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

james277

NameUnavailable said:

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).

Thank you so much, this is the conclusion I have come to as well. The service charge owed is only for building insurance, I have asked to see the policy do you know if I can request receipts/invoices for the insurance policy to make sure the numbers line up?

The itemized summary is just the ground rent for the years and the building insurance. I haven't seen any receipts. Yes you're right this came up due to the buyers solicitors requesting it. At the moment I am tempted to pay it and tell the buyers about this rule and keep it quiet so they can screw him over when they own the property.

eddddy

• What you say is broadly correct about the 18 month rule.

• You do not owe ground rent or service charges until it is correctly demanded by the freeholder

• A service charge amount isn't usually quoted in the lease - because it's usually your share of the insurance costs, repair costs, maintenance costs, and they wouldn't be predictable when the lease is written.

What does the clause in the lease with a question mark actually say? 

But some leases (typically retirement flats) say you have to pay a contribution to the service charge when you sell the property (it's often x% of the selling price per year of ownership).

hazyjo

james277 said:

NameUnavailable said:

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).

At the moment I am tempted to pay it and tell the buyers about this rule and keep it quiet so they can screw him over when they own the property.

Ouch. Why would you even think that?

james277

coachman12 said:

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. 

Thanks James, unfortunately, it's a 2 flat building I own the bottom one and the freehold owns and rents out the top one, he also owns the management company. My current solicitor im using to sell the property is saying this is outside his area of expertise. Do you know if a regular solicitor would be able to help with this?

james277

eddddy said:

• What you say is broadly correct about the 18 month rule.

• You do not owe ground rent or service charges until it is correctly demanded by the freeholder

• A service charge amount isn't usually quoted in the lease - because it's usually your share of the insurance costs, repair costs, maintenance costs, and they wouldn't be predictable when the lease is written.

What does the clause in the lease with a question mark actually say? 

But some leases (typically retirement flats) say you have to pay a contribution to the service charge when you sell the property (it's often x% of the selling price per year of ownership).

I will take a look at my lease thank you. I've taken a look at the lease that has been made up for the buyers and it has the insurance amount im being charged in the service charge box that was a question mark for me.

coachman12

I think you should just phone around , James, and find a solicitor who knows about The Landlord & Tenant Acts, particularly the 1985 and 2019 Acts. You can say it could lead to him getting a worthwhile fee out of it all-----even if not true, as a way of making him/her more eager to meet you and provide initial advice. This area of legislation is not too complicated and you should find a solicitor without too much trouble. If you had the time and patience you could read through the legislative provisions yourself----the Acts are printed, in updated, form online ( with an index to save you time finding the right sections): but you are probably not willing to do that. At another time, I'd offer to do it for you myself----really.

eddddy

james277 said:
I will take a look at my lease thank you. I've taken a look at the lease that has been made up for the buyers and it has the insurance amount im being charged in the service charge box that was a question mark for me.

OK - the document you are describing is not the lease.

It sounds like it might be an LPE1 form, which is filled in by the freeholder when a leaseholder wants to sell their lease.

Essentially, it sounds very much like you have a freeholder who doesn't know how things like service charges work.

It sounds like your freeholder has screwed up by not demanding the service charge correctly. It's up to you how you want to proceed. You can pay the £9321 for a quiet life - but if you challenge it, you might only have to pay a lot less.

But whilst you're challenging / arguing, you're buyer might give up and walk away.

NameUnavailable

The 18 month rule applies to the service charge, not the ground rent. It does seem like you should only be liable for the service charges for the past 18 months so I would challenge on this point.

However, be careful if you don't want to lose your buyers (if they think the freeholder is going to be a problem going forward they may not want to buy the flat at all) and potentially losing more in the long run.

coachman12

Before I go to bed, James, I recommend you look at The Landlord and Tenant Act 1985, sections 20B, 20c and all sub-paras of section 21. You'll find your answer, I think, though I have only just given it a very quick glance. And the ruling from my view is completely in your favour. Sorry for rushing and only giving a cursory read through------but best of luck. G'Night.

rachel230

Be careful with the ground rent. Some leases state it is payable whether requested or not I.e. the onus is on you to pay it annually.
Service charges are different.
Apart from insurance are you aware of any other expense/work done/ maintenance/gardening etc done on the building or grounds?
LEASE is a government organisation that offers pre booked, free  15 minute minute phone calls. Book an appointment on line and make a list of questions you want to ask. You can make as many appointments as you need. They can give incorrect advice at times, but with the basic questions you are asking, they should be okay.
Good luck.