Service Charge - huge price hike - where to go for help?

smileypigface

I bought a property last July (work relocation with good package from employer) which is in a small 4 year old development in a large residential area.

The development is a mixture of types of housing - and types of residents - I am a freehold home buyer and others are on a house buyers share scheme and low cost housing - there are various sized houses and a couple of small blocks of 6 flats. There is a large open green space and a small children's play area with some equipment.

There is a service charge payable monthly for various services.

Last financial year I was paying £6.92 a month - made up of:
Admin - £0.90
Communal Landscaping - £5.68
Play Equipment Maintenance contribution - £0.34

I have just received notice that from 1 April the charge increases to just over £22!
Audit Fee - £0.72
Grounds Maintenance/Landscaping - £5.96
Homeowner Management Charge - £11.83
Play Equipment - £0.34
Surplus/Deficit Brought Forward - £3.74

I rang the office today to ask for a breakdown of why there is such a big difference on last year and why I appear to be paying for different things. I was told that last year's "Admin" is now called "Homeowner Management Charge" - and that the large increase (understatement of the year!) is due to an overspend that has to be covered in the next FY - some overspend!

I was told the annual accounts will be done at the end of the FY and will be available in September for residents like me to see how last year's money was spent and in what areas the overspend occurred. So I pointed out that a budget had already been prepared or else where did they get the figures in the letter they have sent me?

I was basically fobbed off by a man who didn't seem to grasp why I was querying the massive rise in price - so I've written to his manager with my questions - ie, what has caused the huge rise in costs - why, if the admin charge has now been renamed and an overspend occurred, is there an additional item covering a deficit from last year - which in itself is over half the amount I paid per month last year.

Surely if this company is collecting money from residents in order to provide a service they should be accountable to the contributors to explain how and why they have exceeded their budget - how do I find out what their responsibilities to people like me are?

Where can I go for help - for the first 4 years since the development was complete the Service Charge has been consistent with the £7 charge from last year and has only increased generally in line with inflation in that time - this year's enormous rise should surely be open to question?

Any views or experience of this kind of thing?

smileypigface

Yes, but a more than 1,000% price increase from one year to another surely warrants some explanation - this service charge doesn't cover any maintenance of my building (as a freeholder I am responsible for that) - it is purely maintenance of communal outdoor spaces (not including my own garden!).

If my service charge covered all the things the charge for a flat in London covered then I would be happy - however, I'm afraid, it doesn't!

RichyRich

If there is a service charge then I assume your tenure is either commonhold or (long) leasehold. Section 3(b)(3) of 2007 Statutory Instrument 1257 gives you the right to ask an LVT to determine whether you are liable to pay service charges and the amount of those charges.

QTPie

smileypigface wrote: »

Yes, but a more than 1,000% price increase from one year to another surely warrants some explanation - this service charge doesn't cover any maintenance of my building (as a freeholder I am responsible for that) - it is purely maintenance of communal outdoor spaces (not including my own garden!).

If my service charge covered all the things the charge for a flat in London covered then I would be happy - however, I'm afraid, it doesn't!

Hi

We pay £250/£300 a year and are in a VERY similar situation to you (4 bedroom freehold townhouse in a mixed development of houses and a few flats): no children's play area here though, but we do have a communial square/garden in the middle.

Yes, management companies are a rip off... Whose are yours? Ours are Peverel. They do take about 50% of the charges as fees (demonstrated by your breakdown as "Homeowner Management Charge") and - if they are anything like Peverel - they are HELL to get hold of :mad:. I am just surprised that you weren't charged the inflated "Homeowner Management Charge" previously...

BUT, the alternative is "self management" (once the nitial "tie in" to the management company expires), BUT then you need to find some resident mug with a brain and a lot of time on their hands to do it all... which isn't always easy!

Personally, I look forward to moving out...

QT

Idonex

smileypigface wrote: »

Yes, but a more than 1,000% price increase from one year to another surely warrants some explanation - this service charge doesn't cover any maintenance of my building (as a freeholder I am responsible for that) - it is purely maintenance of communal outdoor spaces (not including my own garden!).

If my service charge covered all the things the charge for a flat in London covered then I would be happy - however, I'm afraid, it doesn't!

Think yourself lucky. I live in a block of 2 flats, our 450 sq ft 1 bed and a 2 bed upstairs. There is no garden, no outside space, no drive and no communal area. All the management company do is change the lightbulb in the hall (so small you can barely turn in it) once every 6 months and vac the 0.5 sq met of carpet once a fornight. The charge, 125 quid a month. They said they were going to increase it this year and we said we wouldn't pay any increase whatsoever. They could take the 125 as they do now or try and justify the extra (and current) cost in court. Stayed at 125 a month.

Richard_Webster

Perhaps OP can explain a s far as he is able to legal basis for this charge.

Is the house freehold or leasehold? If leasehold the lease will contain the wording and that needs to be looked at to see what can be collected - but the technical points below will not apply.

If freehold, OP will need to look at a copy of the transfer deed when the house was first sold. This should contain obligations to pay the charge and should describe the items that can be charged for. Obviously if something is being collected that is not allowed by the list of such items then OP may be able to refuse to pay that element, but frankly I would suspect that is unlikely.

The next bit is technical. Is there any mention in that original transfer deed of an "estate rentcharge"? If so the charge will be collectable regardless of who owns the house. If it is simply a covenant to pay the sum then the charge is only collectable from OP as second (or later purchaser) if when he/she bought the house he/she entered into a fresh deed of covenant with the company/Housing Association doing the maintenance to pay the charge. This should all have been explained by the solicitors when OP purchased.

Sometimes Housing Associations are inefficient (and if it is a HA that may be why the increase has occurred - see story below) and that inefficiency might also extend to forgetting to get OP to sign a deed of covenant in which case he may not have to pay the charge in any event!

I had a case a few years ago with a similar situation where there was an ex-shared ownership house on a small estate where there were also flats. The terrace of 6-8 houses had a brick paved parking area in front of them with some flower beds to make it all look pretty. The flower beds needed maintenance and there was a small service charge for this. The amount was very small - about £20 pa but it had suddenly increased to £40 pa and I asked why this was and for a breakdown of the costs. A breakdown was eventually obtained, but because of the HA's inefficiency I got the wrong breakdown because it contained items for things such as lift maintenance (??) (they had presumably sent me the breakdown for the nearby flats.) My buyer clients were not being required to sign a fresh deed of covenant so I told them that it was really up to them whether they made the payments as they could not be compelled to do so.

pinkshoes

Idonex wrote: »

Think yourself lucky. I live in a block of 2 flats, our 450 sq ft 1 bed and a 2 bed upstairs. There is no garden, no outside space, no drive and no communal area. All the management company do is change the lightbulb in the hall (so small you can barely turn in it) once every 6 months and vac the 0.5 sq met of carpet once a fornight. The charge, 125 quid a month. They said they were going to increase it this year and we said we wouldn't pay any increase whatsoever. They could take the 125 as they do now or try and justify the extra (and current) cost in court. Stayed at 125 a month.

I presume they pay your buildings insurance too???

Why don't you and the other owner discuss taking over this between you?

smileypigface

Many thanks for the replies so far .... to try and clarify:

I am a freehold homeowner (well, me and the mortgage company!). Places for People are the organisation I signed a deed of convenant to pay the Service Charge to - I'll have a look at the Deed I signed when I pop home at lunchtime - but I don't recall it went into much detail. Just that there is a Service charge to maintain the shared areas on the development and it is mandatory if you want to purchase a house on the development.

I definitely signed the deed and although it took them several months to acknowledge and bill me, Places for People eventually acknowledged that fact. As I said above, I was told there was no choice as to signing the Deed - no Deed meant no purchase.

It is interesting to wonder if the advice I was given is correct - if I could not be compelled to sign the Deed then am I able, at a future date, to withdraw my agreement to the Covenant if, for example, I feel I am not receiving value for money? Or is it a case that you have a choice at the outset but once you've signed it you are locked in until you move away from that house?

Thanks again for the replies.

Richard_Webster

It is interesting to wonder if the advice I was given is correct - if I could not be compelled to sign the Deed then am I able, at a future date, to withdraw my agreement to the Covenant

If the scheme was set up properly then you it would have been as you said, that couldn't buy the property unless you signed the deed. The deed of covenant would have referred back to the detailed terms in the original transfer which would have set out what you could be charged for. It is very unlikely indeed that you can get out of it - it is only if they forgot to get you to sign the deed of covenant that this might have been the case.

maninthestreet

smileypigface wrote: »

Yes, but a more than 1,000% price increase from one year to another surely warrants some explanation - this service charge doesn't cover any maintenance of my building (as a freeholder I am responsible for that) - it is purely maintenance of communal outdoor spaces (not including my own garden!).

If my service charge covered all the things the charge for a flat in London covered then I would be happy - however, I'm afraid, it doesn't!

I make the percantage increase for the entire monthly service charge as:

((22.00 - 6.92)/6.92) X 100 = 218%

To be brutally honest, what sort of service were you expecting to get for just £6.92 per month? That's barely more than 2 pints of beer around my way.

QTPie

smileypigface wrote: »

It is interesting to wonder if the advice I was given is correct - if I could not be compelled to sign the Deed then am I able, at a future date, to withdraw my agreement to the Covenant if, for example, I feel I am not receiving value for money? Or is it a case that you have a choice at the outset but once you've signed it you are locked in until you move away from that house?

Yes, yours is a VERY common set-up these days: quite a few modern developments (especially in cities/towns) have communal facilities (ours include central gardens, private roads, lighting on the pirvate roads (also not maintained y the council), trees etc). Someone has to take care of them and - in all fairness (although I think that management companies charge too much) - someone has to administer that care.

So, by buying that specific house (although it is freehold), you bought into that... Just like we did, with our freehold house, just over 5 years ago. To not pay would probably have repercusions on you and is certainly not fair on your neighbours either.

The costs you are quoted do not seem unreasonable - providing they do a good job of looking after the place.

QT