Excessive Service Charges

tiptop2019

Just wondering if anyone has had any success in challenging service charges for a domestic, leasehold property?

I have an apartment in a block of 5 - with 3 other residents also raising the same issue of an increasing annual service charge and absolutely no sign of the money being spent on the property.

I asked the management company for a breakdown of the costs for their latest bill, which has increased again for the second time in 5 years. They came back with this:

Lights/Alarms - £300
Insurance: £1,816
General Repairs: £525 (they haven't provided any evidence of what these repairs entailed?)
Cleaning: £360
Directors Liability: £130
Misc: £133 (again, no invoices for this random figure)
Agency Fees: £530 (they pay themselves this for ??? I don't know)
Reserves: £600

TOTAL: £4,394 for the block (or £878 per flat per year)

The overall annual charge does not appear excessive to people I've asked but my gripe is with the agency fees, the directors liability, the reserves and the misc.

The summary says there's only a few hundred left in reserves, so nothing for urgent repairs, we have to pay separately for everything. If any decorating is required in public areas or a lock breaks, we get sent an invoice, they don't consult anyone, they just arrange it with their own preferred supplier which tends to be super expensive.

They pay themselves £530 a year and they also claim Companies House filing and some accountancy costs under that £530 - even though they're a large company, with dozens of properties across this part of the country and it's the same limited company, with one set of accounts to file and one set of fees.

I was exploring the option of RTM (right to manage) but that actually looks very expensive to start off and they're unlikely to play ball and provide any details, which could lead to high solicitor costs, so I'm not sure if that's even an option now.

csgohan4

Accountant fees near I live cost 1800 incl vat for a company with a turnover less than 80k.


By All means you can try and manage it yourself, but time is money, how much is that worth to you?


£530 sounds good value IMO, but the other fees you will need to get more clarification

AdrianC

"Directors Liability" will be insurance against the directors of the management company being held personally liable. £130/year is hardly excessive.

So you're arguing with £530/year - a tenner a week - for the management company's fees, £133 for miscellaneous minor maintenance items, and £600 going into the sinking fund?

Out of those, the only one that would concern me is that £600 isn't enough to go into a sinking fund that's only got a few hundred quid in it now...

I'm sure they do just use a preferred supplier for minor maintenance - the cost overheads of consulting and getting tenders for every single fiddly minor ones-twosy job would be ridiculous, and you'd be moaning that everything took months.

Honestly, I'm not sure owning a flat is for you.

tiptop2019

csgohan4 wrote: »

Accountant fees near I live cost 1800 incl vat for a company with a turnover less than 80k.


By All means you can try and manage it yourself, but time is money, how much is that worth to you?


£530 sounds good value IMO, but the other fees you will need to get more clarification

Oh yes. If it was a single property in a limited company, the accountancy fees are not too bad. I used to pay £1,200 per year for my ltd.

However, they manage multiple properties. So, as far as I can see, they charge each property £530 (it may be more or less). They have one limited company, one set of fees, one set of accounts to prepare but they must have 10 to 15 properties from what I know of.

So, when they charge us £20 for filing a document at CH, they also go on to charge every other property £20 for filing. They also charge us for the Director Liability but again, this must be multiplied across all their portfolio, we won't be the only block paying that fee?

tiptop2019

AdrianC wrote: »

"Directors Liability" will be insurance against the directors of the management company being held personally liable. £130/year is hardly excessive.

So you're arguing with £530/year - a tenner a week - for the management company's fees, £133 for miscellaneous minor maintenance items, and £600 going into the sinking fund?

Out of those, the only one that would concern me is that £600 isn't enough to go into a sinking fund that's only got a few hundred quid in it now...

I'm sure they do just use a preferred supplier for minor maintenance - the cost overheads of consulting and getting tenders for every single fiddly minor ones-twosy job would be ridiculous, and you'd be moaning that everything took months.

Honestly, I'm not sure owning a flat is for you.

Yes. Because that's £1,263 per year being poured in to a Ltd Co. and nothing comes of it. A few hundred pounds may be put away but then it's absorbed by 'admin fees' for them sending a letter once a year.

Again, multiply that by all of their properties, as they're a management agency, they will be clawing in over £12k a year in 'admin' costs that don't appear to have any invoices or costings attached. Easy money I guess.

So you'd be happy to just throw £252 a year in to the abyss and not question it?

AdrianC

OK, now I am sure.

Just buy a freehold house.

eddddy

tiptop2019 wrote: »

General Repairs: £525 (they haven't provided any evidence of what these repairs entailed?)
Misc: £133 (again, no invoices for this random figure)

You have the right to inspect invoices:

Rights to further information (inspecting accounts and receipts) (section 22 of the Landlord and Tenant Act 1985)

Leaseholders also have the right to inspect documents relating to the service charge to provide more detail on the summary. Within six months of receiving the summary, leaseholders (or the secretary of a recognised tenants’ association) can write to the landlord to ask if they can access and inspect the accounts, receipts and any other documents that are relevant to the service charge information in the summary and to ask them to provide facilities to copy these.

Link: https://www.lease-advice.org/advice-guide/service-charges-other-issues/#14

tiptop2019 wrote: »

If any decorating is required in public areas or a lock breaks, we get sent an invoice, they don't consult anyone,

Do you get a formal service charge demand?

(Or are they asking you if you want to voluntarily agree to paying for the proposed work?)

If they want to demand more than £250 for works, the law says they have to do a section 20 consultation.

tiptop2019 wrote: »

they just arrange it with their own preferred supplier which tends to be super expensive.

The law says that service charges must be reasonable.

If it's super expensive, you can challenge it as being an unreasonable service charge demand.

tiptop2019 wrote: »

They pay themselves £530 a year and they also claim Companies House filing and some accountancy costs under that £530 - even though they're a large company, with dozens of properties across this part of the country and it's the same limited company, with one set of accounts to file and one set of fees.

Again, the law says that fees must be reasonable.

One way to test if they are reasonable is if other managing agents charge similar fees.

(Maybe you could contact other managing agent firms saying that you thinking of going down the RTM route, and ask them what their management fee would be. And see if it's similar to what your current managing agent is charging.)

Davy_Jones_II

I’ve no idea if it’s excessive or not in your case, but for comparison a five bedroom flat that I looked at in Poplar had a charge of £21,000 per year.

That was for the flat, not the building.

NeilCr

When you say a bill do you mean for the forthcoming period or for the year gone by? We send out our service charges in advance so they are estimates

Who is your freeholder? They will have employed the MA - if they are approachable could you raise your concerns with them?

If you are thinking of RTM you need to make sure all residents are onside. Otherwise, it could be you doing the running around, etc etc

Eddddy, as usual, gives sound advice in the post above

nik_k

tiptop2019 wrote: »

General Repairs: £525 (they haven't provided any evidence of what these repairs entailed?)

£525 repair costs for a block of 5 flats for a period of 12 months seems super cheap to me...if I could only spend £100 a year on repairs I'd be a very happy chappy

Jacquelyne

tiptop2019 wrote: »

So, when they charge us £20 for filing a document at CH, they also go on to charge every other property £20 for filing. They also charge us for the Director Liability but again, this must be multiplied across all their portfolio, we won't be the only block paying that fee?

The directors and officers insurance will be specific to your block of flats. It's not covering the managing agent or their business, its covering the directors/freeholder of your block of flats.


The same with the filing of accounts. Each block of flats that they manage will have their own accounts which will need to be filed separately under the freehold name. It is not filed within the managing agents own accounts because its a completely separate company.