Unexpected 20% increase in service charge

leafymeadow

Hi, hopefully someone can assist.

We live on a leasehold property where the annual service charge is normally paid in 2 equal instalments.  The first one was paid for in January and the second is due in June.  An annual budget is sent to the individual leaseholders at the beginning of the year.

As leaseholders we have a share of the management company

This June the invoices were sent out to the individual leaseholders, as well as a supplementary invoice which inflated the overall cost by nearly 20% without any notice. This was not done as Section 20.

Can the management company do this without any consultation.

Thanks for your help

eddddy

You're being asked to pay an estimated service charge to cover the next 6 months. Have you been given a breakdown of the estimate?

Are there any line items in the estimate which seem 'unreasonable'?  For example...

• A line item that looks too high (e.g. the amount estimated for paying the gardeners is ridiculously high)?

• A line item that seems unnecessary, or outside the scope of what the lease says the management company should be doing (e.g. repainting something that doesn't need repainting, installing a water feature)

If so, you can challenge the service charge, and take it all the way to a tribunal, if you want.

(The service charge bill might also be recouping a shortfall resulting from an underestimate of costs in the previous 6 months. And it might also include a contribution to a sink fund, if the lease allows it.)

leafymeadow said:

This was not done as Section 20.

A section 20 consultation is required before major works start. It is not required before a service charge bill is issued.

So if there is a line item on your service charge bill which is major works, the management company can collect the money now - but they have to do a section 20 consultation before undertaking the major works.

leafymeadow said:

Can the management company do this without any consultation.

As leaseholders, you have no right to have a consultation before a service charge bill is issued.

As a shareholder in the management company, you'd have to look at the company's 'rules' / articles of association to see if you have a right to consultation / voting etc.

But, for example, if the building needs, say, £50k of maintenance and repairs - having a consultation won't make the maintenance and repair requirements go away.

ReadySteadyPop

eddddy said:

You're being asked to pay an estimated service charge to cover the next 6 months. Have you been given a breakdown of the estimate?

Are there any line items in the estimate which seem 'unreasonable'?  For example...

• A line item that looks too high (e.g. the amount estimated for paying the gardeners is ridiculously high)?

• A line item that seems unnecessary, or outside the scope of what the lease says the management company should be doing (e.g. repainting something that doesn't need repainting, installing a water feature)

If so, you can challenge the service charge, and take it all the way to a tribunal, if you want.

(The service charge bill might also be recouping a shortfall resulting from an underestimate of costs in the previous 6 months. And it might also include a contribution to a sink fund, if the lease allows it.)

leafymeadow said:

This was not done as Section 20.

A section 20 consultation is required before major works start. It is not required before a service charge bill is issued.

So if there is a line item on your service charge bill which is major works, the management company can collect the money now - but they have to do a section 20 consultation before undertaking the major works.

leafymeadow said:

Can the management company do this without any consultation.

As leaseholders, you have no right to have a consultation before a service charge bill is issued.

As a shareholder in the management company, you'd have to look at the company's 'rules' / articles of association to see if you have a right to consultation / voting etc.

But, for example, if the building needs, say, £50k of maintenance and repairs - having a consultation won't make the maintenance and repair requirements go away.

No, but it could make them cheaper, see the Edinburgh Council "shared repairs scandal" from a few years ago for example.

daveyjp

20% of how much? 

You should have received a breakdown of costs to identify why there is an increase.  Building insurance isn't reducing, any maintenance companies will have increased costs of salaries and NI, material prices are increasing.  There may also be a shortfall from last year which is being recovered.