Management company asking for more and more money

[king12345]

Hi Caggers,

I have a query on my friend's behalf.

He pays service charges related to communal areas around his freehold house to a management company.

Recently they have increased the charges by almost 50% without explanation

and asked for £500 arrears because they made a mistake not charging an administration fee for the past 6 years.

At this point my friend requested evidence of expenditures.

They refused to provide them, claiming that the accounts are private (?!?!)

They also ignored my friend's request to view the building insurance certificate which costs around £70/year.

He showed me a breakdown of the charges they claimed in the past 6 years

and I can tell that there is something fishy,

i.e. there's a charge for garden maintenance

and one for landscaping,

one charge named Management charge and

one Administration fee (the one they forgot to charge and they want £500 now).

It sounds like the same things under a different name to me.

He now wants to inspect all accounts for the past 6 years including all supporting evidence to balance the sheets

but they are refusing to disclose these and said that he's only entitled to the breakdown of charges,

a list with the price next to each line.

What can it be done to obtain the accounts?

I thought of a SAR, but would the DPA apply to this kind of situation?

Second question:

the Administration fee they forgot to charge is a contractual fee stated in the lease,

so he needs to pay that, but he can't atm.

What can he do to pay it in small instalments, possibly £5/week?

 

Thanks for your help and let me know if you need any more info.

[caro]

I'm a little confused (not unusual). You say his house is freehold but he has a lease. What is the lease for?

[caro]

Charges have to be claimed within 18 months so they shouldn't be able to go back 6 years, unless something in the lease says different. http://www.lease-advice.org/documents/Service_Charges.pdf

[king12345]

I'm a little confused (not unusual). You say his house is freehold but he has a lease. What is the lease for?

Yes, it's odd.

His house is freehold, but there are communal private gardens and parking spaces

[stu007]

Hi king

 

They really need to have a good read of the lease for that communal area to fully understand its meaning.

 

In the mean time I would challenge this "Administration FEE" for the past 6yrs.

 

1. As this error was of the Management Companies doing what Act of parliament/Regulation/Legislation states they can claim 6yrs backdated money with copies of these provided to you?

2. A complete breakdown of said money.

3. A full explanation as to why this error was not picked up during those 6yrs by your companies Financial Accountants that would have had to do annual accounts for your company?

[king12345]

Thanks stu007,

I try to answer your questions in order:

 

1. They said that because the admin fee is listed in the lease (It's there, I checked) then it's a contractual fee and must be paid even if it is their error that it was never invoiced.

I suppose they are appealing to the fact that debts become statute barred after 6 years (correct me if I'm wrong) and being a contractual fee it would surely be awarded in the county court.

2. We asked for detailed breakdown of all the other charges which are not listed in the lease, so non contractual, but they refused to give them because the accounts are private (?!?!)

We wrote to them highlighting that if that was the case they could charge £1000 a month for service charges without anyone being able to challenge them.

No answer to this.

On that note, if we make a SAR under the DPA, would they be obliged to disclose full accounts including receipts and proof of expenditures?

3. Already asked, they said human error.

[andydd]

Hi.

 

Normally in similar situations, the property is leasehold and you pay service charges, for leasehold properties there are all sorts of laws that apply and even charges can be challanged at a LVT (Leasehold Valuation Tribunal), now called FTT.

 

BUT unfortuntaley these DO NOT apply to freehold properties, so the links above such as #3 don't apply.

 

In your situation, the leasehold rules dont apply, for example, if leasehold you have rights to view invoices, etc. In your situation it is purely contractually..i.e what ever is in the lease, what does it say ?, does it give an amount ?, can it rise ?, or soes it say something like to pay for services ?

 

If the last one then clearly they can only bill you for costs they have actually incurred, if they started legal action, they would have to prove this, you maybe be able to ask to see details as part of the CPR Pre-Action Protocols.

 

I normally deal with leasehold issues and there are many protections in law, alas freehold properties that include a management fee can be tricky as nearly all of the protection is stripped away.

[andydd]

Just to add that sometimes costs like yours CAN be challanged at an LVT if an Estate Management charges, see here > http://www.lease-advice.org/publications/documents/document.asp?item=14#30 i dont know much about them, they are quite rare.

[king12345]

Thanks guys,

One thing is not clear to me:

If we make a sar to see the detailed accounts under dpa, do they have to comply?

How can they charge what they want without proving that they've actually spent the money?

[andydd]

What does your lease say ?. That is your contract and is the first place to start, can you post it up or the relevant parts with perosnal info redacted.

 

Thanks.

 

I dont know if SAR applies, hopefully someone esle can answer, IF it were leasehold, there are clear provisions under Landlord Tenant Act S21 to view accounts and then further under S22 to actually visit their office and physically inspect them.

[king12345]

I'll get the lease and post it.

It may take a couple of days.

Thanks for your help

[bazaar]

Hi, how are you getting on with this, i believe youre talking about a deed of covenant. Have similar situation and made a lot of paperwork, so get in touch through here and lets see what we can do

[king12345]

Still waiting for my friend to find the lease agreement.

The first question remains: can we request the management company to disclose the details of how the money is spent? (i.e. receipt from the gardening contractor).

The truth is that they do not look after anything deemed communal.

They don't cut the grass, they don't repair car park potholes etc.

The residents have been doing it themselves since the houses were built, so I suppose they're just pocketing the money.

This would explain why they don't want to show any receipt or accounts.

I'll be grateful if anyone could answer the question.

Thanks

[bazaar]

The first question, yes you can ask for a full breakdown of their charges, it most likely states that inthe deed. Ie, up front estimate for six months followed by a full and detailed bill six months later.

Although the deed will say your friend promises to pay the company, they also have to provide the service.

So you need the breakdown to allow your friend to make a reasoned judgement over whether the charges are correct.

However, they will most likely refuse this as they will know it will cause them embarrassment. If youve got proof that residents have been doing work on the estate, get them on your side, before any threat of court.

Challenge everything, even down to insurance costs. Lets say this company charges £10 per household, per year for insurance. How many proprties do they manage? If its say 400, then i would expect to see the original insurance policy cost as £4000. If its less, then they have made a profit, which they are not allowed to do.

This formula should work for everything.

Get the bill and the deed together and write down each part, then request the info. If they resist, then that would be fishy to say the least. If it gets to court, then you have certain procedures that allow you to force them to disclose this, as long as the court allows it.

[king12345]

So far they have refused to provide any evidence and separately my friend asked for the building insurance policy documents (they charge £70 a year to 1400 dwellings) but they ignored his request.

I think that they don't have a building insurance as all houses are freehold and the only parts they're supposed to manage are the flower beds and car park spaces.

Would be nice if hmrc investigated the accounts and found no evidence of any expenditures.

All residents have been looking after the flower beds from day one and the car parks are areas of badly broken tarmac without lines or lights, just empty spaces where residents park.

Indeed fishy

[bazaar]

Precisely my point, so that insurance policy should equal 70 x 1400. If it exists, ill wager it doesnt even have the correct value, well worth pursuing. Sounds like exactly same as our company, ive not paid them for over 5 years, so just waiting court, theyve threatened but backed down in the past, they seem to be a little bolder now, but we,ll see.

[bazaar]

Just noticed mail on sunday has an article on similar issues, so ive just sent the reporter an e mail, maybe you can do the same, worth a punt to get it highlighted, [email protected]

[SabreSheep]

Not sure how a SAR would help you. It is a "Subject Access Request" and only information directly relating to you should be given out.

 

A Freedom of Information request is more like what you are thinking about but I believe (although I may be wrong) that this applies to regulatory (Government owned) bodies only

[king12345]

Yes, FIR only applies to government bodies.

SAR is probably the best bet, but they've already said that they will only release a summary of how money is spent without evidence of any sort.

In practice they will break up the amount pay in fictitious charges for work never carried out

[bazaar]

Forget sar , are they threatening court? You can ask that they fully explain all charges, if they refuse then put the account in dispute, if this is a deed of covenant, it will be stated somewhere that they must act reasonably and in the best interests of customers, it may be implied also. So effectively you give them the chance to be unreasonable and they have breached the agreement.

[king12345]

Forget sar , are they threatening court? You can ask that they fully explain all charges, if they refuse then put the account in dispute, if this is a deed of covenant, it will be stated somewhere that they must act reasonably and in the best interests of customers, it may be implied also. So effectively you give them the chance to be unreasonable and they have breached the agreement.

No, they're not threatening court because my friend has always paid and keeps on paying.

They're just refusing to justify how the money is spent.

They sent him an email saying that they're only obliged to provide a summary of accounts, not proofs that they've actually spent the money.

In other words they take the money from 1400 residents and issue a fabricated summary at a cost of a few pounds a year.

I'm thinking of starting a management company myself!

[bazaar]

Oh wow, thats exactly thevsame response i got a few years ago,

Sounds like the same company to me.

Well, i guess if your friend is paying they wont do a thing, but they have to prove they did the work and they have to prove their costs as there is a maximum 15% normally as profit, our paperwork stated 10 % but the snidey gits charged 15 straight away, so was very misleading.

 

I got trading standards involved, they will investigate on your behalf, the more people who do this it will highlight the issues with this type of company.

Good luck