity. I mean, it's a big block with a lift but just that and lighting... FFS!
Red Devil said:
Look at it another way. If you had been paying £100 - £125 per annum over a 4 -5 year time frame would you still be complaining?
Yes, because the roof excepted, you could repaint and recarpet everything every 2 years as the rate that the reserve is now being charged, whilst nothing (I'm excluding the roof) is in need of renewal for some time. creampuff said:
Thanks for that. If there is an item of expenditure- landscaping/gardening in my case, which costs me more than £250, do they need to consult on it? I ask this as gardening isn't one single thing, it's multiple visits by a gardener several times a year on odd jobs.
Any long term agreement, gardening, cleaning etc. falls under Section 20 of T&L 1985 Act, so you and the other leaseholders should have been consulted prior to the agreement commencing.Wings said:
Any long term agreement, gardening, cleaning etc. falls under Section 20 of T&L 1985 Act, so you and the other leaseholders should have been consulted prior to the agreement commencing.
I should add that any long term agreement, being a term of 12 months or more, will be limited to an amount of £100 in any 12 month accounting per leaseholder , where a landlord or management company has failed to consult with leaseholders.I've had a look at the past 5 year's service charges in addition to last year. Service charge has doubled since 2012.
It will take me a month to figure out what is going on, meanwhile service charge is overdue.
Should I pay it in full then figure out what is going on?
Should I pay only a portion of it and say I want more explanation?
It will take me a month to figure out what is going on, meanwhile service charge is overdue.
Should I pay it in full then figure out what is going on?
Should I pay only a portion of it and say I want more explanation?
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