Service charge deficit/overspend

anthonyatp

Hi all,

I purchased a property via shared ownership in May 2021. I have just received a letter from the housing association providing a summary of service accounts for 2020/2021 financial year (ending 31 March 2021).

The service charges they received in that period were around £12k but they managed to spend £22k! Meaning there is a deficit of £10k they are attempting to collect from the tenenats. This results in an extra £1k that I personally have to pay.

Considering I didn't even live/own my property in this period - it seems ridiculous that I have to pay this. Especially when I should be legally made aware of any works will cost me more than £250.

The housing association have been very vague in what my legal rights are - so I was wondering if anyone has some advice on the topic?

Thanks in advance!

eddddy

That's a big overspend!

The bad news is that you probably do owe that £1k to the housing association - as you are the current leaseholder.

The slightly better news is that you probably should be able to claim the £1k back from the person who sold you the house. But you might find it difficult to persuade them to pay.


In fact, your conveyancing solicitor should have noticed that final accounts hadn't been produced for 2020/21 and arranged a suitable retention. (i.e. The solicitor keeps back some of your purchase money just in case this happens. Then the solicitor uses the money held back to pay the deficit.)


But TBH, retentions are often only £250 - so that wouldn't be enough. And some 'less-good' solicitors don't arrange retentions because of the extra work involved.

Maybe check your purchase documents to see what they say about service charge accounts, retentions etc.

eddddy

anthonyatp said:

Especially when I should be legally made aware of any works will cost me more than £250.

... just to add, if there was something that cost over £250 per leaseholder, they should have done a section 20 consultation - but they would have done that with the previous leaseholder, not you.

But the £1k deficit might be made up of lots of small things, with no single thing over £250.

However, you can still analyse the accounts to see if there is anything 'unreasonable' included in them - which you can challenge.

london21

The housing association are working for their own interests and not the best to be honest.
You will need to read the agreements you have and see what it states.

Might be better contacting your solicitor because if you recently purchased in May 2021 do not think you are liable for previous year's service charge.

Leesabee1

In the same way that you would’ve benefited from a surplus, you are liable for the deficit. Your solicitor should have asked about this as it’s usually part of the management pack from the housing association. 

HampshireH

london21 said:

The housing association are working for their own interests and not the best to be honest.
You will need to read the agreements you have and see what it states.

Might be better contacting your solicitor because if you recently purchased in May 2021 do not think you are liable for previous year's service charge.

They own it, of course they are going to work for their own interests. - Maintaining their asset.

OP it seems your solicitor has failed you here and that is not the HA fault.

Were you provided with copies of S.20s from the previous year as part of your due diligence? Or had it confirmed there were none? It's obvious your solicitor didn't obtain final year accounts or any form of assurances or this wouldn't have been a surprise. 

You have every right to analyse the bill. But goodluck trying to get It paid by the former owner