I overpaid on purchase of freehold, managers will not refund. Advice please

Mat0987654

Hi, first post, advice gratefully sought.
In 2016 I purchased a leasehold flat, and subsequently found I had been fallen for the increasing ground rent trap when I looked to sell last year. Conveniently, at the time I was selling, the freeholder also offered to sell to the leaseholders. 18/21 flats agreed to purchase (including me, as otherwise I would be unable to sell. A costly mistake). Prior to purchase, we were a right to manage block.
Prior to purchase, the management company (block managers hired by the leaseholders under right to manage) asked for a deposit of £250 from all interested parties to begin legal proceedings/searches etc. This was followed by a request for £4500 to cover the purchase.
Some time later (c 6 months) having now bought the freehold share, and sold the flat (transferring the freehold share), I requested the statement of completion as had been promised. The statement showed a final cost of £81,600, and covered the purchase, company formation and legal fees.
I noted that over 18 flats, this came to £4533.33 each, and I had therefore overpaid by £216. I asked the management company for a refund of the difference, and received the following response:

In addition to the Completion Statement I sent to you, there were also costs for professional fees (legal advice given by Eccles Heddon and professional fees of Mudd & Co – apportioned to both the Management Company and the newly formed Freehold Company.)

 The remaining balance was transferred to an account held in the name of the Freehold Company to meet future on-going demands of professional fees for the managing agent and accountancy fees so there is no rebate due.

I am not sure why the balance would have been transferred into the company, I did not agree to this (and in the request for £4500, we were specifically told this was more than required and a rebate was likely). Do I have any recourse to recover the £216 (along with the other 17 properties). Nearly £4000 being held in a freehold company accounts seems unnecessary, as the only costs I could see would be accounts (which should be covered by the ground rent of the three flats that did not purchase @ £150 each).

Grateful for any advice. I have had problems with the management company before, and this does not smell right. 

eddddy

This sounds like a contractual issue - the fact that it's related to a freehold purchase isn't directly relevant.

The key question is... what were you told the £4,750 was for before you paid it?

For example, if you were told that £4,750 was 1/18th of the cost of the freehold - perhaps you were misled.

But if you were told it was 1/18th of the cost of the freehold, plus admin costs, plus a contribution to a sinking fund - you probably weren't misled.

NameUnavailable

Any leaseholders funds would have to be passed to the new freehold company once it was set up, so the surplus is in the account to be set against future costs.

I don't think in this scenario you can ask for funds back, but that depends on what is in the small print of the lease and whatever other contracts you signed up to.

Edit - just to add, usually your solicitors would keep a small amount back until the service charges were reconciled, in this case should they be asking the purchasers solicitors for the balance? May be worth asking the question depending on the above points.

AdrianC

Mat0987654 said:

The remaining balance was transferred to an account held in the name of the Freehold Company to meet future on-going demands of professional fees for the managing agent and accountancy fees so there is no rebate due.

I am not sure why the balance would have been transferred into the company, I did not agree to this (and in the request for £4500, we were specifically told this was more than required and a rebate was likely).

So the purchase set up a leasehold company, and the remaining balance from the purchase was transferred into the company so it had some liquidity available for future expenditure.

Doesn't seem at all unreasonable - and I'll bet it's documented in the paperwork.

When was this?
You've now sold your share in the freehold company?
How much time, effort, and blood pressure are you willing to put into £216?

princeofpounds

As mentioned, it depends on what the contractual nature of the payment was. Most likely, it was a simple capital contribution by a shareholder into the company. The money then became the property of the company. When you sold your share, you sold your (indirect) claim to the assets of the company, including the leftover cash.

Otherwise it could technically have been a shareholder loan or maybe even a payment for services, but that would have/should have been made clear at the time. I can't imagine anyone interpreting it as anything but a capital contribution in the absence of other documentation.

Mat0987654

Thank you for your responses, very helpful. The email asking for £4500 had the following text:

The payment amount that each property should make is £4,500 and upon completion, you will receive a detailed statement which outlines the precise purchase price and details for any potential refund or further payment required (the figure is set so that we hope no further call for funds would be required.)

The original email was:
Having expressed an interest in the purchase of the Freehold, part of that process was to make a £250 non-refundable deposit payment (towards legal fees and the final purchase price) to show commitment at this early stage.

The management company has just replied with (reference "previously advised", I dont see this in any correspondence):

We previously advised, on instruction of the Directors of the Freehold Company, that any return of funds will consider the initial costs of running the Freehold Company and the need to keep some reserves in the Freehold Company for future liabilities.

The Completion Statement detailed the fees incurred for legal professionals and our fees for the advice and administration in relation to the transaction were £1,000 plus VAT.

Not sure if its relevant, but all the funds were transferred from me to the block managers, not from me to the freehold company.

Agreed on the point on blood pressure over £216, I wont go to war over it if Im most likely not owed, but I wont let it go if its mine either! My main grumble would be where would it end? If I'd overpaid by £1000, or more, would I give up. But from whag everyone is saying, I may have missed the boat now I've transferred the share.

AdrianC

Mat0987654 said:

We previously advised, on instruction of the Directors of the Freehold Company, that any return of funds will consider the initial costs of running the Freehold Company and the need to keep some reserves in the Freehold Company for future liabilities.

This bit...

Mat0987654

AdrianC said:

Mat0987654 said:

We previously advised, on instruction of the Directors of the Freehold Company, that any return of funds will consider the initial costs of running the Freehold Company and the need to keep some reserves in the Freehold Company for future liabilities.

This bit...

I dont have anything that indicates this from the emails requesting payments be made. I was making them under the understanding that:
 "you will receive a detailed statement which outlines the precise purchase price and details for any potential refund or further payment required (the figure is set so that we hope no further call for funds would be required.)"
Clearly I've been caught by the "potential". I'm guessing I should have stipulated on payment that any excess should be returned to me, and not placed in the company account.

NameUnavailable

Given the relatively small amount involved I guess they just kept it in reserve. It's only an issue for you as you decided to sell, otherwise the money would be there to offset against the next service charge. If they refund you they then need to go to your purchasers for the same amount, as their account will be in deficit compared to all the others. They will then go after you as the service charge should be paid up to date of sale.........