Property Management - Can they do this?

HJS86

Hi everyone,

I hope you can help.

My husband and I have lived in our 1 bed apartment (mortgaged) for 2.5 years. During this time, we have paid service charges, estate charges and ground fees to no less than 3 different property management companies.

Within the last month the property management company as changed again and we are now paying CP Bigwood.

With each change of management, the fees are increasing. We started paying approx £50 a month, (£600 for the year) and are now paying around £70.

Today we received a letter from the new company advising that they are unable to provide us (us being one of the flats on our new build development) with the year end accpunts for the period ending March 24th 2011. However they are able to provide a proposed budget for this period against actual expenditure which highlights a shortfall.

They go on to state that the shortfall will be £4639.43 for the year and have divided this figure by the number of properties on the development. We have been told we have to pay another £42.06 for the year, taking our yearly payment up to a whopping £882.06.

I wouldn't mind, but I don't really see most of what they purport to do as with each new company taking over the management of the development, the less work seems to be carried out! The new management company doesn't even wash the windows - we live in an apartment and are lucky enough to be on the ground floor, but our neighbours obviously really struggle to wash their windows on the outside.

In addition to this, all of the 3 comapnies who have managed to site are rubbish at actually actioning the things we are paying for i.e. i have informed the 2nd company no fewer that 6 times that the commumal bulbs had blown. Eventually, after literally months they did come and replace one of them, but the other is still blown!

Can these companies continue to increase their fees?
Where is the cap off point?

Thanks for your anticipated advice,

FireWyrm

Sorry, no advice, but I'll give you a bump....

jayencee

the property management company is appointed by the freeholder, so either all get together and buy out the freehold, then appoint your own management company, or make an applicaiton through the Leasehold Valuation Tribinal for them to assess if what you are being charged is "reasonable" (although it will cost you to start the process). Alternatively, ask the management co for a breakdown of what they are spending the money on and ask to inspect the invoices

grey_lady

TBH £70 a month isnt unreasonable - I'd expect it to be higher if you have communal lifts - the buildings insurance will be costing thousands, any communal cleaning, maintainence, even things like getting light bulbs in the car park changed and fire safety inspections.

The accounts have to be produced and filed, if not then companies house (presuming that's the way your development has gone) will fine for being late which is something that you will all have to pay for.

If your not happy then get involved with the mangement, understand the accounts - I recently had a development whereby the top floor of 3 blocks of flats paid considerably less, this was never in the lease or any contract but an informal arrangement due to their windows not being cleaned - we changed it so that everyone paid the same and we found a window cleaner with a longer ladder :-)

dopester

HJS86 wrote: »

Can these companies continue to increase their fees?
Where is the cap off point?

PDF Document July 2011
http://www.london.gov.uk/sites/default/files/Service%20charges%20scoping%20paper.pdf

Service charges are payable by most people who live in leasehold properties and also by some private rented sector tenants. In London there are more than 500,000 households that pay these charges.

Service charges cover the cost of services provided by a landlord such as maintenance, repairs and buildings insurance, and may also include things like lifts, lighting, cleaning and gardening.

Level of service charges

If planned and managed carefully these charges are relatively low, predictable and can be budgeted for by households. However, occasionally the cost of major estate repairs or the need for refurbishment to meet Decent Homes standards for example, have resulted in tenants and homeowners receiving bills for thousands of pounds.

Informal discussions with one London borough reveal that, while on average service charges are around £950 per year, where “major works” are required it could result in bills of several thousands of pounds for each property. There have been cases where service charges have reached tens of thousands of pounds per property.

Under English law, anyone who occupies land or a property is either a freeholder (they own the land) or a tenant (they own an interest in the land, but do not own the freehold title to it).

Service charges can go up or down without any limit (depending on the costs incurred by the landlord), but the landlord can only recover those costs which are reasonable.

pinkshoes

How many flats are there?

I owned a flat where we were all given the option of being a director of the management company, which about 1/3 of us wanted to do. We then employed a (decent!) management company and an accountant, and managed the flats this way. It kept the cost to a minimum, and was managed brilliantly. The management company ran everything past us first (i.e. quotes for maintenance issues, cleaning contracts accountant costs, gardening etc...), and we had a meeting about once or twice a year, and communicated mostly by email.

If there's not too many flats, could you not arrange a meeting with the others and see if you could do something similar?

propertyman

HJS86 wrote: »

Hi everyone,

I hope you can help.

1Within the last month the property management company as changed again and we are now paying CP Bigwood.

2: Today we received a letter from the new company advising that they are unable to provide us (us being one of the flats on our new build development) with the year end accpunts for the period ending March 24th 2011. However they are able to provide a proposed budget for this period against actual expenditure which highlights a shortfall. They go on to state that the shortfall will be £4639.43 for the year and have divided this figure by the number of properties on the development. We have been told we have to pay another £42.06 for the year, taking our yearly payment up to a whopping £882.06.

3 The new management company doesn't even wash the windows - we live in an apartment and are lucky enough to be on the ground floor, but our neighbours obviously really struggle to wash their windows on the outside.

4 In addition to this, all of the 3 companies who have managed to site are rubbish at actually actioning the things we are paying for i.e. i have informed the 2nd company no fewer that 6 times that the communal bulbs had blown. Eventually, after literally months they did come and replace one of them, but the other is still blown!

5 Can these companies continue to increase their fees?
Where is the cap off point?

First of all this is going to require you to read your lease and understand how service charges are estimated eg 25- March to 24 March and if they are estimated in advance ( what they think that they will spend) and how frequently the lease allows them to bill those e.g. half yearly quarterly.

Secondly you will have to look at how the actual cost is totalled at the end of the year and how they deal with any surplus- spent less than thought- or deficit- overspent. The common way is a one off bill or it might be included in the current years estimate.

I warn you that this is gong to be very boring but it essential to understand.

1: Didn’t they recently merge?

2: If accounts are not ready within 6 months of the year end this sort of notice is common. You should reply and using the knowledge obtained, reply that
-under clause x they are required to ( typically have accounts certified or audited by the Surveyor or Accountant) and you require them to do it within one month
- you formally request a certificate of expenditure under section 21 of the Landlord and Tenant Act 1985 see http://www.lease-advice.org/publications/documents/document.asp?item=14#14
- ask them to show where in the lease allows such a shortfall can be incorporated into the current budget.

3: Does the lease require them to wash the flat windows?
4: CP Bigwoods are RICS members and have a complaints procedure and you can complain to the RICS bout their performance.

5 There is no cap off, charges must only be fair and reasonable.

If service is bad a simple inspection and record of repairs or regular tasks not done can allow you a at the end of the year to dispute the actual charges and apply to the LVT.

evoke

You may wish to consider becoming Directors of the residents association. Basically you have three important companies involved:

1. The Landlord (the company or person who owns the block) - they may have their own management company that deal with the block on their behalf. You would normally pay ground rent to the landlord or their management company;

2. The property management company - this is the company who you pay a service charge to and is usually (initially) appointed by the landlord. They are responsible for maintaining the communal parts of the development;

3. The residents association company. This is the compant that all residents are automatically members of. The property management company maintains accounts for this company. They manage a bank account for this company and then pay subcontractors and themselves for costs accrued in carrying our the required maintenance on behalf of this company. You usually find that the Directors of you Residents Association limited company are people from the property management company! Therefore all service charges are automatically approved and residents have very little say in the matter.

If you and/or fellow residents apply to become Directors of the Residents Association then the property management company must have approval by at least one Director for all expenditure that requires authorisation. You will also get bank statements and will have to approve the end of year accounts. You'll suddenly see the property management company pull its socks up and actually start working for the residents! You'll also have the authority to sack the current management company and employ another one.

propertyman

evoke wrote: »

You may wish to consider becoming Directors of the residents association. Basically you have three important companies involved:

1. The Landlord (the company or person who owns the block) - they may have their own management company that deal with the block on their behalf. You would normally pay ground rent to the landlord or their management company;

2. The property management company - this is the company who you pay a service charge to and is usually (initially) appointed by the landlord. They are responsible for maintaining the communal parts of the development;

3. The residents association company. This is the compant that all residents are automatically members of. The property management company maintains accounts for this company. They manage a bank account for this company and then pay subcontractors and themselves for costs accrued in carrying our the required maintenance on behalf of this company. You usually find that the Directors of you Residents Association limited company are people from the property management company! Therefore all service charges are automatically approved and residents have very little say in the matter.

If you and/or fellow residents apply to become Directors of the Residents Association then the property management company must have approval by at least one Director for all expenditure that requires authorisation. You will also get bank statements and will have to approve the end of year accounts. You'll suddenly see the property management company pull its socks up and actually start working for the residents! You'll also have the authority to sack the current management company and employ another one.

From the description I am not sure that this applies and is a freeholder or head lessor employing a succession of agents.

brit1234

A lot of these service charges are linked to RPI which is currently 5%. It is for that reason I would never get a flat especially a new build where shared ownership/equity are renowned for the biggest increases in service charges.

Sell and get a 2 bed house instead.

propertyman

brit1234 wrote: »

A lot of these service charges are linked to RPI which is currently 5%. It is for that reason I would never get a flat especially a new build where shared ownership/equity are renowned for the biggest increases in service charges.

Sell and get a 2 bed house instead.

Back in the early days a few tried this process but it now is only found in very old leases or for ground rents, not service charges.

A fixed % increase is of no help to either flat owner or landlord.

The member will have to address these issues so that flat could be sold as the buyer will want clarification.