Management company hikes maintenance charge by 40+% without warning

RainbowsInTheSpray

Just had to listen to a tale of woe from my neighbour who owns a single small buy-to-let flat. The rent from it forms a mainstay of her retirement income.

It seems after many years the freeholder of this block of flats sold up some eighteen months ago.

The new owner's contracted management company, after putting up the maintenance charge by a moderate amount on acquisition, has recently been sending out bills to leaseholders with a 43% increase in the charge.

No advance warning/notice. No breakdown of what 'maintenance' has been done in the past charging period or the present one which is being billed for and which requires immediate payment.

There seems to be a one-sided unfairness here. Is there anyone on the forums who can suggest what redress or otherwise actions which my neighbour could take? Does she have any legal right to challenge this? She has long-term tenants in the flat with whom she is on very friendly terms and does not want to 'shock' the relationship.

MyRealNameToo

https://forums.moneysavingexpert.com/discussion/6657220/management-company-hikes-maintenance-charge-by-40-without-warning

What she pays as a leaseholder technically has nothing to do with their tenants. Obviously if the margin no longer is worth while keeping the flat then there could be an indirect impact that it causes them to increase the rent but there are many forces that drive rent changes.

Leasehold properties I've had the service charge is paid in advance based on the estimated costs for the following year and then a true up is done at the end of the year when the accounts are shared with everyone and any rebate/extra becomes due alone with the charge for the following year.

It's worth talking in absolute numbers and not just percentages plus the number of units. Going from £100 a year to £143 would be a 43% increase but most would say thats still an exceptionally low service charge and if there are only 4 units, well that wouldnt even cover the cost of the accountants annual fee on our service charge.

There are mechanisms to challenge service charges, you have to show that the costs are unreasonable… they arent required to go for the cheapest of everything.

eddddy

It could be that the new management company are taking advantage of the leaseholders.

Or it could be that the previous freeholder was disinterested in maintaining and repairing the property, and it's got into a bad state and now needs lots of money spent.

Or it could be that there's specific 'major works' coming up (like a major roof repair), and they'll start a section 20 consultation in due course.

Or there might be other reasons.

As a starting point, maybe ask the management company for a breakdown of the estimate they are asking you to pay.

AlexMac

You don't say whether this is a small conversion, a biggish block or a flat on a huge estate, but your friend could

• challenge the Service Charge (researching this via online sources such as
  https://www.lease-advice.org/costs-and-charges/service-charges/challenging-service-charges/
  or as a more extreme case,
• seek other leaseholder's views on whether they are up to taking over the management of the block(s) "Right to Manage" or even more extreme
• Buy the freehold (both covered on this the MSE website at) https://www.moneysavingexpert.com/mortgages/buy-freehold-right-to-manage/

RainbowsInTheSpray

Do you know anything more about this 'Right to Manage' thing? Is it something my neighbour could use as a threatened 'possibility' leverage to get the management company to reconsider?

Does anyone know whether the management company is actually within its legal rights to behave in this way?

El_Torro

https://forums.moneysavingexpert.com/discussion/comment/81902640#Comment_81902640

I doubt the management company would take a threat to kick them out seriously, whether it's through Right to Manage or otherwise. While it's certainly something that can be done it requires the majority of the leaseholders agreeing on a course of action, which isn't easy to coordinate.

A management company can increase the service charge by 43% (or more) without much prior notice, yes. Legally there needs to be a breakdown of what they are spending the money on, though if it's a justified increase in spending then it can be done. In this particular case it's possible that the management company is being shady but you haven't given any information to suggest that so far.

gm0

https://forums.moneysavingexpert.com/discussion/comment/81902640#Comment_81902640

First

Threatening RTM is ineffective. It always exists as a possibility alongside freehold purchase. Provided the number of leaseholders required to do it can be assembled in favour. In both cases more than one lessee needs to act as directors of a new Ltd company which runs the affair. And may (or occasionally may not) appoint an agent of their choice. This is not trivial. And hard for smaller communities to sustain as the level of effort required unpaid. Of the volunteers is not trivial.

Agents know the game of RTM and SOF so it is meaningless bluster to threaten them with it.

Second.

We cannot say here. We would need to know more about the title plan, the lease, the communal facilities, their age, condition, and past behaviour of prior owner. But yes - it is likely that they are acting entirely within their legal rights. If work and required things (of freehold) haven't been done. Or charged. Then you took a payment holdiay - now coming to an end.

It could be exploitative and rent seeking - but it may not be. It may just be professional (for profit) replacing unprofessional and lax.

The way to determine it is to look at the bill. And the lease. And with other lessees ask for the breakdown and then review that as categories and recharge basis (split of bill) to against the lease.

eddddy

RainbowsInTheSpray said

Does anyone know whether the management company is actually within its legal rights to behave in this way?

The management company is legally allowed to increase the service charge by any amount - if they have reasonable reasons to do so. And they don't have to give advanced notice.

So you could look at a breakdown of last years service charge, and compare it to a breakdown of this year's service charge - to find out why it is 43% higher. And decide whether there are rerasonable reasons for the increased amounts.

RainbowsInTheSpray

There is no 'breakdown', apparently. There is just a figure - 'maintenance charge' - stated. This year's is that much higher.

eddddy

RainbowsInTheSpray said

There is no 'breakdown', apparently. There is just a figure - 'maintenance charge' - stated. This year's is that  much higher.

So your neighbour has to ask the management company for a breakdown

RainbowsInTheSpray

https://forums.moneysavingexpert.com/discussion/comment/81904063#Comment_81904063

Does the law oblige them to provide this on request?