Freeholder wants £18,500 for first phase of works

glicky

I'm wondering if anyone can help or just give me a bit of advice please.

My friend lives in a private block of flats * floors with 36 flats in total). The occupants have just gotten a letter from the freeholder/managing agents stating that works need to be done on the external and internal (common areas) of the property.

It's been put to tender and the cheapest they have come up with is £18,500 just for the external!! She received a letter stating that if they don't come up with £18,500 within 60 days then a charge will be put on their property. Plus, they want the money up front before they start any work. The residents are going mad and most of them haven't got the money (including my friend). This is just for the external - there's going to be more. The freeholder said all in all the complete works will come to around £40,000, but it will be done in phases!!!

Is there anything my friend/the residents can do about this? Most of them haven't got the money.

Tried to get in touch with CAB, but they are not very helpful unfortunately.

Can anyone give me some advice on what can be done? i.e. information about the charge.

What can they do if none of us have the money. My friend is 56 years old and hasn't got that sort of money.

Any information will be helpful. Thank you.

loubel

Is this the first notification she has received?

There are statutory procedures requiring freeholders to consult on major works; see - http://www.lease-advice.org/publications/documents/document.asp?item=14#19

If they don't follow them then they cannot demand payment above £250 per leaseholder. But if they have, then unless the charges are unreasonable (which would have to be determined by the LVT) she will have to pay them.

A Charge against the property would prevent your friend from selling, mortgaging, transferring etc without paying off the debt.

glicky

loubel wrote: »

Is this the first notification she has received?

There are statutory procedures requiring freeholders to consult on major works; see - http://www.lease-advice.org/publications/documents/document.asp?item=14#19

If they don't follow them then they cannot demand payment above £250 per leaseholder. But if they have, then unless the charges are unreasonable (which would have to be determined by the LVT) she will have to pay them.

A Charge against the property would prevent your friend from selling, mortgaging, transferring etc without paying off the debt.

Thanks for replying.

No it's not the first notification, They were told about the works that needed to be done and were told about the tenders. The freeholder/managing agents said that it may cost around £10,000 per flat (a guess I suppose by the freeholder/managing agents). The cheapest tender came in at £18,500 per flat and they have to pay it within 60 days.

She has no mortgage on the property (but her work as a freelance hairdresser has gone quiet) and I don't think she'd be able to get a loan. I doubt she'd be able to move properties anyway because she couldn't get a mortgage at her age.

With regard to the Charge, does interest get charged and can the freeholder get her to sell it if he needs the money?

System

The cheapest tender came in at £18,500 per flat and they have to pay it within 60 days.

The freeholder said all in all the complete works will come to around £40,000

I think your friend has misunderstood. £18.5k per flat is around £670k total and the proposed overal cost of £40k equates to a total of nearly £1.5M!

£1.5M will probably cover the total rebuild costs including diamond encrusted taps.

Are you sure it is not a total of £18.5k for the first phase I.E. £515 each and just over £1100 for the complete job?

Fire_Fox

Who is the freeholder, is it private or the council? The leaseholders should have received plenty of information with the formal consultation notices they received, did they? They should have been given the opportunity to comment, object or put forward their own contractors, did they?

In general terms not being able to pay is not an excuse for not contributing to the service charges and major works, the long lease is a legally binding contract and leaseholders are expected to set money aside as any other homeowner. Does the long lease provide for the major works to be paid in advance or in arrears/ when the work is complete? Is all the work chargeable under the long lease and is it all required? Please read the long lease alongside the LEASE website already linked to, it is superb.

Your friend can get taken to a Leasehold Valuation Tribunal to be forced to pay, or indeed can take the freeholder to the LVT if the costs are not reasonable based on the work that needs doing. Not bothering to participate in the consultation will not work in their favour. Once there is a ruling, mortgage lenders can be applied to for unpaid charges so the amount is added to the debt. If there is no mortgage a second charge can be put on the property or, occasionally, a sale can be forced. None of this is good for the credit rating, can prevent the leaseholders getting a mortgage in future.

pinkteapot

Couldn't agree more with !!!!!! - I'd bet good money it's £18,500 for the first phase in total, not per flat.

If it's definitely £18,500 per flat, what work are they doing?!

glicky

!!!!!! wrote: »

I think your friend has misunderstood. £18.5k per flat is around £670k total and the proposed overal cost of £40k equates to a total of nearly £1.5M!

£1.5M will probably cover the total rebuild costs including diamond encrusted taps.

Are you sure it is not a total of £18.5k for the first phase I.E. £515 each and just over £1100 for the complete job?

If only. It's a private block and now looks like a very run down council block and has depreciated in value because of it. She also only has a 50 year lease on it left, but cannot afford to renew the lease and pay for these works.

Scaffolding is costing a fortune.

VAT is over £95K
Managing Agents charges over £70k (they are charging 15% of the costs).

There are 8 floors with 4 flats on each floor. The place was a luxurious block of flats, but have been left for 20 years without any work done and needs complete refurbishment of double glazing/new balconies and new lift. This cost is without the roof being done and without the internal decorations of the common parts.

If only is was £550 per flat. Yup, it's coming to almost £1.5m and they are arguing with the freeholder/managing agents/surveyor but they said when they get the money the works will be done. If they don't get the money, a charge will be put on the property.

Fire_Fox

pinkteapot wrote: »

Couldn't agree more with !!!!!! - I'd bet good money it's £18,500 for the first phase in total, not per flat.

If it's definitely £18,500 per flat, what work are they doing?!

It could be that expensive if things like the lift or roof need replacing, very much depends on the block.

glicky

pinkteapot wrote: »

Couldn't agree more with !!!!!! - I'd bet good money it's £18,500 for the first phase in total, not per flat.

If it's definitely £18,500 per flat, what work are they doing?!

Please see my answer above.

Buzby

This is one of he downsides of flatted developments, and the cost of upkeep of common areas remains a burden on all owners/leaseholders, and when purchasing the property, it is common for the soli it or to point this out as it can lead to many unpleasant surprises.

If not enough people pay, the managing agents may complete the works taking a charge on the property, and this is the least worst option. The worst? Nobody pays, the managing agent then issue notice of severance and the building ceases to be maintained. Once it becomes dangerous or flaw uninhabitable, the council can step in to condemn, and this has a far greater impact on mortgage holders.

glicky

Fire_Fox wrote: »

Who is the freeholder, is it private or the council? The leaseholders should have received plenty of information with the formal consultation notices they received, did they? They should have been given the opportunity to comment, object or put forward their own contractors, did they?

In general terms not being able to pay is not an excuse for not contributing to the service charges and major works, the long lease is a legally binding contract and leaseholders are expected to set money aside as any other homeowner. Does the long lease provide for the major works to be paid in advance or in arrears/ when the work is complete? Is all the work chargeable under the long lease and is it all required? Please read the long lease alongside the LEASE website already linked to, it is superb.

Your friend can get taken to a Leasehold Valuation Tribunal to be forced to pay, or indeed can take the freeholder to the LVT if the costs are not reasonable based on the work that needs doing. Not bothering to participate in the consultation will not work in their favour. Once there is a ruling, mortgage lenders can be applied to for unpaid charges so the amount is added to the debt. If there is no mortgage a second charge can be put on the property or, occasionally, a sale can be forced. None of this is good for the credit rating, can prevent the leaseholders getting a mortgage in future.

The freeholders/managing agents did let them know. My friend was the only one who responded out of all the other leaseholders. They (apart from my friend) didn't take it seriously..... until now of course.

My friend gave the freeholders/managing agents names of double glazing companies to deal with but they ignored it.

EDIT: Just to let you know .... service charge is separate (which is about £2,000 per year per flat), which is all up to date and paid up. There is no sinking fund.