Splitting the Costs of a Freehold flat

JiggerandJolley

So, what do the current leases say?

We've read through the lease a number of times and like all legal documents if your not used to reading such things it's not that easy to understand. But it seems that there is no set percentage payable by each flat. It says that the annual amount payable by the tenant, 'is calculated by dividing the aggregate of expenses and outgoings incurred …..by the aggregate of the rateable value of all the dwellings and other rateable parts of the building…….and then multiplying the resultant amount by the rateable value of the Demised Premises'.

It goes on to say that the council has the right at any time to fairly and reasonably substitute a different method of calculation. These could be, referencing floor areas of all dwellings or alternatively, substituted by reference to the number of bedrooms in the Building and 'calculated accordingly'.

We're assuming the rateable value has been used up to this year. But perhaps a different calculation was done for this year and therefore would account for the change in how much each flat pays.

The lease clarifies what the service charges are for and includes the exterior window frames in with the roof, exterior walls and basement.

I'm finding it difficult to get my head around the rateable value method of calculation and how this relates to each flat. If anyone has experience of this it would be good to know.

user1977

But it seems that there is no set percentage payable by each flat. It says that the annual amount payable by the tenant, 'is calculated by dividing the aggregate of expenses and outgoings incurred …..by the aggregate of the rateable value of all the dwellings and other rateable parts of the building…….and then multiplying the resultant amount by the rateable value of the Demised Premises'.

So that is a set percentage, you just need the figures for the last rateable values of the flats in order to do the arithmetic. You may need to delve into the council's archives to get the last pre-poll tax rates rolls (although those are the proportions which everyone ought to have been using for the past 35 years or so, so shouldn't really be a surprise).

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/81885082#Comment_81885082

Fair comment, but if the council had been applying charges on a 50: 50 basis in the past (as indicated by OP), then they clearly have not applied the rateable formula, since it is inconceivable to me that a studio flat would have the identical rateable value of a much larger flat over 2 floors.

Could be the council has unfortunately set a precedent, ignored the lease computation, and successive owners of the smaller flat have never seen fit to challenge, due to ignorance of what the lease required.

The process of buying the freehold should have been an opportunity to reset matters, and potentially that may well be where the 35%/65% split came from. The valuer should be asked if that is how they arrived at the new split, and if it does follow the terms of the lease, your daughter's have a basis to stand their ground. As new Freeholders, they are not bound to follow the errors of the previous Freeholder.

Obviously, things will change if the basement is redeveloped and that flat's rateable value increases.

eddddy

poseidon1 said

Could be the council has unfortunately a set a precedent, ignored the lease computation, and successive owners of the smaller flat have never seen fit to challenge, due to ignorance of what the lease required.

FWIW, I can't see that setting a precedent. More like the owner of the small flat might have case for claiming back some of the overpaid service charges for previous years from the freeholder.

And the freeholder might be able to bill the owners of the larger flat, for some of the undercharged service charges for previous years.

But if the OP's daughters and the owner of the upstairs flat have already become freeholders - then they're the people who the claim would be against. (Which would probably become very messy!)

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/81885164#Comment_81885164

Exactly, with the change in Freeholder to the current leaseholders, past misdeeds are likely a closed book which probably makes no financial sense ( by way of legal costs) to try and re-open.

Main issue now is to get things on a correct footing, which seems to be OPs desire on behalf of daughters.

JiggerandJolley

Thank you everyone. My daughters bought the flat at the end of 2023, so they haven't been charged 50/50 for too long, unlike the previous owner - whose name is still on their lease (my daughters asked the council to issue a lease document in their names but were told the council don't do that). As the charges changed this year I had a look at the council website and it seems that they decided to change the way they calculate the service charges (as it says they are entitled to in the lease) in 2022, to make the system 'fairer and more reasonable'. It seems they are now using a points system 4 points for kitchen, living room, bathroom & hall and 1 point for each bedroom. A bedsit, which is what my daughters have (with an uninhabitable basement - no windows, doors & low ceiling height) should be 4 points whereas the flat upstairs should be 7 or even 8 points. We think that because they bought it around the time these changes were coming in any letter notifying the leaseholder was overlooked and never past on in the sale. Obviously, if they develop the basement which is what they hope to do, they will create 2 bedrooms and both of them will be able to live there and be happy to pay an increased amount towards the charges. But as it is, I think they ae justified in, as poseidon1 says, 'stand their ground' for the time being and pay the amount deemed reasonable for that size flat. If they want to do work on the flat they have to apply to their fellow Freeholders for permission and it will be to everyone's advantage to make their flat larger and share more of the costs.

Thank you everyone for helping resolve this. We have a much better understanding now of how the whole Freehold/Leasehold system works and how much leases can vary.