Service Charge - Excessive Admin Fees

hasani007

Hi guys, would love some advise on the following issue i have with the management company. I own a flat as a leaseholder with a share of freehold. Got charged over £600 in late payment penalties (admin charges) by the management company. A standing order has always been made on a monthly basis, no payment has been missed; however, there was a discrepancy in the amount transferred (i did not increase my payments during a service charge rise). I have increased my standing order monthly payment amount to cover. These charges were not mentioned in any correspondence received from the management company neither email or letter. They have been ignoring my emails to sort this out since August 2023 and now i got an email suddenly requesting the full amount within 14 days (over £2000). I offered to pay a lump sum minus the fees but they are not responding. 

eddddy

Just to get some background... you say you have a 'share of freehold' - so all/many of the leaseholders jointly own the freehold

So do you have...

A lease between 2 parties...

• Freeholder
• Leaseholder

A lease between 3 parties (a tripartite lease)

• Freeholder
• Management company
• Leaseholder

(If you have a lease between 2 parties - presumably it's you (collectively) who have hired the management company. So why would you hire a management company that charges excessive late fees?)

Once you've clarified which type of lease you've got, it will be easier to suggest next steps.

hasani007

eddddy said:

Just to get some background... you say you have a 'share of freehold' - so all/many of the leaseholders jointly own the freehold

So do you have...

A lease between 2 parties...

• Freeholder
• Leaseholder

A lease between 3 parties (a tripartite lease)

• Freeholder
• Management company
• Leaseholder

(If you have a lease between 2 parties - presumably it's you (collectively) who have hired the management company. So why would you hire a management company that charges excessive late fees?)

Once you've clarified which type of lease you've got, it will be easier to suggest next steps.

Thanks for the reply eddddy. I am not 100% sure but we have a ltd company setup (we are the leaseholders/shareholders/directors) and we have hired managing agents.

hasani007

eddddy said:

(If you have a lease between 2 parties - presumably it's you (collectively) who have hired the management company. So why would you hire a management company that charges excessive late fees?)

They were hired before i bought the property. 

eddddy

If you (collectively) hired the managing agents, then it's almost certainly a 2 party lease.

So I guess you could approach this from 2 different directions - 1) as one of the joint freeholders 2) as a leaseholder


1) As one of the joint freeholders
The joint freeholders have hired the management company, so hopefully they should be able to direct the management company. (But it's possible that the contract they signed might limit the influence the joint freeholders have over the management company.)

So would your joint freeholders have sympathy with you for this situation... or would they just say something like "it's your fault"?

If they are sympathetic, you could ask them to direct the management company to 'treat you better' - for example, allow you to pay monthly, if you pay any arrears.



2) as a leaseholder
A lot depends on what your lease (and other agreements) say about service charge payments. For example, the set-up might be like this:

• The lease says full service charge payment (i.e. £2000) is due once a year on a particular date

• The management company voluntarily offer separate agreement that allows you to pay monthly installments. But that agreement says that if you fail to pay the full amounts on time - the option of paying monthly installments is withdrawn. So you have to pay the remainder of the £2000 in one go.

In simple terms, if  the lease and any other agreements allow the management company to refuse monthly installments - then there's no legal options open to you. All you can do is "grovel" and ask them to reconsider.

But if refusing monthly payments breaks the terms of your lease and/or other agreements, then you can fight it.


You also mention Admin Charges for late payments - are you saying that you think they are excessive?

hasani007

eddddy said:

If you (collectively) hired the managing agents, then it's almost certainly a 2 party lease.

So I guess you could approach this from 2 different directions - 1) as one of the joint freeholders 2) as a leaseholder


1) As one of the joint freeholders
The joint freeholders have hired the management company, so hopefully they should be able to direct the management company. (But it's possible that the contract they signed might limit the influence the joint freeholders have over the management company.)

So would your joint freeholders have sympathy with you for this situation... or would they just say something like "it's your fault"?

If they are sympathetic, you could ask them to direct the management company to 'treat you better' - for example, allow you to pay monthly, if you pay any arrears.



2) as a leaseholder
A lot depends on what your lease (and other agreements) say about service charge payments. For example, the set-up might be like this:

• The lease says full service charge payment (i.e. £2000) is due once a year on a particular date

• The management company voluntarily offer separate agreement that allows you to pay monthly installments. But that agreement says that if you fail to pay the full amounts on time - the option of paying monthly installments is withdrawn. So you have to pay the remainder of the £2000 in one go.

In simple terms, if  the lease and any other agreements allow the management company to refuse monthly installments - then there's no legal options open to you. All you can do is "grovel" and ask them to reconsider.

But if refusing monthly payments breaks the terms of your lease and/or other agreements, then you can fight it.


You also mention Admin Charges for late payments - are you saying that you think they are excessive?

Some of the joint freeholders also got the same Admin Charges for late payments and are unhappy. Yes, i think they are excessive. It started with a charge of £120 when the arrears reached £1000 and one of them is £300 (not sure why) with the total charges now over £600. I had zero communication from them by email or letter and the quarterly application for payment they send over by post only stated the service charge for period, reserve fund for period, balance brought forward and total amount due. I am happy to pay the outstanding sum minus the admin charges.

eddddy

The law allows freeholders (and therefore their managing agents) to charge Admin Charges for late payments - but the law says the charges must be reasonable.

The fees aren't related to the amount owed - they relate to the amount of work required, plus expenses.

I'd guess that a tribunal would say that £50 to £70 (plus VAT) per hour is a reasonable charge for Admin tasks - plus 'out of pocket expenses'.



So a freeholder / managing agent might do the following, if service charges aren't fully paid...

• Send a reminder letter - and charge £40 to £50 for the admin work associated with that

• Send another reminder letter - and charge another £40 to £50 for the admin work associated with that

• Instruct a solicitor (who might start by sending you a warning letter) - and you're charged the solicitor's fee - maybe £300 or £400

A tribunal might agree those are reasonable steps to take and reasonable charges. But, for example, if the freeholder / managing agent just instructed a solicitor without any warning letters first - a tribunal might say that's unreasonable.


So you need to ask the managing agent for a breakdown of the £120 charge, £300 charge, etc - to see if they acted reasonably, and the amounts charged are reasonable.


It's usually best to pay Service Charges (including the Admin Charges) in full - but say you are doing so under protest, and you plan to challenge them at a tribunal.


If you don't pay Service Charges / Admin Charges in full - further Admin Charges might be added. Then, if you lose at tribunal, you'll have to pay the additional Admin Charges.

chanz4

why not all directors sack the managment firm

eddddy

chanz4 said:

why not all directors sack the managment firm

The OP is unhappy with the management company, but the directors might be happy with them.

The directors might be pleased that the management company comes down hard on non-payers / late payers - because if service charges aren't  paid, then maintenance and repairs can't be done.


(For example, I know of a building where the directors initially told the management company to 'go easy' on non-paying and late paying leaseholders. As a result, the building started looking tatty, because there was insufficient money for repairs. So the directors told the management company to change their policy and start taking legal action against leaseholders with arrears.) 

In the OP's case, it really depends on the precise facts about what has happened.


Also, sacking the management company won't make the OP's service charge debts go away.

ThisIsWeird

Hasani reckon that this is the first communication from the management company regarding these arrears, or at least about these seemingly inflated admin charges?
If so, and based on Edddy's estimate of what a 'reasonable' sum should be for such an admin letter, would it make sense for Hasani to put the ManCo on the back foot by sending a payment for all the arrears plus £50?
After all, he's going to have to pay this in any case.
Covering letter; "Service charge arrears in full with apologies, plus £50 to cover admin for reminder", or similar?

I suspect the situation is more complex than this - Hasani tried to make contact, but these might not have followed the correct or required procedure, I don't know.

Hasani, are you in a financial position to pay off these arrears? If so, I'd suggest pay it, and asap. Then tackle the other matter.

eddddy

ThisIsWeird said:

If so, and based on Edddy's estimate of what a 'reasonable' sum should be for such an admin letter, would it make sense for Hasani to put the ManCo on the back foot by sending a payment for all the arrears plus £50?
After all, he's going to have to pay this in any case.
Covering letter; "Service charge arrears in full with apologies, plus £50 to cover admin for reminder", or similar?

If the Managing Agent has sent a bill for 'Arrears plus £600 Admin Charges', it's generally not a good idea to pay 'Arrears plus £50'.

As far as the Managing Agent is concerned, the OP would still owe £550 - and they will continue taking enforcement action, and continue adding more Admin Charges to the OP's service charge bill for enforcement action.


It's generally better to pay the 'Arrears plus £600 Admin Charges' (but stating that it's being paid under protest) - to stop further charges being added.  Then challenge the £550 of the £600 charges at a tribunal.

• If the OP wins at tribunal - they get £550 of the £600 back.

• If the OP loses at tribunal - they have to live with the full £600 charge, but no further charges will have been added.