Leasehold managment fee

Wally813

Hello,

We have just purchased a flat in period conversion (London) shared with 3 other units. I believe the freeholder still owns one of the units as it is under controlled rent. One of the other units is under completion and the last unit has been empty since we moved in 3 months ago. All units are 1 bed. Small communal stair case and 10SQM garbage bin space out front.

So it seem the property management company is taking advantage of this situation and has increased their management fee for the property from £1200 (21/22) to £2000 (22/23) and next year £3600 (23/24). This does not include accounting, cleaning, or any work done. We have asked what the price increase justification is or if any additional services would be provide and the only explanation they provide is "This our new minimum rate."

We are both expats and have newer owed a leasehold or had to negotiate with a property management company; so I'm curious how we should approach this? I'm guessing if 2 or more of units agree to hire a new company they can be replaced?

What are the other options as it might be a while until we are actually able to contact the other/new leaseholders?

Thank you

eddddy

Wally813 said:

I'm guessing if 2 or more of units agree to hire a new company they can be replaced?

It's not quite that simple.  I suspect you are talking about the "Right to Manage".

Subject to some conditions, at least half the leaseholders can club together to form a company. That company can then take over the "Right to Manage" the building.

In theory, the leaseholders could manage the building themselves, but perhaps it's better for the leaseholders to hire their own choice of management company. 

The leaseholders could choose a management company with more reasonable fees, and they would also give instructions to the management company. (But they can't give instructions that would override people's leases or break leaseholder protection laws.)

Here's some info: https://www.lease-advice.org/advice-guide/right-manage/

eddddy

Alternatively (or in addition)...

You can also challenge the current management fee 

Based on what you say, I'm guessing the situation is as follows...

• There are 4 flats - so I guess your lease says you have to pay 25% of all building management, maintenance and repair costs.

• So you have received (or will receive) a service charge bill with a line item of (25% of £3600) £900 for management fees 

• The law says that service charges must be 'reasonable' (but doesn't actually give a definition of 'reasonable')

• If you think the the £900 (or anything else on the service charge bill) is not 'reasonable' you can pay it under protest, and challenge it at a tribunal

One way of showing that a management fee isn't 'reasonable', is by showing that other management companies would have (probably) done the same job for less money. 

In theory, you could ask other management companies for quotes, and/or ask them what their minimum fee is - but they probably wouldn't take you seriously, as you are not a freeholder. 

So another approach might be to ask leaseholders in other similar flats in other similar blocks how much their management company management fee is.

Having said this, if you tell the management company that you are taking them to tribunal (and they think you are serious), sometimes they give in, to avoid a tribunal hearing.

As a simplified example, if they are worried that a tribunal will rule that a £3600 minimum fee isn't reasonable - they might prefer to quietly reduce your buildings fees - and continue to charge other buildings £3600. Rather than have an 'official' ruling that £3600 minimum charge isn't reasonable.