service charge levy

minirisksuk

1. The flat is share of freehold.
2. AGM was held in May. 12/52 flat owners attended the meeting. I did not attend because I bought the flat in August.
3. According to the minutes of AGM, the motion for removing asbestos passed unanimously. However, there was no record for voting.
4. The management company came up with three quotes: 82000 pounds; 74000 pounds; 62000 pounds and said they would choose the cheapest one. Then they asked us to pay 62000 pounds (each flat is charged 1200 pounds).
5. I asked the management company for the breakdown of the quote and the asbestos removal plan, but they did not provide.
6. A contractor worked onsite from the beginning of this week and just encapsulated/painting the asbestos flue pipes rather than remove them.
7. I asked the management company again this week for the paperwork, but they still did not provide it.
8. I then checked the other two companies which provided us with the more expensive quotes. It turned out both companies quoted for around 30000 pounds for the removal project.

I will try to find out the exact figures the current contractors charge for this project. Obviously painting asbestos is much cheaper than remove them. If the charge is cheaper than the quote the management company gave us, can I refuse to pay the service charge levy?

eddddy

minirisksuk said:

....can I refuse to pay the service charge levy?

It depends on the history.

• In general, if a piece of work is going to cost more that £250 per leaseholder, the freeholder has to do a Section 20 consultation with the leaseholders. It doesn't sound like that happened. In that case, the law says a leaseholder can't be forced to pay more than £250 for the work.

• UNLESS the leaseholder agrees to pay without a Section 20 consultation ... leaseholders can voluntarily agree to pay more than £250 if they want to. So there's the question of whether your seller agreed to pay £1200, and that now becomes binding on you as the new leaseholder - or whether the freeholders have to chase your seller for the money.

• BUT... if your seller voluntarily agreed to pay £1200 - then there's the question of what they were told the £1200 was for. If they were told it was for removing the asbestos (and not painting the asbestos), then perhaps there is a case for saying that your seller was misled, and the £1200 shouldn't be paid.

Finally... there is the issue of how much you want to annoy your new neighbours. If you refuse to pay the full £1200 - there will be a 'hole' in their accounts. They won't have enough money to pay the contractor.

So it would probably end-up that your neighbours have to pay the money that you're refusing to pay. That might make them very angry with you.

(Perhaps that doesn't seem fair, but it's the type of problem you get with Shared Freeholds.)

Jonboy_1984

The section 20 process is the mechanism to examine the proposed costs before work is carried out, rather than after, and has a mechanism for leaseholders to recommend contractors)
I would imagine the cost includes a management company to oversees the work (typically 12.5 to 15% of the work), VAT in everything and possibly other costs e.g . If redecoration costs are incurred by a different contractor after this lot have passed through, etc.

Was an ongoing section 20 process disclosed to you on the TA7 form, section 5.5 when you bought? 

If it was then it should have been analysed during conveyancing, and a negotiation between the seller and yourself (via your conveyancers) for either the seller to pay it, a retention to be held or rarely you to pay it, because it was correcting a known defect in the building. I would double check your paperwork from the purchase to see if retentions have been arranged.

If had been formally consulted on and they didn’t disclose it the seller may be liable and potentially sue-able but legal costs will/may be incurred upfront. You would need to pay it and then pursue the seller.


If a section 20 process wasn’t carried out then, you can take the management company to a tribunal  to determine if you need to pay any, all or some of it. 

(The recommended course here is to pay it and submit a letter stating you are paying under protest and that you will be asking a tribunal to review it to avoid getting into arrears that could forfeit the lease).


Be aware that if the asbestos (or anything else) was dangerous there are shortcuts permitted in the consultation process.

eddddy

Jonboy_1984 said:

If a section 20 process wasn’t carried out then, you can take the management company to a tribunal  to determine if you need to pay any, all or some of it. 

As I mentioned above - no Section 20 consultation is required, if all the leaseholders simply agree to pay.  So the seller (i.e. the previous leaseholder) might have agreed to pay.

And a service charge bill cannot be challenged at the first-tier Tribunal, if the leaseholder has agreed to pay it.


As you say, this should have come up during conveyancing.


But the OP's complaint seems to be more about the way the work is being done - i.e. asbestos is being painted instead of being removed. The OP thinks the contractor is overcharging for that type of work.

So perhaps the route forward is for the OP to ask to see the paperwork (statement of work, quotes etc), to see if the contractor is actually doing what they've been paid for.


Or maybe a Section 20 consultation has been done... the OP needs to clarify.


Either way - it's unusual for major works to be done, before the money to pay for it has been paid by the leaseholders.

minirisksuk

eddddy said:

Jonboy_1984 said:

If a section 20 process wasn’t carried out then, you can take the management company to a tribunal  to determine if you need to pay any, all or some of it. 

As I mentioned above - no Section 20 consultation is required, if all the leaseholders simply agree to pay.  So the seller (i.e. the previous leaseholder) might have agreed to pay.

And a service charge bill cannot be challenged at the first-tier Tribunal, if the leaseholder has agreed to pay it.


As you say, this should have come up during conveyancing.


But the OP's complaint seems to be more about the way the work is being done - i.e. asbestos is being painted instead of being removed. The OP thinks the contractor is overcharging for that type of work.

So perhaps the route forward is for the OP to ask to see the paperwork (statement of work, quotes etc), to see if the contractor is actually doing what they've been paid for.


Or maybe a Section 20 consultation has been done... the OP needs to clarify.


Either way - it's unusual for major works to be done, before the money to pay for it has been paid by the leaseholders.

I am aware of the cost during the purchase process. I think 1000 pounds are fair for the removal plan. What I am concerned are:
1. The quotes of the three companies I asked are much cheaper than what the management told us. I suspect the management company over-charges us. 
2. The management company so far refused to provide me with any paperwork for quotes, contracts and etc.