Freeholder demanding Ground Rent upfront

Le_Kirk

All owners of apartments in a block in Stratford (East London) had been paying Ground Rent monthly since moving in, then Freeholder said want to have ground rent up front one year in advance. All owners up in arms and, after much discussion, they came to an agreement it would be taken monthly along with other service charge.

Since the Freeholder failed to provide some of the service this year, there was an agreement to refund a chunk of money. Owners were told this week that they would not be getting the refund and it would be taken to cover the Ground Rent that was in arrears!!!

Question: -
1. Is it legal (without prior agreement) to demand ground rent in advance?
2. Is it legal to renege on a previous agreement to allow monthly payment and then take (steal) owners rebates?

If there is law on both points would appreciate knowing what and where it is. TIA

hazyjo

What does your lease say about ground rent?

HampshireH

Totally down to the clause in the lease.

Many leases state in advance.

G_M

Le_Kirk wrote: »

Question: -
1. Is it legal (without prior agreement) to demand ground rent in advance? if that's what the lease says, then yes. If the lease says 'monthly', then you pay monthly
2. Is it legal to renege on a previous agreement to allow monthly payment and then take (steal) owners rebates? Service charges and ground rent are separate. The freeholder cannot use one to pay the other.


If a rebate of service charge was agreed but not provided, then there is a dispute over the service charge.


Payment of ground rent does not affect that.

For more see

https://www.lease-advice.org/


Have you and the other owners considered managing the building yourselves? How many flats? How many owners are unhappy?

eddddy

Le_Kirk wrote: »

Since the Freeholder failed to provide some of the service this year, there was an agreement to refund a chunk of money. Owners were told this week that they would not be getting the refund and it would be taken to cover the Ground Rent that was in arrears!!!

This all sounds a bit confused and illogical.

If there was a service charge surplus, you wouldn't get a refund, you would just pay less service charge in the following year.

What makes you think you're paying the ground rent in advance, as opposed to monthly?

Are you having to pay a larger amount in month 1 than months 2 to 12?

What does your service charge and ground rent statement say?

NeilCr

eddddy wrote: »

This all sounds a bit confused and illogical.

If there was a service charge surplus, you wouldn't get a refund, you would just pay less service charge in the following year.

Doesn't it depend on the lease?

https://www.lease-advice.org/advice-guide/service-charges-other-issues/

"Your lease will say whether you must make advance payments and, if so, whether these are based on the previous year’s cost or an estimate of the cost in the year to come. There will often be a final charge due at the end of the year when the actual costs are known, if these are not covered by the payments you (and any other leaseholders) have made. In this situation, the landlord will send you a bill asking for your share of the shortfall. If the total payments leaseholders have already made are more than the actual costs, depending on what it says in the lease the extra money may be:

used to reduce next year’s charge;
refunded; or
paid into a reserve fund."

I know with us we have various blocks of flats and houses paying various amount of service charges. It is all reconciled at the end of the year which can result in some owners paying more and others getting a refund.

Am I missing something as you know far more about these things than me?

Le_Kirk

Thanks to all those who answered.
To give some answers: -
There is no possibility of the owners buying the freehold, we are talking of a large "professional" freeholder and management company.
The lease does say payable annually on 1st April
The original freeholder/builder sold the freehold to the new company.
The original freeholder collected the ground rent along with the service charge monthly and the owners have this agreement in writing.
The new company has for all of last year and the first six months of this year, collected the ground rent along with the service charge monthly.
There is no "service charge surplus" per se, it was an agreed refund due to the freeholder not providing some of the services.
All of the owners are angry about this. They see it as "not theft but certainly a try-on" They understand that having been "offered" a reduced monthly DDR, it will lead to a zero balance at financial year end, just leaves a nasty taste.
Maybe that's why quite a few owners are looking to sell up and move away from this particular grasping management company.

G_M

Le_Kirk wrote: »

Thanks to all those who answered.
To give some answers: -
There is no possibility of the owners buying the freehold, we are talking of a large "professional" freeholder and management company.
who suggested buying the freehold? Did I miss that? Though I suggested managing the maintenance. That's not the same. See Right To Manage.

The lease does say payable annually on 1st April Then you must pay annually in April, not monthly. Does it say 'in advance'?
The original freeholder/builder sold the freehold to the new company. Irrelevant
The original freeholder collected the ground rent along with the service charge monthly and the owners have this agreement in writing. Irrelevant. What matters is what the lease says.
The new company has for all of last year and the first six months of this year, collected the ground rent along with the service charge monthly. Irrelevant. What matters is what the lease says.
There is no "service charge surplus" per se, it was an agreed refund due to the freeholder not providing some of the services.

In other words you all paid more than was spent. Call it what you want.

All of the owners are angry about this. They see it as "not theft but certainly a try-on" They understand that having been "offered" a reduced monthly DDR, it will lead to a zero balance at financial year end, just leaves a nasty taste.

It is very common for an estimate to be made at the start of the year (April) of how much will be needed to cover the service costs for the coming year.


At the end of the year (ie March) a full account is prepared of all actual costs, which may be greater than, or less than, the original estimate.



If an additional amount is needed to cover extra costs (eg the communal electricity was more expensive than anticipated) then a further invoice is sent to leaseholders. If there is an excess of funds, this is usualy carried forward, reducing the bill for the coming year (which is again estimated in April).


But if you are all so unhappy, then take over! See


https://www.lease-advice.org/advice-guide/right-manage/


https://www.lease-advice.org/advice/find-the-right-information-for-you/?step-option=61