Reasonable service charge increase over 18 years

LDG

I'm looking into service charges on a leasehold property acquired in 2002.
At the time the service charges were stated at £1300 per annum with £100 ground rent in addition.

Following the purchase thousands of outstanding charges from previous years were brought forward (not disclosed) and having failed to locate the seller paid all the charges.

Within three year period the charges doubled and continued to increase.

There was a consistent increase in the amounts of building insurance premiums, security (despite two robberies registered with police), electricity, moreover large works (redesign of common areas, reaccepting, landscaping) together with random things like Christmas decorations have been added without detailed proposals. When details were requested, together with detailed accounts they were mostly refused and the Managing Agent responded that they think they shouldn't be sending this information to the leaseholders. The communication goes one way. Whilst I'm challenging the Managing Agent the amount paid to them has been reduced, which prompted threatening letters of legal action, the demands for accounts disclosure remain unanswered.

Currently the charges stand around £6000 (increase from £1300 17 years ago), various online research tools estimate service charges for 900 properties in the area averaging £2000.

The question is therefore whether there are trends or reasonable annual increase (akin to inflation) that is an absolute baseline increase that must be taken into account before a detailed analysis and quote gathering is undertaken? Over this time span what increases are reasonable to assume? The property valuation roughly doubled over the same time period (service charges more than quadrupled).

Thank you in advance

bouicca21

https://www.lease-advice.org/faq/how-can-i-find-out-what-my-service-charge-is-being-used-for/

princeofpounds

Stop thinking about it in terms of % increase. That's merely a warning sign, it doesn't mean anything legally.

Think about it more along these lines:

- whether it can be legally charged under the terms of your lease (liability)
- whether the amounts are reasonable for what is being provided (proper management)
- whether what is said to have been provided actually has been (fraud)

Lease-advice is a great place to start. It's a government-funded advice service to help you understand your rights and obligations.

It sounds suspicious, partly because of the lack of co-operation on disclosure, and partly because I suspect few leases allow charging for Christmas decorations (but you never know...)

There will still probably be some items however that remain expensive, even if your managing agents are a bit dodgy.

How many properties are under this freehold? Do other leaseholders have concerns?

LDG

princeofpounds
Thank you for your comment. Lease Advice have simply mentioned that whatever is asked is best to pay even under protest, in fact it was quite disappointing as the call added no value whatsoever.

In terms of the important points you raised here is the impression I'm getting
- whether it can be legally charged under the terms of your lease (liability)

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the lease mentions "reasonable charges to recover landlord's costs. Now that's quite a broad definition. Having bright lights on in the entire building 24/7 is hardly reasonable in the generation of motion sensors (one example) along with caretaker's flat rental (who's no longer even on duty due to alcoholism) but again, when details are requested no response follows

- whether the amounts are reasonable for what is being provided (proper management)

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presumably this can be answered if comparative quotes can be obtained. Generally speaking the quality of work delivered is far from satisfactory.

- whether what is said to have been provided actually has been (fraud)

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headings seem consistent with what's delivered, however the sheer amount of charges seems extortionate

Suspicious it is and because of this very reason I'm reluctant to pour any more funds in (having paid a fortune for previous lesses due to improper disclosure and still receive many backdated balancing charges without explanation). Indeed no mention of Christmas lights in the lease specifically.

There are just over 60 flats, all leasehold. Have heard of previous disputes and the residents association, there have been unsuccessful attempts to purchase the freehold in the past (costs about half the price of property), however over half the lessees remained silent so nothing came out of it.
It's not something that's being discussed openly, to each their own.

LDG

Bouicca21
thank you for the link
When requested simply received a one line invoice, one line stating "On account Service Charge" and a comment - that should suffice, we aren't obligated to provide details beyond that, which is not what Leaseadvise or gov.uk is stating. Further requests ignored.

princeofpounds

That sounds expensive for the freehold. Was that a proper valuation or merely what the landlord asked for?


I'm sorry your call to Lease Advice wasn't productive. It sounds to me like they were addressing a relatively narrow question rather than listening to the situation in its entirety. I had hoped they would explain to you the option of a Tribunal.


https://england.shelter.org.uk/legal/home_ownership/leasehold_property/service_charges/challenging_service_charges


However, their online advice is still very useful.


So you can challenge service charges at a First Tier Tribunal, but I would suggest that your best route to look at may be the Right to Manage procedures. But this requires you to get a critical mass of leaseholders together.


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

bouicca21

I think you need to go back to Leasehold advice with the specific question of how to force disclosure of expenditure- not whether you are liable to pay whatever is demanded.

I suspect you will at least have to threaten the tribunal but think they will cave earlier. The other thing to look up, bearing in mind the huge bill, is when the freeholder/managing agent is obliged to issue a section 20 notice.

LDG

bouicca21, princeofpound,
Have contacted LeaseAdvice and received some guidance and links. Timelines and sections of the Act are a lot clearer now. Was told that the burden of proof is on the leaseholder if they want to challenge and that there isn't a cap on charges. Whilst working on particulars of the lease (about whether those can be legally charged) still struggling on the other two points:
1. whether the amounts are reasonable for what is being provided (proper management). What kind of evidence is usually provided to say the opposite is true? Does one go heading after heading and gets a few quotes for each service? perhaps there are resources for building managers where they get the info? My understanding is that before any mediation or Tribunal the evidence needs to be quite quite substantial. Are there any good precedents worth studying as models?

2. whether what is said to have been provided actually has been (fraud)
Again, examples of case examples would probably clarify best.

bouicca21

I’ve not challenged my service charge - I’d actually like the managing agent to spend more! But the stuff I want doing, although legitimate under the terms of the lease, is desirable rather than essential and would require a section 20 and the agent doesn’t want the hassle.

But I do get a print out of expenditure so if I wanted to I could get alternative quotes to test e.g. whether £x for a monthly clear up of the garden and mowing the grass is reasonable.

No one can tell you whether your £6000 charge is reasonable without knowing what you get for that (I’m guessing it’s an upmarket property with lifts, and maybe a gym and concierge?). You will have to go through the accounts item by item yourself and do the comparisons to work out what is and is not reasonable. Sounds like the major works you mention should have been done under a section 20 but without knowing the cost per flat I can’t be sure. And even it it were above the limit, I don’t know whether a section 20 has been used.

NeilCr

bouicca21 wrote: »

I think you need to go back to Leasehold advice with the specific question of how to force disclosure of expenditure- not whether you are liable to pay whatever is demanded.

.

Did you ask this question and, if so, what was the answer?

This seems to me to be key at the stage you are at

Fire_Fox

LDG wrote: »

Have contacted LeaseAdvice and received some guidance and links. Timelines and sections of the Act are a lot clearer now. Was told that the burden of proof is on the leaseholder if they want to challenge and that there isn't a cap on charges. Whilst working on particulars of the lease (about whether those can be legally charged) still struggling on the other two points:

1. whether the amounts are reasonable for what is being provided (proper management). What kind of evidence is usually provided to say the opposite is true? Does one go heading after heading and gets a few quotes for each service? perhaps there are resources for building managers where they get the info? My understanding is that before any mediation or Tribunal the evidence needs to be quite quite substantial. Are there any good precedents worth studying as models?

2. whether what is said to have been provided actually has been (fraud)
Again, examples of case examples would probably clarify best.

Woah back up! You are not at 'evidence for tribunal' stage, you are at 'due diligence' stage.

Read the 'summary of rights and obligations' that should come with your service charge demands. Invest time reading and rereading the LEASE website. Read and reread your long lease.

Formally request access to the audited accounts/ invoices/ receipts/ service contracts, clearly referring to the relevant sections of the relevant Act. Send your letters 'Signed For', keep copies and keep the Post Office receipts.

If you find obvious discrepancies in the documentation, try to involve other long leaseholders. If several leaseholders are asking the same 'awkward' questions, you may find the managing agents relinquish their role.

It took me a long time to get access to documentation for my block, but it was enlightening: we were being defrauded by both the caretaking company and the cleaning company. My initial comparisons were to what is actually in my block (eg. I counted the light fittings in the common areas & noted the brand of lamps) and to the annual accounts of a much larger development (via close relatives).

HTH.