Lease holder - Management company direct debit charge for paying monthly instalments

MohamedO

Hi all, happy new year.

Below is what my lease states regarding payment of service charges.

On 1st January in respect of every Maintenance Year to pay the Proportion of the estimated Service Charge to the Company in advance or by such other payment method agreed with the Company provided that in respect of the Maintenance Year current at the date hereof the Lessee shall on the execution hereof pay a due proportion (calculated on a daily basis to the end of the current Maintenance Year) of the Current Service Charge.

Can my management company justify a £35 admin fee for setting up a direct debit?

We pay the management company 10k a year management fee, why should we pay more by way of admin for setting up a direct debit?

Thanks.

propertyrental

MohamedO said:

We pay the management company 10k a year management fee, why should we pay more by way of admin for setting up a direct debit?

Who is 'we'? I'm guessing your are a leaseholder and simultaneously own a share of the freehold.
As freeholders, you employ (and pay) the manco (£10K each? in total?) to manage the building on your behalf, including collecting the service charges.
As leaseholders, you pay the manco the service charges.

The lease appears to require you to pay the full year's service charge on Jan 1st - at least that's how I read it. In common with many other companies (utilities, insurance co.s etc) if you choose to pay by DD instalments rather than the full amount upfront, there is a charge a) to cover the admin of administering the DD (and checking for/chasing missing payments etc) and b) to compensate for not having the full payment for the full year.

Of course, if I'm right, then as freeholders you could sack the manco and either
a) manage the building yourselves (and save the £10K) or 
b) employ a different manco on different terms.

MohamedO

propertyrental said:

Of course, if I'm right, then as freeholders you could sack the manco and either
a) manage the building yourselves (and save the £10K) or 
b) employ a different manco on different terms.

Thanks for responding.

Our lease doesn't really make much sense to me. 

The 10K figure came from the budget statement for the year's service charge.

Below I have included some paragraphs from the lease. It's a 2002 flat built by persimmon homes.

It says we have an equal 40th share of the estimated service charge.

"WHEREAS:

(A)   The Lessor is the estate owner of the freehold interest in the Development

(B)   The Lessor intends to let the flats in the Building subject to the Regulations with the 

intent that the Lessee for the time being of any of the flats in the Building may enforce the 

observance of the Regulations by the lessee for the time being of every other flat in the Building

(C)   The parties hereto have agreed that the Lessor shall grant and the lessee shall accept a 

Lease of the Property and that the Company shall give the covenants defined in this lease to the 

intent that such covenants shall be annexed to the reversion expectant on the determination of the 

leases of flats within the Development

(D)   The Company is a company limited by guarantee and on completion of this lease the lessee will 

automatically become a member of the Company."

So I am assuming we need a majority of the 40 flats on our development to agree if we wanted to find a new management company?

Thank you.

propertyrental

So yes, as owner of the lease of a flat, you are also automatically a member of the company that owns the freehold.

So you should be getting, as a minimum, an invitation to, and report of, the AGM for the company which you part-own.

Whether decisions of the company need to be made based on a majority of the 40 flats, or some other figure, will be laid down in the Company's Articles of Association. If you don't have a copy, ask one of the Directors of the company (elected at the AGM) for a copy.

I believe you may also be able to get a copy from Companies House, though I'm not sure about that...

https://www.gov.uk/government/organisations/companies-house

eddddy

MohamedO said:

Can my management company justify a £35 admin fee for setting up a direct debit?

We pay the management company 10k a year management fee, why should we pay more by way of admin for setting up a direct debit?

Direct debits incur bank fees and take time to manage.

It's probably fair that only the people who use the direct debit facility pay towards those fees/costs.


If the direct debit fees/costs were added into the annual management fee and shared by everyone, that means that people who pay the full year management fee in advance (and don't use direct debits) would be contributing to the fees/costs of other people's direct debits.