Deed of Variation to Maintenance Charge

little_princess

Hi All,

I apologise in advance for the length of this post

DH & I own a flat and have just purchased the un-self-contained flat next door which we are about to merge into ours.

The flat is leasehold with a share in the management company that own the freehold. As the new flat was not self-contained and we had been told by an estate agent that it would only be attractive to investors looking to turn it into 2 bedsits, we decided that it would be more beneficial to us to purchase this ourselves so that we wouldn't have to worry about the possibility of potentially problem tenants (I appreciate that not everyone who purchases a bedsit would be a problem tenant but if you are not the landlord, you have no control over who they choose to live there)

The problem with this purchase, is that we would be liable for 2 lots of maintenance fees (which are quite high at present due to non-payers...another story within itself :mad:) This would then mean that although the flat will be a lot larger, it will by no means be double in size, and the double fees may in the future put off potential purchasers.

We have therefore put this argument to the directors of the Management company and asked them to agree to a one and a half share of the maintenance fee rather than two. They have agreed to this and have asked the managing agent how we can proceed with this change. However the managing agent has stated that he cannot make this change unless all owners agree with this and they each pay for a deed of variation.

This seems unfair to us, as although the majority of the owners are in favour of this, one flat in particular are firmly against it and around 3 or 4 other flats in the building are heavily in arrears with their maintenance fees (some owe 3 or 4 years worth :mad:) therefore we don't think they should have a voice in the proceedings.

Can anyone tell me who is correct, can the directors decide on behalf of the majority of owners or does each individual owner have to agree???

Many thanks to anyone who can offer advice...and apologies again for waffling on
LP

Richard_Webster

Do the leases set out specific proportions to be paid by the flats or doe sit just say "a fair proportion" or similar wording?

If the former then the their leases will need to be altered and the lessees in question don't have to agree.

If the latter, then the freeholder company may be able to determine a different "fair" proportion. I say "may" because it could still depend on other wording in the lease.

Even then the reality is that even if I were convinced that the majority could alter the proportions, if one of the other lessees disagrees the freeholder company would have to sue him for any extra money it wants to collect from him and then he could defend it, arguing that the company was not entitled to alter the proportions. His solicitors would stress the uncertainty of litigation and costs would be run up by the freeholder company that someone would have to pay. He could effectively muddy the waters for some time and cause expense and stress in the litigation.

little_princess

Hi Richard,

Many thanks for your reply. The leases actually state that

"The service charge payable by the Lessee herunder shall be 16/244ths of the cost to the Managing Agents of fulfilling their obligations".

However over a decade ago their were 2 bedsits which were merged into one flat, which now only pays one maintenance fee, therefore everyone pays 1/15th. The managing agent acknowledges that there are only 15 flats paying, and has yet to produce a deed of variation to the original lease (and none has ever come to light when we purchased both of the flats) but he still maintains that he has to stick to the lease agreement and charge us 2/15ths...even though the lease clearly states 16ths!!!

This means that the directors are now in limbo as to what to do next and who or what is correct!

Richard_Webster

Sorry I can't work out the maths. 16/244ths means someone must be paying an extra 4/244ths as 15 x 16 = 240. Sure you don't mean 16/240ths - which = 1/15th?

Does each lease say the same? If so if you acquire the other lease you will have to pay 32/244ths.

If there are 15 flats each paying 16/244ths then the freeholder can only collect 240/244 = 98.36% if expenses and magically has to find the remaining money from somewhere. Any single flat owner can be difficult and refuse to pay more than 16/244ths leaving the others with the shortfall. if the figures above are right you have that problem anyway.

If you want to reduce it so you pay a lower proportion of the whole then all the other leases need altering to make them pay a greater proportion and I can't see it happening. See below:

Each lessee would have to agree and if they have mortgage lenders then their lender will have to agree to an alteration of the lease Estimate a minimum of £500 legal costs to alter each lease. 13 other leases = around £6500 in other people's legal costs. How long would it take you to pay that from the savings you would make from paying less service charge?

little_princess

Thanks Richard,

So your suggesting that the current collection is not calculated correctly and is flawed? We didn't understand how the 244th was achieved........your 15 x 16 works but I'm still unclear what these figures refer to and would this make the original lease invalid?

Furthermore we have never worked on a fraction basis for the calculation of the maintenance fees, it's not a calculated annual budget divided into a fixed fee per flat so the proportional element is never considered. What the managing agent does is collect £1200 per lessee split into 2 payments annually. This seems odd now given what your suggesting.

Also my fear is that any action taken on non-payers will be at risk if the calculations for monies being collected is incorrect....for example if we go to an LVT tribunal for nonpayers, would there be any issues if previous charges had been incorrectly calculated?

Sorry for further queries, I need to square things before writing a final response to Directors and the managing agent.

LP

silvercar

If you only pay one and a half shares instead of two, the burden on everyone else increases.

So if there were 244 shares and I was previously paying 16 shares, your reduction from 32 to 24 shares means there are now 228 shares around rather than 244. So any random leaseholder will now have to pay 16/228 rather than 16/244. So if the average bill per flat was say £2000. Your reduction means that I would now be paying £2140. An extra £140 just because you have bought the other flat.

I can't see all the other lease holders agreeing. Why would they? It's like asking turkeys to vote for Xmas.

silvercar

As to the odd number of shares, sometimes the ground floor flats have different billing ratios. Either because they are a different size or because they don't have to contribute to the lift or need external window cleaning.

Richard_Webster

As to the odd number of shares, sometimes the ground floor flats have different billing ratios. Either because they are a different size or because they don't have to contribute to the lift or need external window cleaning.

Most likely there are some different proportions somewhere - it would only take one to have 20/244ths to put the thing right, but it might be more complicated than that!

What is clear that the managing agents should calculate the total spend on the building and grounds etc and bill each of you your proportion in accordance with the leases. All the leases need to be looked at to see the proportion for each one.

There is some point in getting back to what the leases say. However unless you can get everyone to agree to alter the proportions your idea is dead in the water. Even then the legal costs of doing so with mortgage lender involved and their admin costs being payable for each one the cost will be quite considerable.

little_princess

Many thanks Richard and silvercar for your responses it's made things a lot clearer and your help was much appreciated.

Kind Regards
LP