Absence of Service Charge Clause in Lease

[wartonarmy]

Can anyone please offer help with this:

 

I have one of six converted flats above a cafe. The owner of the cafe is the Freeholder or Lessor of the building.

 

The Lease [dated 1981] on my flat has a clause whereby the Lessor can recover my contribution to the costs and expenses incurred by him in fulfilling his obligations under the Lease to include:

 

the cost of external decoration and communal lighting to the stairs,

 

the cost of building insurance,

 

all other expenses [if any] incurred by the Lessor in and about the proper convenient management and running of the property.

 

such sum as shall be necessary [if any] by the Lessor to establish a sinking fund for the purpose of defraying the costs of providing such services and performing such acts which are not of an annually recurrent nature.

 

Since 1981, all the flat owners have received copies of the quarterly electric bill and are billed our share; similarly, at renewal, we are billed our share of the building insurance; when the building was redecorated [many years ago] the work was completed and we were each invoiced our share of the bill. We all paid promptly, no problem at all.

Importantly, there is no reference in the lease to 'Service Charge' or to annual making up dates, accounts etc. We have simply paid our share of actual itemised bills. We have never paid any 'Management Fees' even though the bills come via a 'Managing Agent' [who happens to be the husband of the cafe owner]

 

Now, suddenly, I receive a 'Service Charge Demand' for the year ahead, to include building insurance and sinking fund. That's all there is. Just a demand for £825 ....no notice....no information on the Landlord etc....no summary or breakdown of the 'service charge' Our average yearly expenditure would normally be around £160.

 

The accompanying letter justifies the service charge by virtue of the clause in the Lease stating 'all other expenses [if any] incurred by the Lessor...etc'

 

Ok, my first question is can an Annual Service Charge, in advance, on account, simply be imposed when there is no specific clause referring the Service Charge calculation, dates etc. in the Lease?

 

Secondly, can a Lessor simply appoint a Managing Agent and pass on his fee as a legitimate expense under the 'proper convenient management and running of the property'?

 

It seems a bit odd, that after 28 years, the Lessor is able to just suddenly pluck a figure out of the blue and demand unsubstantiated 'Service Charge' and 'Management Fees'

[Guest Old_andrew2018]

Bump

[Kentish Lass]

The lease on one of my properties (funnily enough refurbished in 1981) sounds very similar to yours, except that the freeholder never seems to bill anyone for anything (including ground rent) until they sell!! The gutters need attention and the outside needs refurbishment but I suspect it will take a rocket to get the freeholder to do anything.

 

The way the above method works is actually very unfair. Say Jo Bloggs owns leasehold of flat for 5 years and no major works are carried out, he then sells to Jon Doe. A year after Jon Doe buys the leasehold, major works are carried out and Jon Doe has to pick up his share of the tab. Jo Bloggs has lived and used the property for 5 years without paying any share towards the building's upkeep.

 

It is actually much fairer if all leaseholders pay a regular amount into a "sinking fund" which then pays for running repairs, which if carried out regularly can actually save a lot of money in the long run. If the fund is adequate, it may also build up enough to pay for any major works. This means that everyone who owns a leasehold in the building, for however long, pays their share towards the maintenance.

 

BUT, I think that if freeholder wants to make such a radical change to how repairs and maintenance are handled, he should consult with all the leaseholders beforehand.

 

I suspect that you are not so much against the idea in principle, just the way it has suddenly been foisted on you - and I suspect your fellow leaseholders will feel the same. These management schemes do involve some administration and as such an admin fee is not surprising, but it seems to me that you are entitled to a detailed breakdown of all these charges so that you can question them.

 

I suggest you get together with the other leaseholders so that a united front can be presented to the freeholder. You do have certain rights regarding reps and maintenance etc. but I am not a lawyer, and not an expert in this field.

[andydd]

Can anyone please offer help with this:

 

I have one of six converted flats above a cafe. The owner of the cafe is the Freeholder or Lessor of the building.

 

The Lease [dated 1981] on my flat has a clause whereby the Lessor can recover my contribution to the costs and expenses incurred by him in fulfilling his obligations under the Lease to include:

 

the cost of external decoration and communal lighting to the stairs,

 

the cost of building insurance,

 

all other expenses [if any] incurred by the Lessor in and about the proper convenient management and running of the property.

 

such sum as shall be necessary [if any] by the Lessor to establish a sinking fund for the purpose of defraying the costs of providing such services and performing such acts which are not of an annually recurrent nature.

 

Since 1981, all the flat owners have received copies of the quarterly electric bill and are billed our share; similarly, at renewal, we are billed our share of the building insurance; when the building was redecorated [many years ago] the work was completed and we were each invoiced our share of the bill. We all paid promptly, no problem at all.

Importantly, there is no reference in the lease to 'Service Charge' or to annual making up dates, accounts etc. We have simply paid our share of actual itemised bills. We have never paid any 'Management Fees' even though the bills come via a 'Managing Agent' [who happens to be the husband of the cafe owner]

 

Now, suddenly, I receive a 'Service Charge Demand' for the year ahead, to include building insurance and sinking fund. That's all there is. Just a demand for £825 ....no notice....no information on the Landlord etc....no summary or breakdown of the 'service charge' Our average yearly expenditure would normally be around £160.

 

The accompanying letter justifies the service charge by virtue of the clause in the Lease stating 'all other expenses [if any] incurred by the Lessor...etc'

 

Ok, my first question is can an Annual Service Charge, in advance, on account, simply be imposed when there is no specific clause referring the Service Charge calculation, dates etc. in the Lease?

 

Secondly, can a Lessor simply appoint a Managing Agent and pass on his fee as a legitimate expense under the 'proper convenient management and running of the property'?

 

It seems a bit odd, that after 28 years, the Lessor is able to just suddenly pluck a figure out of the blue and demand unsubstantiated 'Service Charge' and 'Management Fees'

 

To answer question 1.

 

The 'costs' incurred you mention above can be recovered from you as a 'service charge' However if there is no mention in the lease of advance or on account payments, then these costs can only be recovered after they have been incurred. There doesnt need to be 'dates' mentioned in the lease but you must be billed with 18 months of any costs being incurred.

 

As to the calculation or 'split' is there no mention that any costs to the property as a whole be split 6 ways ?

 

Question 2.

 

I too have disputed this with my landlord, there is no clear answer to this and I think it would eventually need to be decided by an LVT court.

 

Thirdly you mention a sinking fund, unless there is a provision for this within your lease then there is no obligation to pay this.

 

Your first step is to re-read the lease with regards to the calculation or split of the payments, as this is very important.

 

Andy