S20 for work on leasehold property

Schwarzwald

by way of reference, as I am pretty much in similar situation, also roof renewal / section 20 / London leasehold.

They have added a management fee of 15% / >£5k in my case which I am also challenging ...  they are not responding though

saajan_12

DullGreyGuy said:

So the management agent came back @eddddy and stated that their contract with the freeholder allows them to add a 12% fee and then quotes the part of our lease which states the leasee with pay the leasor 1/34th of all payments and expenses incurred by the leasor in carrying out its obligations of maintenance under the 7th part.

Is that sufficient of a get out for having to justify the charge?

There's 2 separate contracts here:
A) Freeholder-Leaseholder: Says you pay 1/34 of <costs>. You can't dispute the 1/34 split eg if you don't use certain communal because that's what you agreed to in the lease and there might be other things you use more that everyone also splits. However the <costs> have to be reasonable, so they can't spend £100k on a £10k lift and expect that to be reimbursed.  

ManagementCo-Freeholder: Says the freeholder pays 12% admin fee on any works done. That's legally between them, not your problem. 

-- 
So basically the 2nd contract isn't yours. Your question would be why does the freeholder think a 12% fee is reasonable to recover from you. [If they reduce the fee for you then they might try to renegotiate the contract with the management co, but that's separate]. 

DullGreyGuy

So asked again for them to rationalise the charge mentioning the requirement for charges to be reasonable as per the quoted act. The crux of their response is:

1. Contract with freeholder allows them to charge 12%-17% for non-standard work
2. Freeholder and the agent have agreed with the scope of this work 12% is reasonable
3. The industry standard is 12%
4. There is no cost breakdown, any form of plan for what the agent will be doing for the 12% other than a nebulous list of things like dealing with tenants, site visits etc
5. Their fee is fixed so if work increases the fee wont
6. My Lease states I have to pay 1/34 of whatever the freeholder pays

NameUnavailable

15-20% fees are 'normal' so 12% could be seen as good value!

The agent will be charging a fee of circa £350 per lease per year for their basic services and they make their money on the commission on major works (and to be fair there is work involved in arranging/managing contractors etc). Whether the fee is fair in each case is another matter but to challenge it you would need to go to tribunal and you will most likely spend more challenging it than you'd save, such is life.

Your other options are to go for RTM and handle all the work yourself or buy the freehold and take full control.

DullGreyGuy

NameUnavailable said:

15-20% fees are 'normal' so 12% could be seen as good value!

The agent will be charging a fee of circa £350 per lease per year for their basic services and they make their money on the commission on major works (and to be fair there is work involved in arranging/managing contractors etc). Whether the fee is fair in each case is another matter but to challenge it you would need to go to tribunal and you will most likely spend more challenging it than you'd save, such is life.

Your other options are to go for RTM and handle all the work yourself or buy the freehold and take full control.

I guess it depends what you consider as their basic services? We pay just under £2k per year in total with Insurance at £14k, "cleaning" and "water" being the second largest individual lines at £10k each. Block management, maintenance and annual maintenance are £7.5k each, reserve £5k  then a host of smaller items like electricity, lift line, bin hire, H&S, accountants etc

If you take the £50/hr I struggle to see how they will be spending over 140 hours to deal with a single contractor replacing  two sections of flat roof, one above the stair well and the other above a flat. 

eddddy

DullGreyGuy said:

So asked again for them to rationalise the charge mentioning the requirement for charges to be reasonable as per the quoted act. The crux of their response is:

1. Contract with freeholder allows them to charge 12%-17% for non-standard work
2. Freeholder and the agent have agreed with the scope of this work 12% is reasonable

Points 1 and 2 are nonsense.  It's a bit like saying "We've agreed with the freeholder that we're going to overcharge all the leaseholders". (Why would the freeholder care, if the agent plans to overcharge the leaseholders?)

DullGreyGuy said:

3. The industry standard is 12%

Industry standard for what?

The agent describes it as a "Resident liaison fee". That sounds like an admin job - writing letters to tell residents what's going on.

If it includes administering the section 20 process - perhaps that's a bit more specialist. That requires knowledge of the law, and they need to follow the correct legal processes. So they could justify a slightly higher hourly rate for that.

If the agent employs their own in-house surveyors, architects, structural engineers etc who will be using their specialist skills to oversee the project, instruct the contractors, inspect the contractor's work, etc perhaps the 12% charge is reasonable. (To cover the salaries of the people they employ.)  But I doubt that's the case.

DullGreyGuy said:

We pay just under £2k per year in total with Insurance at £14k, "cleaning" and "water" being the second largest individual lines at £10k each. Block management, maintenance and annual maintenance are £7.5k each, reserve £5k  then a host of smaller items like electricity, lift line, bin hire, H&S, accountants etc

I wouldn't muddy the waters by mentioning any of that at the moment.

DullGreyGuy

eddddy said:

DullGreyGuy said:

So asked again for them to rationalise the charge mentioning the requirement for charges to be reasonable as per the quoted act. The crux of their response is:

1. Contract with freeholder allows them to charge 12%-17% for non-standard work
2. Freeholder and the agent have agreed with the scope of this work 12% is reasonable

Points 1 and 2 are nonsense.  It's a bit like saying "We've agreed with the freeholder that we're going to overcharge all the leaseholders". (Why would the freeholder care, if the agent plans to overcharge the leaseholders?)

DullGreyGuy said:

3. The industry standard is 12%

Industry standard for what?

The agent describes it as a "Resident liaison fee". That sounds like an admin job - writing letters to tell residents what's going on.

If it includes administering the section 20 process - perhaps that's a bit more specialist. That requires knowledge of the law, and they need to follow the correct legal processes. So they could justify a slightly higher hourly rate for that.

If the agent employs their own in-house surveyors, architects, structural engineers etc who will be using their specialist skills to oversee the project, instruct the contractors, inspect the contractor's work, etc perhaps the 12% charge is reasonable. (To cover the salaries of the people they employ.)  But I doubt that's the case.

Industry standard is both for management agents to bill based as a percentage of the non-standard work done and the percentage range which they therefore conclude as an industry standard its "therefore its reasonable"

They state the fee covers:
1) Site visits
2) Liaising with leaseholders, residents, contractors and other parties before, during and after the work

No claims it covers any technical services but will include the S20 process by the sounds of it.