450% service charge hike on my leasehold flat. Can managing agent just do that?

pthompson

hazyjo said:

What do you mean by "buy the leasehold of my flat"?

Is this an ex local authority property?

Sorry if I wasn't clear.  What I mean is that I bought the flat as a leashold; not as freehold.
Not ex-LA -- it's a private landlord based in Bahrain owning the block via a Panama-based shell company with whom I have to liaise via his eye-wateringly expensive solicitors in Switzerland. 

pthompson

eddddy said:

Usually a lease will specify what percentage or proportion of the total service you have to pay.

But sometimes a lease will just say that each leaseholder must pay a ‘fair’ or ‘just’ proportion of the service charge. If your lease says something like that, ask the managing agent on what basis they are adjusting your proportion of the service charge. For example, is it on the advice of an RICS surveyor?

Then, if you want, you can tell the managing agent that you will only pay the adjusted proportion under protest, and you intend to challenge it at a tribunal.

Thanks Edddy,
I've found it in the lease:  It says I am to contribute 8% for the Sch 1 expenditure and 0% for Sch 2 (i.e. common parts).  And 8% of Sch1's accounts are indeed £912.   So the managing agent is correct.

It appears that I (and presumably the previous leaseholder) should have been paying £912 but have only been billed £200 p.a. in error.

It's comforting to know that they're not suggesting I pay any "arrears", but am I right to challenge them on the grounds that 450% is such as big and unexpected hike?   I reiterate:  One of the attractions of the flat when I purchased it was the relatively low service charges.

pthompson

bouicca21 said:

Your lease should tell you what proportion is allocated to your flat.  The managing agent can’t just change it, so the question is how have they  been calculating it in the past And did they do it correctly.

Thanks.  It seems that the managing agent has neen calculating my proportion incorrectly.   I should have been paying £912pa but was only billed £200.
Given that one of the attractions of the flat when I purchased was the low service charge, am I right to challenge them on the grounds that 450% is such as big and unexpected hike?

greyteam1959

I would be keeping quiet if it was me.
The big guns might start firing and demand payment of arrears.

inspectorperez

Does your lease provide for annual accounts supporting the management charge? I would speculate that it should in order for Sch 1 and 2 expenditures to be quantified and used as a basis for apportioning the charge. As management charges are normally on a "break even" basis (although some may include a sinking fund), it would appear on the face of it that either the other leaseholders have been overpaying, or there is a deficit in the agent's client account for this property. I am therefore surprised that you are not being asked to settle what appear to be arrears for your flat.

I guess that is not what you are hoping to hear, but that is certainly my experience in dealing with management companies as a reporting accountant.

eddddy

ARH_2 said:

On paying under protest, this is a risky move. Really you should work out what you owe and pay that. If the other side doesn't agree they will try to convince you of their point of view and/or take legal action. Paying under protest and then trying to recoup that payment puts the effort (and cost) required to make it happen with you.  

FWIW, that's not good advice for a leasehold service charge.

It's much, much safer to pay under protest and then challenge it at a tribunal. This flowchart explains the risks of withholding some or all of your service charge payment: https://www.lease-advice.org/files/2016/09/service-charge-dispute-resolution-flowchart2-1.pdf

eddddy

pthompson said:

Given that one of the attractions of the flat when I purchased was the low service charge, am I right to challenge them on the grounds that 450% is such as big and unexpected hike?

No - that's not a basis for challenging a service charge.

If you argued that in a court / tribunal - the reply would be that you should have read the lease to see what your service charge liability would be.

But if there are individual costs included in the service charge which are unreasonable, you can challenge those individual costs.

bouicca21

If it’s due, irs due. No grounds to dispute.

AdrianC

So it hasn't gone up 450% (actually, only have been +350%). They've really been undercharging you nearly 80%.

Smile, and accept their kind offer not to backdate the erratum.

eddddy

pthompson said:

I've found it in the lease:  It says I am to contribute 8% for the Sch 1 expenditure and 0% for Sch 2 (i.e. common parts).  And 8% of Sch1's accounts are indeed £912.   So the managing agent is correct.

It appears that I (and presumably the previous leaseholder) should have been paying £912 but have only been billed £200 p.a. in error.

It's comforting to know that they're not suggesting I pay any "arrears",

It appears that I (and presumably the previous leaseholder) should have been paying £912 but have only been billed £200 p.a. in error.

It doesn't work like that.

You pay 8% of the service charge.

• If you are paying £912 this year, it means that this year's estimated total service charge is £11,400
• If you paid £200 last year, it means that last year's estimated total service charge was £2,500

Perhaps there are a lot of repairs planned for this year - repairing the roof, repainting the windows, putting up a new fence etc, and/or there was a big deficit last year.

Perhaps next year there will be no repairs needed, so the total service charge might drop back down to £2,500 and you'll only have to pay £200 again.