Service charge hike

Gazump

Buying a property. Current owners pay £1000. Got informed by solicitors that I will be will paying £2000!!!!

Have not received the official papers to confirm this, but are they taking the pizzle?

Are landlords allowed to do this? Surely I should be paying the current rate. If the rate is put up simply because I will be a new owner, what will the other occupants in the same block of flats be paying?

I would like to know more about service charges. Are there regulations? Can they charge what they like? As a leaseholder, do you have the right to challenge the charge along with other tenants?

pie81

Reasons why a service charge might double:

- some work to the communal parts needs doing next year, there is no sinking fund so leaseholders have to pay as and when work is done, and the charge will go up to pay for this work.

- the buildings insurance premium has gone up (it would have to be a massive increase though, and I'd want to know why it had gone up - lots of burglaries? flooding? etc)

- the managing agent is charging more (again, would have to be a massive increase, so seems unlikely)

Ask for a breakdown of what the expected service charge will cover, and why it's so much higher.

They can't charge you more just because you're new - hence seems likely to be one of the above.

Yes, leaseholders can challenge charges if they are (a) not things that are payable by the leaseholder under the lease or (b) unreasonable (but NB they have to be VERY unreasonable).

sunnysea83

if a leaseholder is unhappy with any cost of the service charge regardless of how unreasonable the sum they can challenge it and they can challenge it regardless of whether or not its an item allowed under the lease, obv if its not allowed under the lease you should def challenge it.

The leaseholder can challenge the charges at the LVT

The LVT can decide about all aspects of the liability to pay a service charge. It can decide by whom, to whom, how much and when a service charge is payable. A service charge is only payable insofar as it is reasonable. Therefore in deciding liability a tribunal also decides whether service charge costs are reasonable and whether the standard of any works for which the costs are charged is reasonable. Applications can be made either before or after service charge costs have been incurred. Applications are made under section 27A of the Landlord and Tenant Act 1985.

However as you do not own the flat you cant make the above application yet, i would suggest you ask your solicitor for a copy of the current years service charge and the new charge thats £1000 more.

Its likely that there is going to be major work done, which of course the current owner could know about and be a reason for selling! If the work is more than £250 per leaseholder certain notices known as a section 20 need to be served on the leaseholders and if it turns out the extra is for major work you may want to ask have section 20 notices been served for this work to the current leaseholder and when the work will start.

It could be that there is a sinking fund being set up for future work
A reserve or sinking fund is a fund collected over a period of time to be used for a specific purpose such as a large scheme of work. This could be roof renewal, external redecoration or other large expenditure. The aim is to split the cost over a longer period of time to avoid a very large bill in one service charge year. Your landlord can only set up such a fund if the lease allows.(taken from the lease website)

You may also want to make sure that a large retainer is held by your solicitor or the vendors solicitor from the vendor to cover any service charges for the period that htey owned the flat in the current service charge year when the final accounts are produced at the end of the service charge year (normally take 2-3 months to be produced). Otherwise you could end up paying for aditional service charge when the previous owner occupied the flat. Its pretty much standard pratice for a solicitor to ask for a retainer, for example when i sold my flat last year i had to put a £300 retainer with my solicitor (which im still waiting for back!)

www.rpts.gov.uk
www.lease-advice.org

Hope the above helps OP.

Gazump

Thanks to both of you, very informative.

Firstly, from the report back there is no "section 20". Not sure what that is though.

But, there is a sinking fund! Why does this sinking fund magically appear now? Or do you think the current owners have already started to pay this and failed to tell me early on? Is a sinking fund normally ongoing or does it drop back to normality? EDIT: Oh I see it is over a period of time. My solicitor is getting the statement of service charges so hopefully it should show me what this increase is (I'm now thinking it is most likely a sinking fund) and how long this period is.

Fire_Fox

If you read the LEASE website that has already been linked to most of your questions about service charges, sinking funds and major works consultations will be answered. Your conveyancing solicitor will have a lot more information from the managing agents that simply an annual figure, so study that to understand where the £2000 is being spent.

You have no need to worry about LVTs at this early stage, that's just muddying the waters as you haven't even completed the sale yet! Best course of action once you have completed is requesting breakdowns and service contracts, then compare this with the long lease. One you know what should be being done (e.g. monthly window cleaning) you can assess whether the money is being spent wisely.

sunnysea83

Out of interest OP do you know who the managing agents are?