Excessive Service Charge Recovery Fees

Travel2_2

Hi all, 
I was hoping to get some advice regarding my service charges for the local mgmt company that look after the estate (my property is freehold). The charges £168 are currently just over 2 months late, they are due semi annually prior to the period commencing in this case the period is 01/07/2021 up to 31/12/2021. Completely my own fault for not paying on time despite receiving reminders on email. One week after the final reminder I received an email notifying me the charges have been referred to a solicitors for recovery. The management company have noted a referral fee against me of £180 plus the solicitor email has also added £180 in legal fees plus £3.50 in late payment interest. The total amount demanded £531.50 seems excessive given the initial amount due was £168.

Could anybody possible advise me on what steps to take next? (I called the management company to settle the original £168 but they refused to take my payment and insisted I contact the solicitors to settle the full balance). I read somewhere that paying the balance under protest is advisable, is that still the best option in my case? And then raise a claim to get my money back? I’m not very legal minded so please correct me if I’m wrong but doesn’t this constitute Abuse of process & double recovery?

anselld

Unfortunately with a Freehold property you have less protection than a Leasehold where you could potentially appeal to the First Tier Tribunal against unreasonable charges.
By all means pay under protest but the route to any recovery may be difficult.  You could perhaps try the relevant property redress scheme which the Managing Agents should be members of but you really don't have much of a defence.

HampshireH

You could ask for the management companies published schedule of costs/fees. The referral fee cost would be the only one I would question being "reasonable" but if it's clearly documented that this is what it costs then you don't really have much arguement.

But at the end of the day you knew they would go legal if you didn't pay and must have been expecting that to cost more.

I don't think this is one you will win.

A complete aside but I've often wondered what pot the "fees" go into when charged by management companies. Do they go back into the pot for estate costs? Not relevant to your question sorry. But maybe one to ask when you've resolved it

eddddy

Travel2_2 said:

I read somewhere that paying the balance under protest is advisable, is that still the best option in my case? And then raise a claim to get my money back? I’m not very legal minded so please correct me if I’m wrong but doesn’t this constitute Abuse of process & double recovery?

You've probably been reading about Leasehold service charges. There is a pile of legislation that is intended to protect leaseholders from unreasonable service charges - but there isn't any legislation to protect freeholders. All you have is standard Contract Law.

(When you say 'raise a claim', I suspect you mean at a Tribunal. That's only available to Leaseholders, not Freeholders.)


So you need to read the contract (i.e. probably a Deed) you signed to see if it allows them to charge you the fees mentioned. And whether it allows them to charge further fees for non-payment whilst you dispute the fee (it probably does).

So maybe pay it, and then dispute it further, to avoid the risk of further fees being added.


In consumer contract law in general, there are rules outlawing "unfair contact terms" and "penalty clauses" / "fines" - but I don't think they would apply in this case.

(If the late-payment terms really are onerous, perhaps your conveyancing solicitor should have highlighted this before you bought. But I suspect a solicitor wouldn't regard them as onerous.)

daveyjp

If the payment is demanded under a rent charge you should be paying it asap.

The measures available to the management company are draconian.  They could impose a lease on your property to secure payment of the debt, your freehold is then worthless.

HampshireH

daveyjp said:

If the payment is demanded under a rent charge you should be paying it asap.

The measures available to the management company are draconian.  They could impose a lease on your property to secure payment of the debt, your freehold is then worthless.

OP has said service charge. Hopefully that's correct.

eddddy

HampshireH said:

A complete aside but I've often wondered what pot the "fees" go into when charged by management companies. Do they go back into the pot for estate costs? Not relevant to your question sorry. But maybe one to ask when you've resolved it

It's a fee payable in return for providing a "service". It goes to the person/company providing that service (e.g. the management company etc).


In simple, paraphrased terms, the property owner has (usually) signed a 'contract' in advance agreeing that:

"If I fail to pay my service charge on time, I agree that you will send me a reminder letter and I agree to pay you £40 (or whatever) for sending that reminder letter to me."

So none of the fee would be allocated to maintaining the estate etc. It's the same as if you pay a plumber £40 to fix a leak.


If the property is leasehold, that £40 (usually) should only be the actual cost of sending the letter (including staff costs etc)

If the property is freehold, that limitation doesn't apply.

chanz4

ground solutions by any chance?

daveyjp

HampshireH said:

daveyjp said:

If the payment is demanded under a rent charge you should be paying it asap.

The measures available to the management company are draconian.  They could impose a lease on your property to secure payment of the debt, your freehold is then worthless.

OP has said service charge. Hopefully that's correct.

Service charge is used because people understand it.  Its the legal mechanism for securing debts of the 'service charge' which is important, not what it is called on a day to day basis.

As the property is freehold it won't be a leasehold type service charge arrangement as the lease covers service charges clauses and consequences of not paying on time.

With freehold a formal agreement is required and this could be by way of a rent charge or covenant.