Service charge has increased 108%

[Deleted User]

Tiglet2 said:

Deleted_User said:

bouicca21 said:

I am totally lost.  What doesn’t match?  Maybe some hard figures would help.  So, something like, in 2022 the budget for communal cleaning was £x but the estimate for 2023 is £y. 

And how does the estimated budget compare to actual expenditure? Was the estimate for the previous year actually accurate?  Is there a shortfall?

I’m not really sure how it could be confusing. The total budget for 2022 decided by the number of flats (which are all the same size) equals what the owners were paying in service charge. 

I am saying if you decide the 2023 budget by the same number of flats it doesn’t match. What we are paying is far higher. 

I’d rather not post the actual numbers. The only documentation on the site is the budgets for the past three years. I can’t find anything to say what was actually spent if these are predicted budgets.

Have you got a copy of the Management Pack?  If not, ask your solicitor for it.  They, in turn, will ask the seller's solicitor for it - not sure how far along the purchase you are and whether or not this has been received by your solicitor yet. 

Within the pack there will be the last three years Final Account Statements (obviously not for the current accounting year since the actual expenditure won't yet be known).  The Final Accounts are the actual expenditure, not the estimated budget.  This will give you a far more accurate understanding of whether their budget was in line with expenditure or if it fell short.  If it has fallen short for the last three years, perhaps they have adjusted the budget in the current year?

I own the property.

I do have the management pack, it advises for the whole estate there was a shortfall of about £4000 last year 21/22. But this is across the whole estate, not just my block. (I think there are about 40 properties)

I have found the figure for my block which is £450

Richard1212

I said in an earlier post that I was flabbergasted by the increase of 108%. And after all the posts since then, I am still very confused about this whole matter. May I ask which Management Company is involved please ? Such companies are supposed to always have a reserve/contingency fund as set out in the Code of Practice as agreed by the Secretary of State. My Management Company also invites all residents to attend a meeting once a year to go through the financial forecasts. 
 
The company managing the estate of flats which I rent out has increased service charge for 2023 from circa £91,000 to circa £97,000----divided by the total number of flats (34) that creates an increase per flat of about £4 per week. The full menu of the service charge is set out : gardening ( a very large and award winning garden and ponds) , window cleaning, communal area cleaning, security entry phones and cameras, on-site manager etc etc. 

 The HomeOwners’ Alliance puts the London service charge average at between £1,800 to £2,000 per year. Yearly averages for other major cities are closer to £1,500. What are the total annual service charges of the O/P ( before the current bombshell) ?

So you will see from all the above why I am having trouble getting my head around what is going on in the O/P's "estate". I suggest seeking advice about the very complex and lengthy provisions of the Landlord and Tenant Act 1985. The first action would be to write a formal letter to the Management Company and then taking the matter to a "First Tier Tribunal".

eddddy

Richard1212 said:

 The first action would be to write a formal letter to the Management Company and then taking the matter to a "First Tier Tribunal".

The OP would need a reason for going to the First Tier Tribunal.

"My Service Charge Budget has increased by 108%" wouldn't be a valid reason. (I think the tribunal would be very irritated if you brought a case as vague as that.)



The OP needs to provide specific details of why the budget is unreasonable.

It depends how the man co have constructed their budget, but examples of valid reasons might be things like:

• The budget for window cleaning in 2023 is £15k. The windows are cleaned once a month. Each clean should cost about £300. So a reasonable budget would be £3.6k

• The budget for ad-hoc repairs is £30k. In the past 3 years, ad-hoc repairs have never cost more than £10k per year. The management company have been unable to give any details to justify a £20k increase. So a reasonable budget would be £10k.

That's why people have been suggesting that the OP needs to drill into the details.



But some man cos construct budgets differently - e.g. a very simple example would be "Last year's actual costs were £x. Costs have increased by roughly 25%, so we'll add 25% to £x to make this year's budget."

In that case the OP might provide evidence that costs hadn't increased by 25% - or that less work is needed next year than last year, etc.

Richard1212

In reply to eddddy, I have to point out that I did not say anything about O/P's letter being written as merely : "My Service Charge Budget has increased by 108%". That is nonsense. I said the first thing to do was to write a formal letter to the management company--that has to be done before Tribunal route can be followed. It is quite obvious to everyone that the letter should go into as much detail as possible ! 

[Deleted User]

Richard1212 said:

I said in an earlier post that I was flabbergasted by the increase of 108%. And after all the posts since then, I am still very confused about this whole matter. May I ask which Management Company is involved please ? Such companies are supposed to always have a reserve/contingency fund as set out in the Code of Practice as agreed by the Secretary of State. My Management Company also invites all residents to attend a meeting once a year to go through the financial forecasts. 
 
The company managing the estate of flats which I rent out has increased service charge for 2023 from circa £91,000 to circa £97,000----divided by the total number of flats (34) that creates an increase per flat of about £4 per week. The full menu of the service charge is set out : gardening ( a very large and award winning garden and ponds) , window cleaning, communal area cleaning, security entry phones and cameras, on-site manager etc etc. 

 The HomeOwners’ Alliance puts the London service charge average at between £1,800 to £2,000 per year. Yearly averages for other major cities are closer to £1,500. What are the total annual service charges of the O/P ( before the current bombshell) ?

So you will see from all the above why I am having trouble getting my head around what is going on in the O/P's "estate". I suggest seeking advice about the very complex and lengthy provisions of the Landlord and Tenant Act 1985. The first action would be to write a formal letter to the Management Company and then taking the matter to a "First Tier Tribunal".

The management company is Firstport. I understand one of the worst in the country.

Let me try to explain a bit better. I purchased a property, prior to purchase I received a copy of the signed accounts for 2021, in this there was an additional spend of £4000 on a summery level, It states:

"Please note that because of how we are required to allocate costs across your development, even though the overall accounts are in deficit, some blocks or schedules have a surplus, as detailed on the enclosed schedule."

The total for the entire development was just over £60k. This for for the year 2020-2021 and signed off accounts.

When I look at the schedule for my block in the signed accounts, it comes to around £8.5k with a deficit of £600 or so. So this would be for the last year signed off before my purchase 2020-2021.

Now when I was buying the property, I also received a budget for the year 2021-2022. estimated. This estimated the service charge for my block would be around £9.5 for the year 2021-2022. This is an increase of around £1000 since the previous year. Total spend for the whole development was down to around £58k. The previous year it had come to £60k. I do not yet have the signed accounts for the year 2021-2022 so I cannot see how much it actually cost.

So far, these costs equal a service charge of around £1000 a year. I was sent a document of account which the previous owner had been paying in service charges from 2021 up until just before my purchase. She was paying £500 for each half year roughly.

All of this I saw prior to ownership, so I am assumed the cost would obviously increase, but did not expect it to double. Firstport have taken so long to transfer the property to me on their system, that I only gained access in late December. This is some five months after taking ownership of the property. The service charge had been paid by the previous owner up until the end year. So when I finally was able to access my bill, I saw that they were asking for £2000 a year. That is when I started to ask why it had doubled.

I found the estimated service charges for 2022-2023, and after looking at the figurers, concluded that it didn't make sense. The estimated service charge for 2023 states

The overall estimated budget for the Year End 30th September 2023 is £58k roughly.

The cost for my block is is just over £6k. This is LESS than 2020, 2021 actual costs in previous signed off accounts. The cost for the entire development is less than the previous year. 

SO can you see why it doesn't add up? I asked Firstport a week ago to explain this and so far no response. I have paid a partial payment.

 

diystarter7

hi
One of the several pitfalls of a service charges


At times, not ref this OP's case but crroks dump rubbish in your communal bins, besides it in the carpark etc etc and your service charges go up.

Thanks

[Deleted User]

diystarter7 said:

hi
One of the several pitfalls of a service charges


At times, not ref this OP's case but crroks dump rubbish in your communal bins, besides it in the carpark etc etc and your service charges go up.

Thanks

I would just like to know why the charge has doubled, if they could explain it, it wouldn’t be so bad. 2k a year in London is ok, but again, their figures don’t add up.

Richard1212

Thx StrictGold---what an excellent summary if I may say so.

Yes, FirstPort are as bad as they come ! I would NEVER consider using them as a bleaching agent let alone a management agent. They have a long history of "shady" dealings which have been raised just about everywhere, including in Parliament. They changed their name from Peverel a few years ago because they were getting such horrific press---but it was just a change of name : the company remains the same one ( google "criticisms of Peverel/FirstPort----there is even a Facebook account called "We hate Peverel/FirstPort" ! ). It is awful that it took them 5 months before you could use the online portal which outlines their finances for your estate. Make sure you have got access to that online portal.

I agree with you that the case you outlined is baffling. I have even phoned the management company I pay to manage my rented flats to ask them what they think---and they are also baffled and say they often are when they hear of FirstPort activities.

The overall management company budget sounds lower than most "estates" of about 30-40 flats. So I assume you are well outside London and that you do not benefit from many "extras" such as lifts, gardening/landscaping , window cleaning, security, residential manager  etc. And the figures you quoted sound on the low side of good ------ so nothing apparently sinister. Look for a mention of Reserve ( or Contingency)Fund in the budget menu-----these are required or are the "norm" under the Landlord and Tenant Act 1985 (it's a chore but google that Act ) and browse through the opening index and look at any items in the Act which catch your eye). The only thing I don't understand is your reference to differing amounts for different blocks---that should not be ! It should only be the total budget for the whole site ( divided by the number of flats to give everyone the same service charge). Has everyone on the site found a 100% increase in service charge or just you or others in your block ? If so, that cannot be.

So what are they playing at ?  My only thoughts are : 

1. They have quoted wrong figures by mistake and they have not caught up yet----just like it took them 5 months to allow you access to the online finance portal. Let's hope so.
2. The previous owner did not in fact pay the service charge for the periods before and after her departure ---and you are being lumbered with the consequences. Possible/unlikely ?
3. It's interesting that the amounts you mention are £2000 instead of £1000 ( they are too perfectly matched figures to be coincidental ie are they accidentally charging you for more than one period : is it possible that they are quoting you £1000 for 6 months ( making £2000 for the 12 month period) ?

The course of action ( and I apologise if I have missed this in previous posts on this thread) is to simply ask FirstPort what on earth is going on and seek an explanation from them in writing. 

I do hope you get this matter resolved because it sounds crazy. I wish you the very best of luck and ask you to return again with any further questions or facts I may have missed in this long thread----and in any case I would really like to know the eventual outcome if you have the time and do not mind letting me know in due course. All the very best.  

Jonboy_1984

It is possible it’s lot of little increases in the current economy and occasional fees. 

E.g. our last property had a bit of a jump in the final year. 

This was because the cleaners used for the communal area had gone bust and the replacements were VAT registered, so 20% more expensive.

There were also several periodic inspections up for review at the same time (fixed wire, fire safety etc) and a brickwork inspection as one of the communal garden walls had fallen down.

I am also aware the communal electrics (hallway lighting, cleaners sockets etc) where on a commercial multi year electric contract so at some point the current higher costs would kick in.

A few years before that the management agents had started collecting the share of building insurance premium at the same time as the rest of the annual charge to streamline the administration.

diystarter7

Deleted_User said:

diystarter7 said:

hi
One of the several pitfalls of a service charges


At times, not ref this OP's case but crroks dump rubbish in your communal bins, besides it in the carpark etc etc and your service charges go up.

Thanks

I would just like to know why the charge has doubled, if they could explain it, it wouldn’t be so bad. 2k a year in London is ok, but again, their figures don’t add up.

Hi
An apartment one of our kids  lets out, charges have been going up an went down a few years ago.
The management co is good and yours is they should have sent you a paper copy but at the least
via email a breakdown in details, income, outstanding, what is in the bank, what was spent on what, what the plans are and if nay money in the kitty and how much they gey get paid.

Sadly, as I said before, these costs at times can be justified for major repairs, unexpected costs, rise in bills, repairs/replacement of intercom, comm areas etc but they need to tell you how the figures were reached and if you are not happy with that, you along with other owners can decide on new management I think but I am not certain how that works.

Link below may help further

https://www.dailymail.co.uk/property/article-10131607/Property-service-charges-challenge-unreasonable-increases.html

Thanks