Management Company / Service Charge Questions

_s79

I finally completed (26th May) on a leasehold flat; 997 years remaining on the lease.

It was a nightmare process as the management company had gone insolvent; complicated further by someone with an interest in 6 of the 18 flats who set up an 'ad hoc' management/maintenance company but have no legal covernance. I therefore had to take out an indemnity policy.

Looking at the statement summary they increased the service charge from £70 p/m (already too high for the area imo - a small town on the Wirral, not near a City center, a 3 year old build etc) to £75p/m at this time.

I know that they have insured the building and I think the premium was around £1,200 (will double check later).

The company accounts are filed in December each year. Do they have to make them available to me?

I have plenty of concerns about paying £75 p/m when there are a number of issues such as;

• The electric gates for the car park don't work
• The front door handle has been forced and is hanging off
• There is an SORN/abandonded veichle in one of the two visitor spaces
• The communal area's are in desperate need of painting etc etc
• There is no slush/reserve fund in place

On top of all that, I am wondering, since the original company has not yet been reinstated and they have no legal covernence, am I / others legally bound to pay this service charge?

I haven't moved in yet but have spoken to a couple of residents but they were clueless about the service charge as they rent.

BitterAndTwisted

How do you propose the management company can afford to have those repairs done if no-one pays any service-charges towards them?

_s79

BitterAndTwisted wrote: »

How do you propose the management company can afford to have those repairs done if no-one pays any service-charges towards them?

I have no idea if everyone is, that's why I want to see the accounts. Do they have to make them available to me? I know that a few of the flats are rented though the same estate agent that I bought with and that they are paying the service charge.

G_M

If it's a legally constituted management company then yes, you can see the accounts. If it isn't......

There again, if the mgmt co is insolvent you should be grateful someone in the place cares enough, and has enough gumption, to try and keep things going. Why not get together with him and ensure everyone contributes and the repairs are done? Otherwise the place will go rapidly downhill and the value of the flats will fall too. You could also help ensure the 'new' company gets properly constituted.

£75 does not seem much, esp for a place with electric gates etc. And a need to build up a slush fund. And do repairs. Where ever it is.

I'm amazed you did not check everything before buying.

BitterAndTwisted

Your quarterly service-charges are paid in advance. it's at the end of the year that the accounts are done and you can see what's been collected and what's been spent. Then you will either get a bill for your share of the balance, a refund, or the monies go into a sinking-fund. The accounts you will be interested in seeing are the service-charge ones and not the company's annual accounts, these two things are completely separate. All leaseholders are entitled to see the accounts but if you want to see the actual invoices the management company should let you inspect them at their offices. It's not common practice to include all of the invoices with the accounts, they are just summaries split into categories of expenditure and showing the income received. Normally the management company will send you a copy of the accounts when they send you your balancing statement some time after year-end.

It sounds fortunate that someone is taking on the responsibility of collecting monies for essential maintenance or none would be done. Are the other leaseholders getting involved in setting up their own company to manage these properties?

_s79

G_M wrote: »

If it's a legally constituted management company then yes, you can see the accounts. If it isn't......

There again, if the mgmt co is insolvent you should be grateful someone in the place cares enough, and has enough gumption, to try and keep things going. Why not get together with him and ensure everyone contributes and the repairs are done? Otherwise the place will go rapidly downhill and the value of the flats will fall too. You could also help ensure the 'new' company gets properly constituted.

£75 does not seem much, esp for a place with electric gates etc. And a need to build up a slush fund. And do repairs. Where ever it is.

I'm amazed you did not check everything before buying.

My solicitor requested a copy of the accounts during a questionnaire. They put N/A

The management company is based in Northern Ireland, the flats are on the Wirral.

£75 p/m is a lot if nothing other than a bit of gardening is being done.

_s79

BitterAndTwisted wrote: »

It sounds fortunate that someone is taking on the responsibility of collecting monies for essential maintenance or none would be done. Are the other leaseholders getting involved in setting up their own company to manage these properties?

I am not sure what the situation is to be quite honest. I guess I will glean more information when I can speak to someone there that isn't a tenant but rather an owner.

I`m really not trying to avoid paying the service charge enough though I feel it is high for the area (similar properties in the area are ~£50-60 p/m). My concern is that I don't want to be paying it to someone just for the sake of it when they have no legal right to enforce the covenence and could be pocketing it.

I have drawn up a list of questions for them:

1. Request a copy of the service charge / maintenance accounts (not invoices)
2. Further information on declared interest in 6 of the flats
3. Date of when they formed
4. Legal Covernence / Companies House situation
5. Summary of maintenance carried out
6. Planned maintenance
7. Slush fund / reserve situation
8. Situation regarding the increase and possible reduction of Service Charge
9. Is there a residence group / meeting due

I think they are all fair questions. Anything else that I should be looking to ask?

BitterAndTwisted

It depends on how long ago the previous management company went down the Swannee. The new ones may not have been managing the properties for over a year so there may not be any service-charge accounts to examine yet.

_s79

BitterAndTwisted wrote: »

It depends on how long ago the previous management company went down the Swannee. The new ones may not have been managing the properties for over a year so there may not be any service-charge accounts to examine yet.

Yes, this may well be the case. The copy of the buildings insurance policy (£1,100) runs from the beginning of Feb this year.

I will make some calls tomorrow.

_s79

OK, I contacted the management company and was told the following;

The management company (not a 1 man band; with 200 properties and 6 of the 18 flats in my block) took over the management/maintenance of the block 2.5 years ago after being unhappy with the way the previous company were acting. Previous company are since insolvent and struck off companies house.

I am the only owner occupier out of the 18 !!!!!!
There is no sinking fund due to costs created by previous issues (a bad tenant who caused damage, a leak, a repair of the gate etc)
The freehold was illegally sold without their knowledge and they continued to pay the collected ground rent to the previous person(s)
Most worryingly, there are no accounts
They are currently taking legal advice regarding reinstating the insolvent company and will be requesting ~ £175 per flat for this
They plan to increase the service charge by a further £10 p/m and got quite angry when I suggested this was high for the area.

It sounds quite worrying to me.

Catti

I find it hard to believe that your solicitor did not look into all of this during the conveyancing process. Are you sure he does not have information that he has perhaps not passed on to you?