Liability for balancing service charge

Wilko100

I sold a flat in June. Camden is the freeholder and asks for payment of service charges in 2 instalments - an interim payment at the start of the year and a balancing charge in September. The purchaser knew this and requested a retention of £500 to cover any balancing charge for the period of my ownership. I agreed to this. The final bill is now in and is higher than the retention. The buyer has asked that I pay it but the charge was demanded after the flat was sold and so I think it may be the buyer’s liability even though the balancing charge is for services performed during the period of my ownership. Any advice on the legal position? It seems to be a bit of a grey area 

eddddy

The buyer is liable to pay the freeholder the excess service charge. (So you are not liable to pay the service charge to the freeholder)


But when you sold the flat, you probably agreed in the contract that you would reimburse the buyer if they have to pay the freeholder an excess service charge relating to the period you owned the flat.

It's a term in the standard conditions of sale, so unless you specifically told your solicitor to remove that term from the contract - you probably owe some money to the buyer.

canaldumidi

Do the right thing.

Irrespective of the law, it's clear the charge applies to the period of your ownership so morally you owe it.

Wilko100

Thanks. That’s sort of what I thought but very conscious of straying outside my lane and taking 1+1 and making 5. I’ve got what looks like a standard apportionment clause. Can’t say I paid too much attention to it at the time as I wasn’t expecting any big bill for work done in the year 

eddddy

Yep - so clause 6.3.5 applies.

The precise apportionment wasn't known at completion, but it's known now because the buyer has the final bill.

So you're supposed to pay within 10 days of the buyer notifying you - assuming you're happy that the apportionment has been calculated correctly.

Wilko100

Boo! We reduced the price massively to compensate for the potential cost of upcoming major works and Covid whacked us so we’ve taken quite a hit on this (obviously nothing compared to what some people have suffered during Covid) but it adds to the general suckiness and sense of not being able to control your own destiny! Thanks for your help. Will further raid the savings!

saajan_12

You can check your exact apportionment and retention wording, but it would typically say that the service charges would be apportioned pro rata for the period of your / buyer's ownership within the billing period. You'd be liable to pay it within 10 days of being notified.

The retention is typically just there to have some cash in hand rather than having to chase you for a small amount - without limiting your liability to that amount. However do check as I have seen contracts for sale where the where the retention was the maximum that could be claimed (non-standard clause).