Service charge retention questions

neilio

I'm in the process of selling my leasehold flat. The solicitor has asked if I am agreeable to a retention of funds from the sale to contribute to any service charge deficit when the building landlord runs their end of year service charge accounts, in order to protect the buyer from monies that might be owed from the time of my ownership.

The retention amount being requested is £500. This is incredibly high. There has never been a deficit of this much, the maximum was probably £120 several years ago, and other years I have been owed money back.

I had another buyer who pulled out several months ago and they were requesting £300 retention which I did agree to. But this new buyer is asking for £500 and I think it's way too high.

I've initially responded saying I am not agreeable, so I'm waiting to see what they respond with.

How do the solicitors come up with these numbers?

Who keeps the retention? Does the cash get passed to the buyer or does it sit in the solicitor's account indefinitely until such time that the buyer might need to draw down on it in the event of a deficit?

I would agree to the amount, but my solicitor said that it is very rare (practically impossible) for the vendor to claim any retention monies back if they are not all spent. Is that correct? Who keeps the monies that are not spent?

Guest101

The money is kept until the end of year accounts are published, and used only for a proportion of costs that would be yours.


It's very common, im unclear why your solicitor is giving you bad advice.

neilio

I know that (see original post). My questions are: What happens to the rest of the money? Who keeps it? Does it get returned to me? Does the cash I provide now go to the buyer or do the solicitors keep it until it is required?

davidmcn

It's held by the solicitors and you get any excess returned to you.

Guest101

neilio wrote: »

I know that (see original post). My questions are: What happens to the rest of the money? Who keeps it? Does it get returned to me? Does the cash I provide now go to the buyer or do the solicitors keep it until it is required?

?? You get it back....


The solicitors keep it.

neilio

So my solicitor did give me bad advice. How can I hold my solicitor to account on this so I do get the monies back? What can I say to them, or quote? Is there any legal jargon I can use to make sure that if I agree to the amount that any excess is returned to me?

This might sound daft and you wonder why I'm concerned, but when a solicitor says one thing and other sources say another, I need to know what I'm talking about or referring to when making my justification

Guest101

neilio wrote: »

So my solicitor did give me bad advice. How can I hold my solicitor to account on this so I do get the monies back? What can I say to them, or quote? Is there any legal jargon I can use to make sure that if I agree to the amount that any excess is returned to me?

This might sound daft and you wonder why I'm concerned, but when a solicitor says one thing and other sources say another, I need to know what I'm talking about or referring to when making my justification

I think you just need to ask them for clarification, I suspect it's a communication issue.

davidmcn

neilio wrote: »

How can I hold my solicitor to account on this so I do get the monies back? What can I say to them, or quote? Is there any legal jargon I can use to make sure that if I agree to the amount that any excess is returned to me?

Don't use jargon, just ask in plain English where the money will be lodged and whether/when you get the excess back. I suspect it's just a misunderstanding and that nobody is planning to steal your money.

G_M

This seems perfectly straightforward.

* As you yourelf said, at year end, you may owe the freeholder money for the time you lived there if he has spent more than anticpated (on repairs, maintenance, services etc)

* Your buyer will be hit by this charge as he will have become the leaseholder - so understandably does not wish to pay for the period before he purchased

* you and he agree a retention. He willpay the full purchase price as agreed, but the retention amount will not be passed to you on Completion. The solicitor will hold it in his Client Account.

* at year end, the freeholder will calculate the cost for the year.

* If there is an additional amount to pay, it will be divided (number of days ownership each) between you and the buyer. The solicitor will pay the freeholder your share and return the balace to you

* if there is nothing to pay, the solicitor will return the full retention to you

* the amount of the retention is whatever you and the buyer agree. The buyer will of course want to make sure it is enough for the worst case charge, and the solicitors can advise on what this might be.

*Since you will in any case get back any amount not needed it is only a temporary cost to you

When is the year end for your freeholder? End of calender year (December)? Or end of financial year (April)? Either way it's only a few months and then you get the money back (unless it is due to the freeholder).

ps - this happens all the time!

saajan_12

neilio wrote: »

I know that (see original post). My questions are: What happens to the rest of the money? Who keeps it? Does it get returned to me?

Why would this make sense, where else would the excess money (once service accounts finalised) go?
- buyer? Then the retention is just a reduction in price then, nothing to do with service charges.
- solicitor? That's just extra fees then, somehow dependent on the state of service charge accounts.

Ofcourse its supposed to go to you, just need to clarify with the sols what the process is for that.