Service Charge Fraud?

G_M

da_rule wrote: »

Under section 21 of the Landlord and Tenant Act 1985 you can request a summary of the accounts from the landlord. Then, under section 22 you can ask to see receipts and invoices etc.

You don't have to pay the service charge (under section 21A) until the required information under section 21 has been provided.

https://www.legislation.gov.uk/ukpga/1985/70

AdrianC

eddddy wrote: »

I think you've misunderstood the solicitor's comment.

Given there are 34 flats, I would guess that each flat owner (leaseholder) is responsible for 1/34th of maintenance/repair costs.

So if freeholder/landlord spends, say, £3400 on repairs, each leaseholder has to pay him £100.

The freeholder/landlord owns 8 of the flats, so he collects a total of £2600 from the remaining 26 leaseholders.

So he has spent £3400, but only gets back £2600 - so he has effectively paid out £800 (i.e. £100 for each flat he owns).

It's worth clarifying that the freeholder and leaseholder might be the "same person", but what's relevant here is whether they're the same legal entity.


So if Mr Joe Bloggs owns the leasehold flats himself, and Mr Joe Bloggs also owns Bloggs Property Ltd, which owns the freehold... then, yes, "Joe Bloggs" is paying "himself", but he isn't actually doing that. Mr Joe Bloggs is paying Bloggs Property Ltd.

Even if it is all Mr Joe Bloggs personally, all 34/34ths of the service charge need to be accounted for in the accounts provided to the other leaseholders.

So - "roof maintenance: £3400. £100/flat" - it's just that only £2,000 changes hands, because Mr Joe Bloggs doesn't physically need to get £100/flat out of his bank account to pay the charge for his 14 flats, only to pay it straight back into the same bank account. He can just say "Yep, I've had the £100 in from each of the other 20 leaseholders, so <tick>".


This is where the OP seems to be getting confused. He's seeing Mr Joe Bloggs with 20 of the 34 flats, roof maintenance bill of £3,400, and assuming that's being worked out to £3,400/20 = £170/flat not owned by Mr Joe Bloggs.


Whether that's what is actually happening, we have no way of knowing without seeing the documentation. But if it IS happening, then there's something amiss unless the leases in place for those 20 flats explicitly provides for it. And if the leases do, then that's something the OP agreed to by buying the lease for that flat.

loveprada

Thank you all for clarify the situation. I do realise what the legal position is and nevertheless I am suspicious of fraud. As clarified by Eddddy and Adrian C, I am suspicious that the entire, say, £3400 is being charged to the 26 flats that are independent leaseholds. I would not know whether the freeholder owns the individual flats within different companies to the freehold. At any rate we are hoping to enfranchise and have handed it over to a solicitor and I wanted to see if there is a way of investigating this without having to employ say a forensic accountant.

tlc678910

Hi,
Are you going to ask to see the accounts and receipts as suggested?

loveprada

tlc678910 wrote: »

Hi,
Are you going to ask to see the accounts and receipts as suggested?

Yes, I'm about to ask for it now. As suspected there is an exponential leap in "General repairs and maintenance" of £7k in the 2018 accounts and our building insurance is £23k for 34 flats - we dont even have lifts. So unrealistic.

loveprada

da_rule wrote: »

Under section 21 of the Landlord and Tenant Act 1985 you can request a summary of the accounts from the landlord. Then, under section 22 you can ask to see receipts and invoices etc.

You don't have to pay the service charge (under section 21A) until the required information under section 21 has been provided.

Thank you!!

loveprada

AdrianC wrote: »

You do realise you're alleging criminal fraud here?

Yes, that's precisely my point

kleapatra

loveprada wrote: »

Yes, I'm about to ask for it now. As suspected there is an exponential leap in "General repairs and maintenance" of £7k in the 2018 accounts and our building insurance is £23k for 34 flats - we dont even have lifts. So unrealistic.

Don’t want to ruin your rant but I deal with a building of 8 flats (as part of my job) and the insurance is around £11k so £23k isn’t really that outlandish. Just think, if one burns down, they probably all will and that would be expensive hence high premiums!

loveprada

kleapatra wrote: »

Don’t want to ruin your rant but I deal with a building of 8 flats (as part of my job) and the insurance is around £11k so £23k isn’t really that outlandish. Just think, if one burns down, they probably all will and that would be expensive hence high premiums!

Thanks for that, maybe there have been some insurance claims that have pushed the premium up.