Managing Agent Service Charges 'deficit' - 3 months extra?

rsp

Hi everyone,

Just after a bit of advice. My managing agent recently sent me a 1/2 yearly demand for £1210, which is about £371 higher than it should be.

I had to email them to find out why it was so much higher than budgeted, as service charges should have cost ~£130 per month, around £834 for the period.

I got a reply saying that the £371 was 'deficit' in the previous years' service charges (2011).

A couple of things strike me as odd here. #1 - they didn't bother to include any detail with the demand: just the line "Service charges arrears outstanding" and the total amount. #2 when I asked them for an explanation, I simply got rather rudely directed to review their accounts which are available online.

Now, I've explained to them I have absolutely no problem paying them the service charges for the current period at the now higher rate of £139/month. I've sent that payment to them now (their demand, by the way, was dated 18th October, but was received 24th October - giving only 7 days to pay).

What are my rights here? I feel it is not acceptable for the Agent to have miscalculated to the point where actually they are charging me the equivalent of 3 months' service charges in excess for the previous 12 months. Even if their operating costs were so much higher than expected, how is this my fault? Do they have a duty to be mindful?

I have asked them, again, to send me a proper explanation for the difference between what they budgeted, and what they actually incurred.

They're not new to operating the development: they've done this for three years now, having purchased the freehold from the previous owner who operated it for 4 years.

Any help much appreciated!

Thanks,

Rik.

G_M

Service charges are usually paid in advance.

At the start of the year, the managing company estimates how much they will need during the coming year and bills accordingly. However, they cannot forecast 100% accurately.

Electric charges my rise; Labour charges may increase; an unexpected minot repair may come up

So an adjustment (+ or -) can be made at year end.

Check the online accounts.

For more info, see Leaseadvice.

Fire_Fox

Are you receiving annual summaries of accounts and have you compared this to previous years? We've had a hike this year particularly on insurance and on electricity so you may find the increase is reasonable. If you have any queries on the summary accounts leaseholders have the legal right to view and copy the accompanying invoices and service contracts, I doubt you have any right to a personal letter of explanation! Put all your queries and requests into writing, do not telephone or e-mail, and continue to pay your service charges in full or you will be in breach of contract (long lease). You can later challenge service charges that have already been paid.

Read some of the LEASE article along with your long lease. See what provision there is for paying in instalments in your long lease, you may find the full year is due in advance so letting you pay quarterly is actually a concession. It is your responsibility as a leaseholder to ensure you have the funds available to cover your contractual obligations - service charges, ground rent, buildings insurance and major works. You know when the invoices are due, put it on your calendar. http://www.lease-advice.org/publications/

propertyman

rsp wrote: »

I got a reply saying that the £371 was 'deficit' in the previous years' service charges (2011).

I simply got rather rudely directed to review their accounts which are available online.

Now, I've explained to them I have absolutely no problem paying them the service charges for the current period at the now higher rate of £139/month. I've sent that payment to them now (their demand, by the way, was dated 18th October, but was received 24th October - giving only 7 days to pay).

What are my rights here? I feel it is not acceptable for the Agent to have miscalculated to the point where actually they are charging me the equivalent of 3 months' service charges in excess for the previous 12 months.

Rik I understand it is a 25 % increase, but you are substituting opinion outrage and " I think" with how it is. Save it for now.

As has been posted service charges are"what they planned to spend" and at the end of the year, it's what "was spent"

Rude as it was, the accounts on line should answer your question, compare
1: last years budget ( on which the intimal demand was based)
2: the actual spend for the year

Then you ask why was x estimated as £y but actually £z? If the answer is unacceptable or nonsensical that's when you start arguing

But please dont say " I think" or "believe you have a duty" its nonsense and you have to be objective eg "if the utility costs went up- when was the contract last tendered, are they actual or estimated readings, but we told you the timeclock was broken, lights were on for 3 weeks while you fixed it"

The law ( and your rights which are set out in the summary of rights that must be sent with the bill or you can withhold payment) is that service charge msut be fair and reasonable. You,not they, have to show, not just believe, that they are not.

Do check your lease to see how deficits are recovered- does it
1:require a one off charge in addition to the current years estimated contribution, or
2: is it rolled into the current years budget-
make sure the agent did it right.

Good luck.

Alceste

We have a similar problem on a flat we bought last February - we've just had a service charge demand for a deficit for 2011 - before we bought it - what should we do? All tips gratefully received.

Fire_Fox

Alceste wrote: »

We have a similar problem on a flat we bought last February - we've just had a service charge demand for a deficit for 2011 - before we bought it - what should we do? All tips gratefully received.

In general you inherit ALL the legal rights and responsibilities of being a leaseholder for your flat, unless your conveyancer had the vendor agree to fund this (unlikely). Have you read the LEASE website already linked to?
http://www.lease-advice.org/publications/documents/document.asp?item=14
http://www.lease-advice.org/publications/documents/document.asp?item=72
http://www.lease-advice.org/information/faqs/faq.asp?item=43

Why are the annual accounts being done so late? IIRC they have eighteen months to recover certain costs, is this for financial year ending April 2011? If so they *may* be too late but it *may* depend when they actually paid the bills, hopefully Propertyman will clarify. Do you have any concerns that they charges are not reasonable or reasonably incurred?

ETA just thinking about the six month limit for if a leaseholder requests accounts, wondering if the requests made during the conveyancing count ... :think:

propertyman

There are 3 things;

If the lease was granted after 1.1.1996 then as a general rule the deficit charge is not the current lessees responsibility.

However if costs have not been established at the time of purchase it is the position that your solicitor should have agreed either a retention or undertaking, or an indemnity policy will have been taken out by you.


The exceptions are the good old fashioned "male chicken" up, or the vendor has said "warts and all".

In short fetch out your purchase file and see what it says or contact the solicitor.

BUT write to the MA and explain that you will be paying the current charge however you do need two weeks to check what arrangements were made about the deficit between you and your vendor.

propertyman

Fire_Fox wrote: »

ETA just thinking about the six month limit for if a leaseholder requests accounts, wondering if the requests made during the conveyancing count ... :think:

Yes, the conveyancing will have no effect. As long as the request is made after the year end or the relevant accounting period, the landlord must produce it within one month, but not earlier than 6 months after that period ended ( unless he chooses to do so ).

If ours aren't out to clients within 3 months I want to know why!

propertyman

Fire_Fox wrote: »

IIRC they have eighteen months to recover certain costs, is this for financial year ending April 2011?

The 18 month rule is a tricky one.

1: it has no bearing on interim (estimated) charges

2: the limit can be extended beyond that as long as the amount that they will contribute is demanded or they are notified it will be demanded.

3: if the actual costs are less than 1, its commonly stated that none of the charges for the year are due which is incorrect- in that case certification can be later than 18 months if no additional deficit payment is required.

It's unlikely to be April 2011 and more likely 24th Dec or 31st Dec 2011. The demand should have been sent by the 23rd June/ 30th June or a section 20b notice sent advising owners of the cash expenditure (plus accruals 2010) and their likely contribution. That gives a worst case scenario.

Unless you are the London Borough of Barnett and got it horribly wrong.....:eek: