Extortionate Service Charge request and late notice

DownToContest900

Hello everyone, thank you for taking the time to read my issue 

Some background --- Me and the other half purchased our first flat 2 years ago (leasehold). Quoted Service charge per annum was £2,000, give or take. In the first year we paid 3,000 as they had a ton of extra maintenance which the sink fund did not cover. Last year we paid 2,800 as the management company changed hands, an audit was done and it appeared 2022 was in deficit and they needed to recoup the difference. We're new naive leaseholders and paid it for a quiet life. 2 years, both over budget, what can we do? Anyway...

Last week we received a quote for the 25/26 charge -- £17,222.15 EACH. They want to replace EVERY roof on 4 blocks (36 flats). Apparently this will cost £534,000. They have set the payment due date of 26/06/25?!

Reasoning is - They surveyed the roofs. They need new roofs. Previous management company did not transfer any guarantee or warranty of previous works done (only 5 years ago) hence freeholder has given the go ahead for our management company to start gathering the funds. We absolutely cannot afford this.

From my understanding and deep hole of researching last week once we received this mental estimate was that the management company should have served a section 20 notice, indicating they were looking into doing the works... and then they should have ideally consulted every leaseholder about what needs doing, what it'll take and what it'll cost along with relevant quotes.

I have requested my conveyancing solicitors assistance on reviewing the situation as me and my partner are stressed up to our eyeballs. I did however want to make this post as I respect all of your opinions and appreciate any tips/advice that could be sent my way. Perhaps some personal experiences you had that I could relate to or some reassurances that the management company cannot demand this money upfront/in 2 installments as its absurdly unreasonable. Also if you have any thoughts on how they have gone about requesting the money with no heads up or notice.

The current situation has absolutely ruined our first time buy experience. If we have to fork out 17k, we also will have to cancel wedding and holiday plans. Not to mention, we will be paycheck to paycheck for the foreseeable future.

If you made it this far, I appreciate it!

theartfullodger

Sorry to read your story. Leasehold costs are I understand a right minefield. Wedding costs?  When we married, probably cost in total less than £150.  Entirely everyone's choice what to spend, but can be done cheaply, indeed less than £150.  

Best wishes to all.

bouicca21

Surely the first step is to ask why no section 20 has been issued?

DullGreyGuy

DownToContest900 said:

From my understanding and deep hole of researching last week once we received this mental estimate was that the management company should have served a section 20 notice, indicating they were looking into doing the works... and then they should have ideally consulted every leaseholder about what needs doing, what it'll take and what it'll cost along with relevant quotes.

There are exemptions to S20 if the works are urgent and dispensation in principle can be requested after the event but the freeholder is risking being stuck with the majority of the bill if the courts dont agree that the work could have waited. 

We've had 2 section 20s in our time as leaseholders, in both cases an initial notice was sent inc the option to suggest people to carry out the work and then subsequently the outcome of the tender process. In both cases the letters invited consultation but thats as far as your "ideally consulted every leaseholder about" goes. 

In one case we did challenge the oversight fee the agency were intending to charge and they did back down. 

DownToContest900

theartfullodger said:

Sorry to read your story. Leasehold costs are I understand a right minefield. Wedding costs?  When we married, probably cost in total less than £150.  Entirely everyone's choice what to spend, but can be done cheaply, indeed less than £150.  

Best wishes to all.

Most definitely! The wedding delay definitely isn't do or die but the drastic budget cut wont fly with my partner. She has a small non negotiable guest list. It most definitely can wait for better circumstances rather than done cheaply. I for one do not mind popping to a registry office for an hour and going to the pub but alas, we have to keep them happy

Voyager2002

Does your household insurance include any legal cover, perhaps even a legal helpline?

There seems to be so much that could be subject to legal challenge: how on earth could roofing work be defective after just five years, yet not be covered by any form of warranty? It sounds as if someone has messed up in a big way, and probably there will be professional negligence insurance to cover the damage. However, this kind of situation requires a proper solicitor and could be an absolute minefield for an amateur.

eddddy

As others say, there should be a section 20 consultation - which might take 3 months.

If the work is urgent, and cannot wait 3 months, the management company can do the work and then apply for dispensation - but that's risky for them, as dispensation might be refused.


Also, the law says that service charges must be 'reasonable'.

You suggest that major work was done to the roof 5 years ago, so it doesn't sound 'reasonable' that more major work is required now.

• From your perspective, it's (almost certainly) irrelevant that the management company has changed hands.

• The new management company / owners take over responsibility for everything that the previous management company / owners have done

DownToContest900 said:

Reasoning is - They surveyed the roofs. They need new roofs. Previous management company did not transfer any guarantee or warranty of previous works done (only 5 years ago) hence freeholder has given the go ahead for our management company to start gathering the funds. 

I'd suggest that greatly strengthens your argument.

The work should be covered by a warranty / guarantee, but the new management company / owners have nullified the guarantee (by taking over the management).

I would strongly argue that the new company / owners are liable for the losses resulting from their actions.

Because had the new company not taken over, presumably the roof would now be repaired under guarantee.


(The detail of the argument is slightly different depending on whether you have a 2 party lease - between Freeholder and leaseholder
- or a 3 party lease between freeholder, management company and leaseholder.

And whether the management company has new owners, or whether it is a new (different) management company.)

fullyrendered

When your solicitor gave you the freeholder's/management information pack (LPE1) what did it say about work expected in the next 2-ish years?

What evidence have you been given about the condition of the roof? Ask for a copy of the latest survey.

What work was done 5 years ago? Was it temporary/patch repairs or more significant?

You should make contact with other leaseholders in the building(s) and share the cost of a surveyor to act for you and assess the work required, and the 'reasonableness' of the costs, timing, etc.

Seek help from LEASE: https://www.lease-advice.org/ and learn about Section 20 consultation for planned works: https://www.lease-advice.org/topics/section-20-consultation/

And (probably first) read your own lease, to understand what works you have to pay towards, and what proportion of the costs, and when those costs can be demanded.

thegreenone

My late Mums flats (3 blocks) were scheduled for reroofing.  It was needed.  I think there was at least six months of discussions, meeting and quotes.  They were Share of Freehold.  Once agreed,  the residents had a year to pay the £10k per flat via Installments, if they preferred.


Do you think the 25 date should be 26?  But even so you should definitely have received a section 20 first.  Perhaps the previous owner received one but kept quiet to sell.  But that should've been in the management pack.

DownToContest900

Thank you everyone so far, This is fantastic and invaluable advice. I spoke to my solicitor this morning and he echo'd exactly what has been mentioned above. Main points are as followed:-

• When he conveyed our property, LPE1 was fine and reserve fund was full so no large projects were suspected or planned for.
• Strength in numbers - I'm dropping slips off each of my neighbours this evening with my contact details should anyone wish to coordinate. Also want to establish if anyone at all did in fact receive the S20 and any follow ups as I most certainly did not. I work in finance and pride myself on details and do all the home admin.
• Freeholder should absolutely be holding insurance/ guarantee for the previous work as it was substantial. Try to obtain proof of this and if there is none, flag the issue. If there is none and the work has already failed from previous contracting, this should be liable for their negligence insurance.
• He will triple check our lease for me and ascertain which percentage we should even be liable for. 2'3rds of the flats are 3 bed and ours is one of the 2beds. 

Slow and steady progress considering we were notified on thursday but i'm so eager to challenge this. Even my solicitor scoffed when I mentioned the amount of £17k. No way the normal person has this laying around waiting for repairs without any due diligence or notice. Makes you sick  

DullGreyGuy

DownToContest900 said:

Even my solicitor scoffed when I mentioned the amount of £17k. No way the normal person has this laying around waiting for repairs without any due diligence or notice. Makes you sick  

Better than many, plenty of stories of leaseholders getting massive bills for significant repair work required on their buildings, worse are ex local authority as they dont have sink funds so you get cases like the guy getting a £146,257 for their one bed flat in a high rise tower block. 

Our last place, we rented, was on its way to massive bills hence the service charge (on a share of freehold) was £8,000 per year to build the sink fund. The quote for the scaffolding alone had been over £1m and that was 10 years ago.