Selling a Leasehold property suddenly being asked for £9321.45 Service Charge

james277

Hi, I'm at a bit of a loss of what I can do so wanted to ask all of you. I'm in the process of selling my £630,000 leasehold flat. I have never been asked or received letters in regards to service charge or ground rent. In my original leasehold the ground rent is set as £250 and the service charge amount has a question mark. Having never been issued any demands for this money the freeholder is now stating I need to pay all the service charge and ground rent for the last 5 years I've owned the property equalling £9321.45.#

This is a lot of money to find however I can do it, however, it doesn't seem right that they can suddenly demand 5 years worth of charges at the same time, if i'd sold in 30 years time this figure would have been massive. I've done some reading and have read about the 18 month rule, which means I only have to pay the service charge and ground rent for the previous 18 months as no demands were made before now.

Would this apply to this situation? I would also like the current buyers to complete and not pull out so don't want to drag this out with a long legal battle.

Thank you for your help!

hazyjo

You must have known about the service charge and ground rent then you bought, surely? It's one of the first things people ask buying leasehold. You are obliged to pay it, I'm not even sure they have to remind you or request it. Didn't you once question why you left received a demand, or who you should be paying it to?

It will be due, it's just whether they will accept a reduced amount or payment plan. I'm very surprised they didn't realise the shortfall each quarter or year.

They will probably also be charging you several hundred for a management pack to sell. Perhaps there's a deal to be done there. In their shoes, I'd not be so accommodating though, sorry.

james277

Unfortunately, it was my first leasehold property and the freeholder originally owned this property as well as it's a 2 flat building, originally he didn't have insurance for the property and had to setup up when I brought, so was unsure of the figure, this meant my leasehold has a question mark on the service charge cost.

I understand that this should have been paid yearly, however from research I should have not paid anything until I received a demand letter with the management companies address on. Also I believe the 18 month rule would apply here.

james277

Here's a link about the 18-month rule if you've not heard of this before.

https://chacc.co.uk/compliance-blog/s20b-rule-explained/#:~:text=According%20to%20the%2018%2Dmonth,time%20the%20cost%20was%20incurred.

davidmcn

What advice is your solicitor providing?

hazyjo

Isn't that for charges over and above the usual service charge? Such as extra unforeseen repairs etc?

james277

davidmcn said:

What advice is your solicitor providing?

He has said he doesnt have experience with this as he's never seen a leasehold with a question mark for the service charge. SO i would need to pay for a lawyer who specialises in this. unfortuantely

james277

hazyjo said:

Isn't that for charges over and above the usual service charge? Such as extra unforeseen repairs etc?

Is there a time limit in which the landlord can recover service charge costs?

Legislation often known as the ’18 month rule’ requires the landlord or manager to issue a demand for service charge items within 18 months of them incurring the cost. If the demand for payment is received later than this, the landlord or manager cannot recover the costs relating to this item, unless a notice was served during the 18-month period stating that the costs have been incurred and that the leaseholder would be required to contribute to them at a later date. It has now been established that the 18-month period should begin from the date the landlord or manager receives the final invoice for the works or services they arranged.

NameUnavailable

The freeholder absolutely has to issue demands for ground rent and service charges. You don't have to pay unless they do so in the correct legal form.

In respect of the service charge you should ask for an itemised summary for each year, as well as the accounts to show what was actually spent (depending what your lease says they should credit/refund any unspent monies or possibly allocate it to a sinking fund). Are you aware of any work that was done to the building over the years?

Your purchasers solicitors will ask for this information (maybe that is what has prompted your freeholder to bill you now). I'm not sure what the legal position is regarding them collecting arrears - your solicitors should be able to advise on this point.

The problem you have is if you get into a dispute your buyers may be put off buying the flat, and taking this to tribunal will take many months and could cost you more than the amount you're being asked to pay, even if you win the case (you will have to pay your costs and possibly the freeholders costs as well).

NameUnavailable

https://www.gov.uk/leasehold-property/service-charges-and-other-expenses

coachman12

My knowledge of leasehold flats is out of date but this is surely an issue which illustrates why solicitors exist. You can get a free initial interview and advice ;
and if a solicitor shows you a way to make this dubious demand go away, it's worth his fees , within reason, given the seemingly high demand suddenly sent to you-----when I think such service charges should be made clear upon purchase and then sought formally at least once a year.
Do you live in a "community" of flats, with communal gardens, gated security, etc ? If so, do you have a Residents Committee ? Do you have a Management Company, such as the notorious FirstPort ? If so, they have to take all the blame.
I don't think you should be asked for £10,000 that you should have been asked for, if appropriate, every year ( or every 3 or 6 months)-----and I wish you every success in fighting what looks like an injustice James.