Service Charges - Bill Doesn't Add Up

marklee

Hey All,

I just got a letter through from the management company for the estate that I live on, saying that they had finalised the 2007/08 annual accounts and that as the costs were over the original estimates, they had identified that I needed to pay an additional £700 towards the year's service charges, demanding payment in 14 days.

I checked my leasehold agreement, and it does say that they can do this where the actuals go over the estimates (and the 14 days payment terms are stipulated).

However, the sums don't quite seem to add up. My leasehold agreement stipulates a % of 'grounds' costs, and a % of 'building' costs that I'm liable for. Applying these to the actual figures in the estate accounts (which were provided with the letter), I worked out that I was only liable for £500 of the annual costs - and when factoring in the payments that I'd made during the year, there was only a shortfall of £100 which I need to pay now.

I've contacted the management company (by email) saying that I don't think they've calculated my bill correctly, outlining my calculations, and explaining why I think that £100 is the correct amount.

All I've had so far is an acknowledgement, saying that they will 'investigate' and get back to me.

However no news as yet.

I'm getting worried that they won't get back to me until after the payment deadline. What do I do?

Failure to pay service charges can start you on the slippery slope towards leasehold forfeiture - and the material I've looked at on the net doesn't make it clear what to do if you belive that the charges have been incorrectly calculated - do I just pay up the full amount if they're still 'investigating' and go through the small claims court to get the difference back? Or should only I pay what I believe is the correct amount?

(I realise that the probable answer here is "Get in touch with your local CAB" - but would be interested to hear if anyone's had any similar experiences).

Thanks for the help! :T

clutton_2

when did you get the letter ?

have you talked to other flat-owners to see if they have had similar demands ?

did you send your letter by recorded delivery ?

marklee

I got the letter last Thursday (dated Weds) - my response to them was be email, but I did get an acknowledgement back from them, proving receipt.

I think I will call tomorrow morning to chase... And if I still don't get an answer, will send a letter to both the management company and the freeholder by special delivery.

marklee

Oh, and there's very few leaseholders on the estate (5% of flats) - and I haven't been able to catch any of the ones I know to see if they've also got a similar letter.

drummer75

I have posted a thread on a similar subject. How long have you been there and been paying service charge? Do you pay every month?

The council are our freeholders and every year we have been in credit but they dont tell you this unless you ask. We just get estimate costs and actual costs, they dont tell you how much you have paid them already. Its quite possible that you are in credit from previous years too. The council thought we were in debt until I told them that I had a direct debt to them each month for the last 3 years. It turned out they owed us about £400 which we never would have known about. So my advice would be get your bank statements to prove the payments and if you have been there longer than a year dont forget to look at these years too. Good luck

marklee

Thanks for the thoughts!

I've been there for almost three years now, and pay on a half-yearly basis, based on estimated charges. The first year I ended up overpaying (though only by £50), and this was carried over to the next (the year now in dispute).

The management company is newish, and there's only a handful of leaseholders (until four years ago, the estate was all rented) - so the management of service charge accounts is distinctly amateurish.

I rooted through my leasehold agreement and found a clause that said where there is a shortfall between the actual costs of estate management and the amounts paid over the year, they can demand payment to make good the shortfall, but only on presentation of an account statement, outlining the percentage of estate / block costs that they are holding me responsible for (which, naturally, must match my leasehold agreement), and all payments that I have made towards that year's service charges.

And guess what? They never sent me an account statement - just a letter demanding £700 and a copy of the estate's aggregated accounts.

So I've sent both the management company and the estate freeholder letters by recorded delivery, stating:

• That I disputed the amount owed, and provided my own calculations as to the proportion of the estate costs as to which I believe that I am liable for, and outlining details of payments made (including dates etc).
• That I believed that their payment demand was unenforceable as they had failed to provide an account statement.
• That I wish to resolve the matter in a speedy and amicable manner, and would be happy to pay any moneys owed upon receipt of an account statement (as defined in the leasehold agreement), subject to its accuracy.

No response yet, but they only received the letter on Wednesday.

Fingers crossed!

olly300

Tomorrow morning contact lease-advice - http://www.lease-advice.org/ on the telephone. Keep ringing all day until you get through.

They also have a FAQ -
http://www.lease-advice.org/information/faqs/faq.asp?item=44

I have asked the landlord to send me a breakdown of the service charges as I cannot tell what the service charge was spent on and s/he has ignored me. Can I withhold my service charge until I receive a reply?

You have a right to receive a summary of the service charge. To exercise the right you must first request the summary in writing. Where a landlord has received such a demand he must provide the summary within one month (or within six months of the end of the 12-month accounting period, whichever is the later). If there are more than four dwellings in the building, the summary must be certified by a qualified accountant as a fair summary and sufficiently supported by accounts, receipts and other documents produced to the accountant. Failure to provide a summary of the service charge without a reasonable excuse is an offence and the landlord can be fined up to a maximum sum of £2,500. Notwithstanding the above comments it is worth checking the lease to see if the lease terms place the landlord under an obligation to provide audited accounts.

marklee

Thanks for the pointers!

To be fair, the management company have provided aggregated accounts showing their expenditure, which I think is what that FAQ is referring to.

I have a specific entitlement under my leasehold agreement that a demand for payment such as this will be accompanied by an account statement which essentially shows how they've arrived at the sum they're demanding (i.e. the proportion of costs for which I'm responsible - payments already made). I haven't received that, so from that sense, I think I can legally refuse to pay, regardless of whether or not they seem to have been plucking numbers out of thin air. (Point 1 below)

I have received a service charge bill; do I have to pay it?

This answer can depend on a number of issues, so care must be taken if you are considering not paying. However, some basic pointers that will make a bill payable are:

1. that the demand is made in accordance with what your lease says
2. that what you are being asked to pay is ‘reasonable’ and
3. that the demand is accompanied by a statement of your rights relating to it.

Care should be always be taken however when any of 1 to 3 is disputed or any other basis for non-payment, and you should always get advice before deciding not to pay.

Arguably Point 2 applies to my case too - demanding a service charge payment in excess of your obligations under your leasehold would strike me as being unreasonable. However I'm not a legal pro, and I know that 'reasonableness' is a bit of a quagmire.

Point about getting formal advice is noted though... will get in touch with these guys tomorrow and see what they have to say. Payment deadline was today though, so if I have stuffed up, it's probably too late to remedy...

moneypenny2k

First of all, find out which leaseholders are directors of the management company.
then contact them and ask to meet with them or talk to them about your concerns.

They should have a better idea than you about what is going on. They may have answers for you. If not try and tap into their concerns and ask them to talk to the management agents. They have more clout than you.,

Just to clarify, Management agents are a company paid by the management company (all the leaseholders will be shareholders in this company, but a few volunteers will be directors)

I'd not worry about missing the payment date by a week or two unless there are seriously punative penalties involved.

marklee

The estate freeholder is a private company, and the managing agent is a subsidiary company. The freeholder rents out about 95% of the accommodation, with the remaining 5% being on leasehold.

Management companies (I think) only come into play where the leaseholders own a portion of the freehold of the building - in this case we do not, so I'm not aware of any kind of structure being in place.

There is a tenants and residents association of which I'm the sole leaseholding member - the association takes little interest in leaseholder matters as they are generally all pretty much opposed to the sell off of the flats, so they take a certain amount of glee in seeing leaseholders 'suffering'

As you say - if it just takes a week or two for them to check and figure out how much I owe them, it hopefully wouldn't turn into a bigger issue.