Property Management Fee increases

James654321

Hello All,

I have flat, its in a block in a development of 3 blocks. The development is managed by a company.

Each block has lighting, lifts, electronic doors and is cleaned semi regularly.

Recently this company informed me of  increases in service charges.
1. The charge is now increased by precisly 20 pounds sterling each month.
This equates to a yearly increase of  240 pounds.
2. It will also now increase each year by 4%
3. Last years charge is paid, but they say last years also must go up so there is also additional one off charge of 240

I have partial information, but no experienced  knowledge on property.

Some reasearch tells me that increases must be reasonalble. And not greater than ....250 pounds per year. 

lease-advice.org/advice-guide/living-leasehold-flats-guide/

My question is does this seem normal/ok?
And 
Is there anyway to ensure the charges are valuable and do not become crippling?

The parts that seems old..
- the fee increase is a round figure
- the increase is just in the 'reasonable' amount.
- requesting  aditional  fee for a previous year.

And lastly, my worry is a company which i have a relationship with can request any payment they choose and the fees will make the flat unsellable

canaldumidi

What do the annual accounts show?

Did the income for last year = the expenditure for last year?

Presumably last year there was a shortfall (due to increased charges paid for electricity, lift maintenance etc etc) and hence the additional one-off charge.

And hence also they've realised that current costs now exceed the income from leaseholders.

Having said that, this is not usual mechanism for balancing the books. Normally at the start of each year they estimate what the cost will be for the coming year and charge leaseholders accordingly. Then at the end of the year they do their sums (and produce annual accounts as evidence!) and either charge a bit more if they've underestimated, or carry forward any amount not paid out, to the following year.

What they are doing here is estimating their required income (hence the 'round figure') and at some point (year end? in two years?) they'll balance the books and possibly make another 'one-off charge' or (if you are lucky) return some money to you

But the key thing for you is to examine the annual accounts each year to see where your money is going!

eddddy

I assume you're a leaseholder (as you mention a link to lease-advice.org).

Almost all leasehold flats have variable service charges - although some Housing Associations charge fixed service charges.

So you probably have a variable service charge.


In simple terms, a variable service charge works like this:

• The management company add together all the bills they have to pay during the year - for insurance, repairs, maintenance, communal electricity etc and add their management fee.

• The total amount is then divided amongst the flat owners (leaseholders). Your lease will say what share  you have to pay

• If lots of repairs and maintenance etc are needed in a particular year, your service charge bill for that year will be high. If not much repairs and maintenance etc are needed in a particular year, your service charge bill for that year will be low.

• At the beginning of each year, the management company estimate what the service charge will be (i.e. they estimate what bills they'll have to pay), and send you bills for the estimated amount(s). It's only an estimate - which is why it's a round number.

• At the end of the year, they add up all the bills they've paid - if their estimate was too high, there's money left in your account. If their estimate was too low - you have to pay extra to cover it.

You've read about service charges being 'reasonable' - but you might have misunderstood. In simple terms, that means every bill must be 'reasonable'.

For example, if the management company is paying the cleaning company £80 per hour - that's not 'reasonable', because they should be able to find a cleaning company that only charges £20 per hour.

• Your info about service charges increases being limited to £250 isn't correct.

• Also, the management company can't generally promise that future service charges will only increase by 4% per year.  For example, electricity charges might increase, insurance premiums might increase, they might need more to do more repairs than they expect.

saajan_12

Can I check do you mean the actual costs for electricity, trades people, cleaners, etc?
Or do you mean the management company's fee for dealing with the above? 

James654321

Great to get some opinions on this. 

canaldumidi said:

What do the annual accounts show?

Did the income for last year = the expenditure for last year?

Presumably last year there was a shortfall (due to increased charges paid for electricity, lift maintenance etc etc) and hence the additional one-off charge.

I agree. When querying the back dated demand for more money, I asked for clarification on the spending, I got a list of all costs and a list of all the money the charges brought in for last year.

The balance difference was 1 pound 20p.
(The last item on the costs was a 'Maintaince' at 20k, not 19,562 or 20,001.26, which bumps the entire cost to the value of all service charges)

So know Im confused, last years payments are paid and the costs were £1 short... where is the 250 need and the 4%...

So looking again this list is not an audited accounts its a budget sheet. but why give me guess numbers when I am questioning a 25% increase. I want to know why 25% and not 1%

It all seems easy to put the p but very hard o see exactly why. 

James654321

saajan_12 said:

Can I check do you mean the actual costs for electricity, trades people, cleaners, etc?
Or do you mean the management company's fee for dealing with the above? 

Thanks saajan_12. Its the entire fee for those items, servicing, cleaning, unknown extras, plus a fee for dealing with those charges.

Previous replies state that those costs have a real figure and I should check. Information back is shows fees and charges are equal. So still dont know why an increase is required. And I unfortunately dont hear or see anyway of contesting it.

eddddy

James654321 said:

So looking again this list is not an audited accounts its a budget sheet.

So you're saying the estimated maintenance charges for the coming year are £20k.


If you haven't been provided with a breakdown of the £20k, you can ask for a breakdown. 

canaldumidi

James654321 said:

Great to get some opinions on this. 

canaldumidi said:

What do the annual accounts show?

Did the income for last year = the expenditure for last year?

Presumably last year there was a shortfall (due to increased charges paid for electricity, lift maintenance etc etc) and hence the additional one-off charge.

So looking again this list is not an audited accounts its a budget sheet. but why give me guess numbers when I am questioning a 25% increase. I want to know why 25% and not 1%

Perhaps the accounts have not yet been audited?

https://www.lease-advice.org/advice/find-the-right-information-for-you/?step-option=61

and

https://www.lease-advice.org/faq/how-can-i-find-out-what-my-service-charge-is-being-used-for/