Can I refuse to pay the Management Company?

GixerKate

I live on a small estate (newbuild as of 5 years ago) and the developer put a management company in place mainly to maintain the green spaces, playground etc.  The maintenance year runs from October to September so they should have sent out the new bill last October.  They are utterly incompetent and they still haven't sent out the bill to the majority of the residents (to date just one person has received an email).  They haven't done anything and when queried they have said they have run out of funds and have stopped work until funds are received.

The Residents Association Committee are in the process of becoming Directors for the estate and the first thing we plan to do is to give notice to the Mgt company and take it on ourselves.

If we all pay the bill for the year I assume it will be backdated to cover October 24 to September 25 and we won't see a penny of it once their service is terminated.  This means all residents will have to pay now (June) and again in October 25.

So, legally speaking, what happens if residents simply don't pay the Mgt Company?  They essentially stopped all work months ago due to lack of funds (caused by themselves) and we have reams of evidence of their incompetence plus funds that have disappeared.

eddddy

Taking a step back - the estate service charge would normally work like this...

• When the residents pay their bills, the money goes into a 'kitty' (or service charge bank account)

• When work is done (e.g. cutting the grass, filling a pothole) the management company pay the bill from that kitty

• If you change management company, whatever is left in the kitty should be handed over to the new management company - and when the new management co gets work done, it is paid for from that kitty

So in your situation, the 'correct' thing for the residents to do is pay their bills in full - so the money goes into the kitty, and then whatever is left in the kitty will be handed over to the new management company.


But maybe you are nervous of doing that because the current management co is incompetent, and maybe you're worried that the kitty money will go astray.


The problem is that the current management company can probably start charging you late fees, solicitors fees, debt collection fees, etc - if you don't pay. 

daveyjp

If you don't pay a contractually agreed amount the debt can be chased in the usual way.  If you don't pay the remedies are Court action, bailiffs.  There may be a charge on the property which means it can't be sold until the debt is cleared.

Be also very careful with property that it isn't subject to a rent charge.

There is no extra protection for freeholders as regards service charge issues as there would be for leaseholders.

35har1old

daveyjp said:

If you don't pay a contractually agreed amount the debt can be chased in the usual way.  If you don't pay the remedies are Court action, bailiffs.  There may be a charge on the property which means it can't be sold until the debt is cleared.

Be also very careful with property that it isn't subject to a rent charge.

There is no extra protection for freeholders as regards service charge issues as there would be for leaseholders.

Can it lead to loss of home?

whizzywoo

35har1old said:

daveyjp said:

If you don't pay a contractually agreed amount the debt can be chased in the usual way.  If you don't pay the remedies are Court action, bailiffs.  There may be a charge on the property which means it can't be sold until the debt is cleared.

Be also very careful with property that it isn't subject to a rent charge.

There is no extra protection for freeholders as regards service charge issues as there would be for leaseholders.

Can it lead to loss of home?

Yes a Rent Charge in your Deeds can lead to a loss of home.  Check your documents from when you bought the property as it will be specified.  Non payment of the Rent Charge can lead to the developer repossessing the house even if they haven't notified you of the charges.  A Rent Charge is similar to management fees but is set up a different way and much harder to avoid paying the debt.

GixerKate

eddddy said:

Taking a step back - the estate service charge would normally work like this...

• When the residents pay their bills, the money goes into a 'kitty' (or service charge bank account)

• When work is done (e.g. cutting the grass, filling a pothole) the management company pay the bill from that kitty

• If you change management company, whatever is left in the kitty should be handed over to the new management company - and when the new management co gets work done, it is paid for from that kitty

So in your situation, the 'correct' thing for the residents to do is pay their bills in full - so the money goes into the kitty, and then whatever is left in the kitty will be handed over to the new management company.


But maybe you are nervous of doing that because the current management co is incompetent, and maybe you're worried that the kitty money will go astray.


The problem is that the current management company can probably start charging you late fees, solicitors fees, debt collection fees, etc - if you don't pay. 

Yep thats my understanding too and that is what happened the first year they starting working on the estate.  Unfortunately they were severely incompetent - they forgot to bill 40% of the estate as they didn't bill the Social Housing team (we have a number of shared and social housing homes on the estate), they claimed there was a 10k hole in the budget and it was only when they sent through an extract of their finance system (which the person wasn't supposed to do and hasn't been seen again) that I identified that not only had they not billed for 40% of the homes on the estate, but they also had an additional £6k in the kitty.  They stopped paying the landscaping company and after 4 months they were threatened with legal action and then reluctantly paid the outstanding amount.  The landscaping company have (understandably) refused to contract with them again.  There are also 6 homes on the estate that they never collected the management fee from the previous year either.

They have now sent out a bill that is to cover October 24 to September 25 during which they have said they have stopped work due to lack of payment which was due to the fact they didn't send out the bill.  Its very frustrating that we will be forced to pay.

At least long term we will be getting away from this company but right now we will end up having to pay twice in one year as they will not be sending over any remaining amount in the kitty. 

GixerKate

daveyjp said:

If you don't pay a contractually agreed amount the debt can be chased in the usual way.  If you don't pay the remedies are Court action, bailiffs.  There may be a charge on the property which means it can't be sold until the debt is cleared.

Be also very careful with property that it isn't subject to a rent charge.

There is no extra protection for freeholders as regards service charge issues as there would be for leaseholders.

Yeah, thats what I figured, just was wondering if there was something I didn't know about.  There definitely isn't a rent charge.  Long term we will be ok as it will soon be run by the residents but right now it doesn't seem fair that we will have to pay for severe incompetence and negligence.