Retention Not Held Back (Leasehold)

kitchendevil

Hello,
I recently purchased a leasehold property.
At the time, the year end accounts weren't finalised so my solicitor advised they would ask for a retention to be held back from the seller.

After completion it was clear:
a) The seller had not settled their account, and there were outstanding maintenance charges
b) The year end accounts found that there was deficit that would need to be shared between all leaseholders.
Although this was all before I took legal ownership, this debt is now transferred to me as the new owner.
If I do not settle the debt within the coming month I will be charged administration fees and maybe subject to debt recovery.

My solicitor asked the sellers solicitors to cover these costs from the retention. It appears that the sellers solicitor did not hold back the retention.

My solicitor is advising they did all they could, and can not do anything further.

We have contacted the seller, but they are advising unless the management company confirm the amount due they won't pay it. The management company are advising the seller they don't get involved in working out apportionments, this is up to the solicitors. My solicitor has provided the sellers solicitor what we believe to be due.

This has been at deadlock for about a month now.

So I'm looking for advice on:
a) Is my solicitor correct in advising they have done all she could, and they are not at fault?
b) Is there any action I or my solicitor could impose on the sellers solicitor to make them cover these costs?
c) Should I simply settle the debt and take the seller to Small Claims Court for the outstanding amounts?

Thanks in advance!

Thrugelmir

kitchendevil wrote: »

c) Should I simply settle the debt and take the seller to Small Claims Court for the outstanding amounts?

Is this what your solicitor has advised you to do?

kitchendevil

Hi Thrugelmir, they aren!!!8217;t providing me with any advise; simply saying they!!!8217;ve done all they can do and completed their work.

Tom99

How was the retention documented, was it part of the sale contract or just word of mouth between solicitors?

silvercar

My solicitor asked the sellers solicitors to cover these costs from the retention. It appears that the sellers solicitor did not hold back the retention.

Your solicitor should be the one pushing back on this. Saying to the other solicitor that they are held to account for the retention. If that was what was agreed in the contract, then it should have been retained. If the sellers solicitor screwed up, they need to make good.

eddddy

kitchendevil wrote: »

My solicitor asked the sellers solicitors to cover these costs from the retention. It appears that the sellers solicitor did not hold back the retention.

A retention would normally be held by your solicitor, not the seller's solicitor.

So can you clarify... are you saying that your solicitor asked if you could keep a retention?

If so...

• Did the seller's solicitor say 'Yes' or 'No'?
• Did your seller's solicitor say 'Yes', but your solicitor forgot to retain it?
• Did your seller agree that they would pay an apportionment?

If the seller never contractually agreed that they would pay an apportionment of the costs, you don't really have a case.

kitchendevil wrote: »

We have contacted the seller, but they are advising unless the management company confirm the amount due they won't pay it. The management company are advising the seller they don't get involved in working out apportionments, this is up to the solicitors. My solicitor has provided the sellers solicitor what we believe to be due.

Might they be saying they will only pay a bill with their name on it - i.e. they will only pay money they actually owe?

The bill you have has your name on it - so you owe the money, not them.

(If they didn't contractually agree to pay an apportionment, they have no duty to pay any part of a bill owed by you.)

kitchendevil

Hi Eddddy,

I thought it might be the case that my socilitor should have held the retention, but I couldn!!!8217;t find anything online to definitely say this, so I was unsure if I could go back and raise a complaint regarding this.

My socilitor asked me to confirm I was happy with the retention amount after the sellers sociltor agreed to the ammount. I was not given any further details as to who was to hold the retention or what the agreement terms were. I have asked to see a copy of this agreement if it exists.

At exchange the sellers socilitor provided a breakdown payable by me that included apportionment for the remainder of the months service charges. To clarify the purchase was mid November and I was asked to pay for the remainder of November!!!8217;s service fees. As the seller has not paid the October and November service I hoped that this could be used as evidence that they should have paid this?

On the point regarding the name on the bill. As the service charge is issued 6 monthly they recieved a bill with their name on it at the start of that period. They paid that normally by standing order monthly, and essentially decided to cancel that standing order early , thus leaving the debt.

eddddy

Your posts are really hard to follow - but I think you may misunderstand the legal position, so I will just explain that.

• When the seller owned the flat, bills would be issued in their name and they have to pay the full amount.

• When you own the flat, bills would be issued in your name and you have to pay the full amount.

It doesn't matter what date you bought the flat, or what period the bill covers - what matters is who the owner is on the date the bill is issued (i.e. the person named on the bill).

• For example, if you buy a flat on the 1st March 2018, and a bill is issued by the freeholder on the 2nd March 2018 - relating to repairs done in 2017, by law, you owe that money and you have to pay it (even though it relates to repairs done before you owned the flat).

---

However, many buyers and sellers think that is unfair. So, often, the buyer and seller ask their solicitor to make a separate agreement about apportioning costs. Sometimes this involves keeping a retainer.

It sounds like you solicitor may have drawn up an agreement like this.

So you need to read that agreement, to see if your seller owes you any money. (Don't read somebody else's agreement that you find on the internet - that may be different to yours.)

If you don't have that agreement, you could probably ask your solicitor for a copy.

Tiglet2

When solicitors agree to retain funds they will draft a Special Conditions clause to be inserted into the Contract. This Condition will contain details about which solicitor is responsible for holding the agreed sum, how the funds are to be calculated and also when the funds are to be released. Often there will be a specified time limit for the funds retention, usually around 18 months. Once the final accounts for the year have been finalised (you need to find out when this is likely to be) the funds can be apportioned between the purchaser and the seller and distributed to the correct parties in accordance with the agreement.

The purchaser
If you are purchasing a property, your solicitor should have paid the funds to the seller's solicitor minus the amount of retention which had been agreed. The solicitor responsible for holding the funds will retain them until the finalised accounts are received. If there was a deficit in the Service Charge for the year, the solicitor will calculate the costs of the Service Charges from the date of purchase, which will be the sum which you as the purchaser owe. Depending on the terms of the Special Conditions, the payment for the Service Charge deficit can then be made. If there is no deficit, then the funds will be return to the seller.

The Seller
If you are the seller, the retention of funds means that when the completion monies are paid on the date of completion, they will be less the amount agreed for the retention. Normally, the solicitor responsible for retaining the funds will be responsible for receiving the final accounts and calculating the distribution of the monies, although this may differ depending on the agreed Special Conditions.

Once the accounts have been received, the solicitor will note whether there was a Service Charges deficit and if so, how much of this occurred during your ownership of the property. The solicitor will then calculate the sum which you owed during your ownership and this sum will be either paid directly to the Management Company, or the purchaser!!!8217;s solicitor depending on the agreed Special Conditions. You will then receive the remainder due to you. If there is no deficit, then the total of the retained funds should be returned to you. Alternatively, if a surplus has been identified then you should receive payment for the surplus calculated during your ownership.

OP you only completed on your purchase in November. It is highly likely that there are no finalised accounts as yet. Obviously you do need to clarify whether a retention has been held at all. If you have a copy of the purchasing Contract, check the Special Conditions on the reverse. You do have to pay the bills pending finalised accounts though.

kitchendevil

Thanks Tiglet2 that is really useful, I've now requested the agreement between the solicitors.

eddddy sorry, I'll simplify, putting the retention & end of year accounts issue aside.
Property Management Fees demand was issued on in Sep 2017 for 6 months of fees addressed to Seller.
Only a sixth of the demand amount was paid by the seller.
I purchased mid November 2017, paying the seller my contribution of November fees.
The seller paid no more of the demand.
If the seller does not pay any more of the demand, then the full outstanding balance will be transferred to me, and I will have to pay it.
I appreciate I should pay half (Dec, Jan & Feb), but the seller should be paying the other half (Sep, Oct, Nov).

eddddy

kitchendevil wrote: »

Property Management Fees demand was issued on in Sep 2017 for 6 months of fees addressed to Seller.
Only a sixth of the demand amount was paid by the seller.

So assuming the lease says that fee is due in Sep 2017, the seller still owes the property management co 5/6ths of that bill.

(i.e. Assuming the fee was due in Sep 2017, but the management co allowed the previous owners to pay the total amount in 6 stages.)

If the lease doesn't say that the fee is due in Sep 2017, the situation may be different.

(If for example, the lease says the fee was due in Feb 2018, and it was being paid in advance - you would probably be liable for the full amount, as you owned the flat in Feb 2018.)

kitchendevil wrote: »

The seller paid no more of the demand.
If the seller does not pay any more of the demand, then the full outstanding balance will be transferred to me, and I will have to pay it.

No - not if the fee was due in Sept 2017.

The Landlord and Tenant (Covenants) Act 1995 does not allow a service charge that has been demanded from a previous leaseholder to be transferred to a new leaseholder.

See: https://www.lease-advice.org/faq/ive-recently-bought-a-leasehold-property-am-i-liable-to-pay-service-charges-relating-to-a-period-prior-to-me-purchasing-the-property/

And: https://bradysolicitors.com/brady-blog/happens-service-charge-arrears-property-sold/