Solicitor Asking for a Retainer for Service Charge

Mind_Overload

Is it normal for the buyers solicitor to do this? I am selling a leasehold flat. the accounts for the year are settled in September, which has been done this year, I believe I am close to exchanging so could be moving out in December (fingers crossed)
They want to hold £500 for a year, why? Any tips please, thank you

message below:

We have received an additional enquiry from the buyer' solicitors. They are requesting that we keep a retention of £500 to cover any deficit of service charges during your period of ownership. As the service charges are collected on the basis of an estimate of annual service charge at the beginning of each financial year at the end of the financial year accounts are prepared which will show whether or not the amounts collected from leaseholders is sufficient. If the amounts collected will not be sufficient a further payment must be collected from the leaseholders. Since at the time of completion of your sale it may not be possible to determine what if any excess will be payable at the end of the financial year, the buyers solicitors have asked that a retention is made to be held by us spending the year end accounts 2024 being finalised. Once those accounts have been finalised, if an excess is due which relates to your period of ownership the amount payable will be paid from the retention amount held on completion. If there is no excess due, the retention will be released to you although bear in mind that this may be a year after completion.

theartfullodger

It's not when they are settled but what will be owing, innit.

I'd agree.

user1977

The "why" seems to be explained in the bit you've quoted above?

Hoenir

Seems self explantory and normal practice in such circumstances. 

Mind_Overload

Thanks, it makes sense (but I like to check these things) I have only ever heard of this from today, and my sale has been ongoing for 7 months

subjecttocontract

Entirely normal practice. It's a pain having to wait for the £500 but as soon as the accounts are published for your period of ownership and provided there is no surcharge you can get the money refunded.

eddddy

Mind_Overload said:

Is it normal for the buyers solicitor to do this? I am selling a leasehold flat. the accounts for the year are settled in September, which has been done this year, I believe I am close to exchanging so could be moving out in December (fingers crossed)

What do you mean by "the accounts for the year are settled in September"?

Do you mean something like...

• The accounts for the year June 2023 to May 2024 were finalised and published in September 2024?

• And therefore you paid the estimated bill for June 2024 to May 2025 on 1st June 2024?

If that was the case, the Service Charge you've paid for 1st June 2024 to your completion date in December is an estimate. It might turn out to be an underestimate - in which case the buyer will claim some/all of the £500 retention.

So you'll know how much of the retention you'll get to keep when the 2024/25 accounts are finalised in September 2025.