Service charge paid but demands still being made

[ladyluck17]

Please would someone kindly offer me some advice. I bought a flat in a converted house about 9 years ago. I have never lived in it as I married shortly afterwards but I rented the flat to an older gentleman who has lived there since, for about 9 years now. When I bought the flat I was responsible for maintaining my part of the building as there was no management company in place, so I took out buildings insurance for my flat.

 

There are five other flats in the buildings. All the other residents are owner occupiers. About two years ago, one of the residents contacted my husband to say they were thinking of banding together to purchase the freehold so that the maintenance of the building would be secured and the cost shared.

 

They first needed to track down the freeholder. We said we would be interested. Please keep us informed. One of the residents contacted my husband about 18 months ago to say they had two residents interested so far but would keep us informed.

 

To my horror, I received a solicitors letter a few weeks ago stating that I owed over a thousand pounds in service charges for this year till March 2016. It transpires that the other occupants have formed a management committee and had banded together to become the freeholders.

 

I replied to the solicitors stating that the last I heard was the discussion stage and I had not received notification of the forming of a committee or that the other residents had purchased the freehold. They did not want to know. They said that if I did not pay immediately they would take me to court and I could lose the flat.

 

I reluctantly paid the thousand pounds requested by the solicitors for the service charges, as they said I could lose the flat if I did not pay immediately, money that I had put aside for Christmas, but despite my payment they have now sent a claim form stating that I still owe the service charges and have added on another two and a half thousand pounds in legal fees.

 

Can anyone please help, I cant sleep at night. The claim form came last Friday and it says I have 14 days to reply.

 

Any help at all would be greatly appreciated, Thank you

[citizenB]

I will try and find someone who can help you.

 

Meanwhile, have you spoken to Shelter - they don't just deal with Homelessness, they have a section that deals with this type of issue as well.

 

http://england.shelter.org.uk/get_advice/private_renting

 

I think I have linked you to the correct part of their site, however, you could also telephone them.

[andydd]

Hiya.

 

What does the lease say ?. It will spell out the service charge regime and who is responsible for what and how the cost is split.

 

The 'normal' situation is that the Freeholder is responsible for repairs to the main building and insurance and he recoups the cost via a service charge from the leaseholders (including you).

 

You say the letter from the solicitor is the first you have heard of the charges, to be payable the leaseholder must be sent valid demands, these must contain a summary of rights - service charges, demanded in accordance with the lease and a whole heap of legislation (including sending demands or informing you within 18 months of costs being incurred).

 

The fact that you were not informed when new FH company or perhaps it is RTM company ? was up and running sounds wrong, did they write to you address or the property address ?. normally a FH or management company will write to property addresss UNLESS youve given them an alternative address.

 

This whole thing sounds wrong, why did you pay the thousands asked ?, did you not think of disputing it or defending it in court ?

 

Go away, find and scan your lease and docs received so far and redact any names and adresses and you can then post them here if required, Im sure we can help more.

 

Also have a look at the LEASE site, they provide free help > http://www.lease-advice.org/

[ladyluck17]

Hi there, thank you both for replying so quickly. I will have another read of the lease that I received when I bought the property 9 years ago. I did not think it was relevant as there was no management company in place. I now discover that one has been formed by the residents of the building. I was put under so much pressure from the solicitors. They were emailing me it seemed every other day demanding payment. I asked them how this can be due when I had received no notification.

 

I called my tenant and asked for the numbers of any of the residents in the building. He gave me the number of a resident that he thought had started getting other owners together to buy the freehold. When I called him I explained that I was not aware of the committee. He said that I still had to pay service charges. I asked if I could also buy and become an owner too and I also asked for copies of any letters that had been written to me. He ended the conversation by saying that he would arrange for original letters to sent to me.

 

During the conversation he also said that he had put £10,000 into the formation of the committee and he wanted his money back. I requested that he please send me copies of any correspondence that was relevant to me. He said I would receive a call or email within two days. Three days later there was no reply from him.

 

I called but he did not answer the phone. He then sent me a text saying he had nothing to say to me and that I needed to revert to the solicitors. I feel so stressed about this

Edited December 7, 2015 by citizenB
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[ladyluck17]

Hello Andy, I felt too afraid to wait until Court to dispute this. I felt really intimidated. I called the Leasehold Advisory Service before I came to this forum and they said that I could run up even more thousands of pounds if I wait until Court to dispute this. I felt so intimidated by the solicitors.

[tezza1234]

This just sounds as wrong as it can get, id go to court, no judge on earth can uphold this, in future, stay of the phone, email or letter only, do not feel intimidated, now papers have been served it will likely go to court, but you have nothing to fear, the guys here are amazing and will help you win. Sorry i can't be of more help, just thought id offer a confidence boost, do not worry yourself, easier said i know but you can do it.

[BlurredFX]

Hello,

 

Andydd is very knowledgeable about such matters, he is the best person to help you.

 

But what he says about your lease is exactly correct - more details are needed. Even if you can't scan your lease just yet, do you have copies of the letters sent? They may give a clue.

 

In my very limited experience, they will have either bought the freehold or will have formed a RTM (Right To Manage) company. In both cases you should have had formal letters. Have they sent them to the flat and the tenant thrown them away?

 

Don't be too scared by court, as long as the amounts a relatively small, there is little prospect of then adding loads of fees.

 

As Andydd says, a copy of your lease and any letters from their solicitors are required so we can get a handle on the situation. If it goes to Court, they can be forced to provide all their documentation to you and the Judge as he will need evidence to make his judgement.

 

See if you can scan and post some more info up.

 

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[andydd]

Not sure I understand what has happened here.

 

1. When you bought the property, did you pay any service charges ?

 

2. You say you were responsible for maintaining your part of the building ?, why did you think that ?, did you just assume ? Was there no Freeholder ?, (management companies normally just do the day to day management of the building but ultimately the responsibility lies with the Freeholder).

 

3. It appears that a RTM (Right to manage company has been formed, these companies take over the management of the building, collect monies, arrange repairs), but it appears you knew nothing of this ? - or only in the early stages

 

4. The RTM process is explained here > http://www.lease-advice.org/publications/documents/document.asp?item=21 I dont know the exact process but I believe ALL leaseholders must be contacted and invited to join.

 

5. Buying a property and renting it out can lead to all sorts of problems, especially if the FH or Management Company doesnt know your address for correspondence, there is a risk that letters go to the property and the tenant throws them away.

Can you scan the letters received so far and post them up here so we can help. The original RTM letters and letters from solicitors.

 

Most important of all, any service charges are only payable IF valid demands have been sent to you (although note my comments in #5), if no valid demands then no service charges and also no legal fees, also legal fees only payable if allowed by lease, many simply do not allow them)

 

Andy

[ericsbrother]

If you now own a part of the freehold then your flat cannot be repossessed but a charge can be put on the property which would prevent you from selling it. The original freeholder may have sold the frehold to another person or company and the flats are still leashold but you now have a different Landlord. This would have lead to legal notification being sent to you. the third option is that the other leaseholders have got together as a majority (you should have been informed what was going on) and taken over the managemnet of the building and the freeholder has not changed so no change to your lease. This could cause the problems you have outlined and could result in the forfeit of the lease but if they sue you and lose it will cost them personally. There are procedures for making demads for monies for maintenance etc and as you havent received any paperwork they are remiss and you could well not be liable for anything at all due to their errors. however, if they can prove they have delivered the necessary documents to the flat address they are on firmer ground so it would be worth taking advice on how to proceed and whether the charges are legal and reasonable.

[ladyluck17]

Hello, thank you all for assisting me with this. I really appreciate all your replies.

 

When I bought the flat 9 years the freeholder was absent, I understand the person lived in another country and had no interest in the building. Then, two years ago, some of the other owner occupiers began discussing the possibility of purchasing the freehold. It appears that they have since purchased the freehold but as I live away from the property and I am not an occupier like the others, this has gone on with very little information being given to me. I have the name of the company and I have a copy of the lease. Could someone please guide me as to how to send it to you so you can read it? I know Andy said it would be helpful to see the lease, how do I get it to you.

[andydd]

Thanks.

 

The others leaseholders may have created a RTM company or sounds more likely a freeholder company to which they all have shares, either way you should of been in formed of the progress, it appears you received the first initial correspondence.

 

Hopefully someone can tell you the scan to pdf and attach here process.

 

It maybe useful if you visit Land Registry and get the Title Deed info, this will say who the LH and FH actually are, it only costs £3 and once paid you can download it straigh.t away. Go here > https://www.gov.uk/search-property-information-land-registry and click Start Now.

[andydd]

Ive read the lease..

 

Landlord is/was Christopher Wayne Evans (in 1989) it may well have been assigned to other people/companies since then. This is normal.

 

Be worth getting up to date Title Deed from LR as I suggested for £3, this will show who actual Landlord is now.

 

You as leaseholders will pay 1/7th of the service charge, and an amount towards a reserve fund.

 

Ground Rent payable to Landlord (IF there is RTM company that took over then GR is still payable to LL) of £26 for 1989 – 2019, twice a year I think. BUT only IF valid demands received by you.

Clause 4 (I) is Standard S146/Forfeiture clause allowing LL to recover legal costs BUT only if the landlord is going down the S146/Forfeiture route, this doesn’t apply IF he is simply going down the court claim for a monetary route

 

Clause (ii) is similar, it says “to pay legal costs…reasonably incurred by the landlord of and incidental to the service of all notices and schedules relating to wants of repair to the flat..” My reading of this is that if they ask you to repair something that is demised to you then they could recover legal costs, it DOESNT IMO cover chasing you for service charges. So IMO they cant recover extra legal costs for chasing you.

 

Contribution section.

 

But confusing this, but you must pay £48 four times a year in advance, and then later it will be balanced against any actual expenditure.

 

The LL can charge 4% against Lloyds rate as interest on late payments (this wont be a fortune though).

 

Landlord must insure the building.

 

Forfeiture section.

 

Not sure this applies as there is a lot of legislation and court claims that must be made before it gets anywhere near forfeiture, for example the part ‘whether legally demanded or not’ doesn’t apply as valid demands MUST be sent and must comply with a whole host of legislation, much of it bought in after the lease was written.

 

 

 

To summarize nothing surprising about the lease, you need to concentrate on:-

 

1. What happened when you first bought the property ?, was there no Landlord/Freeholder then ?, this would normally be flagged up as a potential problem by your conveyancer, if there was a landlord, what address did you give him/did he use for corresponding with you ?

 

2. What happened when the other leaseholders bought freehold? why where you not informed?, what address did the first letter get sent to and what address have the recent solicitors letters been sent to ?

 

3. For ground rent and service charges to be payable they must be sent to ‘you’, this is why the address is important. No demands then nothing is payable and neither would be any extra charges or interest.

 

4. Even if sent, GR demands must comply with S166 of Leasehold & Commonhold Act 2002, service charge demands must comply with law, lease, come attached with VALID 'Summary of Rights – Service Charges' and contain landlord address in UK.

 

5. Legal costs are only payable IF lease allows (id argue yours does not), they must also be accompanied by 'Summary Of Rights – Administration Charges' (many forget this).

 

6. Service Charges and Admin Costs can be disputed at an FTT (a court dealing with lease issues).

 

So can you answer the above points, also scan any docs you’ve received from other LH when forming company, any demands you’ve received and solicitor’s letters.

[bankoff]

Hi Ladyluck

 

Andy is absolutely right about this, all of it. There is one thing that may not have been mentioned. Most of these Service Charge claims which are sent to County Court tend to be transferred to a First Tier Tribunal, especially if they are disputed, you must set about disputing this and with luck any court claim will be transferred.

 

Sorry Andy to butt in,,,,, nice to see you are still helping, you helped me once with lots of information.

[andydd]

Ill add that Im correct in saying a court claim has been started so its quite important that the claim doc and the previous solicitor letter are scanned and posted (redacted first) asap so we can help with a defence.

[ladyluck17]

Hello Andy and the others that are contributing to help me. Thank you so much for spending so much time assisting me in this.

 

Andy, I have taken your advice and looked at the title deeds at the Land Registry buts its a completely different name to the one on the letters.

 

I asked the management company at the outset to send me copies of original letters and notices but they have still not sent them to me.

 

I will have a go at uploading the other documents I have as I know that time is of the essence.

 

I will try and get that done within next few hours.

[andydd]

Sometimes the Land Regisrty ones are a bit out if date but should be reasonably accurate and show who the current Leaseholder is and who the Freeholder/Landlord is.

 

As you prob know the original lease will show original Freeholder and original Leaseholder, but these two will be assigned to different people over the years but the lease wont change so the LR Title Deed should show who the current Freeholder and Leaseholder are, it also shows some other bits and bobs, charges on property, etc.

 

IGNORE THIS - The LR doc correctly shows the new Freehold company

[andydd]

An update to this as the OP PM'ed me some info.

 

1. The previous Landlord/Freeholder was absent/did nothing, so previously LHs had no demands for and didnt pay service charges)

 

2. The LH has made offers of partial payment and has now paid all outstanding service charges (but without admission ?)

 

3. A court claim was started by LL/FH, shortly before LH paid outstanding monies

 

4. The court claim includes legal costs of £2000, whilst this isnt recoverable under small claims track rules, many leases allow the cost to be recovered on a contractual basis, BUT the lease must clearly allow this.

 

5. The claim is a straight forward money claim, it is NOT a claim for S146/Forfeiture (this route is available to LL/FHs but rarely used or successful).

 

6. The lease clause relied upon by the LL/FH is the standard S146/Forfeit clause, saying if the the LL/FH starts or contemplates forfeiture he can recover legal costs, this is a common trick, the LL/FH starts a standard money claim but pretends/alludes to the fact he is following or at least contemplating S146/Forfeit proceedings, he only says this as this is the only way he can hope to recover legal costs.

 

So if the service charges demands were not sent (there seems to be some confusion over correspondence sent to property address (its let out), or actual address of OP), then any resulting legal costs for non payment cannot be recovered.

 

The clause IMO does not allow recovery of legal costs, a very good piece on the scenario here >http://nearlylegal.co.uk/2015/12/leasehold-disputes-costs/ the latest Fairbairn Upper Tribunal linked in the blog is promising.

 

Here is a previous LVT decision which is almost an identical scenario > http://decisions.lease-advice.org//app/uploads/decisions/act85/7001-8000/7032.pdf the LH won although LVTs are not binding.

 

There is also another major flaw in LL/FHs claim that I wont mention here, its strong enough IMO to use strike out/summary judgment to strike out legal costs part, as the service charges are now paid, this would leave nothing except maybe court fee paid by Claimant (LL/FH).

 

Also the FH/LL is trying to say that the OPs payment of partial amounts/full amount is an admission or agreement that debt is owing, Im not sure about his (with hindsight the OP should of marked correspondence Without Prejudice, let this be a lesson to others), I dont think correspondence specifically states an admission and in Leasehold Cases, S27 of Landlord & Tenant Act 185 says "payment of amounts is not an admission", this is so Leaseholders can pay first then dispute later at an LVT/FTT court (this is advice normally given to LHs).

[andydd]

Ive asked OP to send of Acknowledgment of Claim and also the following letter to get some more info.

 

Dear Sir/Madam

 

Request for information under CPR 31.14, Sections 21 & 30A of The Landlord and Tenant Act 1985 and Sections 2.4, 3.4 & 3.26 of The RICS Service Charges Code.

 

I request that you provide me with the following details/documents.

 

1. The dates on which Service Charge demands for the period 2014 – 2015 were sent, to which address(es) and any proof of posting.

 

2. A Summary and breakdown of the Service Charge amounts for 2014 and 2015.

 

3. The Insurance details covering xxxxxxxxxxxx for the years 2014 and 2015.

[andydd]

An update to this,

 

 

The scenario is.

 

1. Service Charges and Ground Rent were not paid, built up to a debt of around £1000.

 

2. FH has started claim for SC & GR debt AND also solicitors legal costs, claiming they are payable under lease S146 clause. (Legal costs payable if FH intending to forfeit)

 

3. FH has continued to send new SC & GR demands over this period, when questioned claiming that despite the fact that sending new demand may waive the right to forfeit, non payment of this new demands creates a new breach (sounds ok so far).

 

4. Now the important bit, last demands for GR & SC sent in October, these not paid, ok..so new breach giving right to forfeit, but soon after that date, payments made by LH and accepted by FH (thus IMO waiving any right to forfeit AND any right to associated costs)

5. November., Court Action started, although this is for debt, its not actually an application for S146 breach.

 

My opinion is that there have been no new breaches therefore the right to forfeit has been waived by accepting payment, anyone any thoughts ?

 

(Ill also add that the Administration Charges - Summary of Rights is incorrect, this gives LH a right to withold payment.)

[BlurredFX]

What pre-action protocol relevant here? Am I reading this right in that the FH is seemingly just looking to earn himself some cheap "legal fees"?

 

Regarding, "Legal costs payable if FH intending to forfeit" I would argue that the FH can't intend to forfeit if he doesn't have a Judgement. He could intend to do many things, but if he doesn't have the tools to do it, he won't be able to.

 

All my knowledge tends to come from where andydd has pointed me previously. I don't mind chipping in to the debate sometimes.

[andydd]

Further update to this (Ive been helping the OP all this time and its been quite a saga).

 

The FH has been running up huge bills, now over £20,000 in costs he claims he can recover from the LH using the S146/Forfeit clause, Im confident he cant as he has made many mistakes, SC and Admin Charges invalid, he has waived right to forfeit, all SC/.GR paid over a year ago, only outstanding amount is £2000 legal costs BUT forfeiture cannot be contemplated for such "defualt charges" (relating to late payment costs, interest, etc).

 

The FH solicitor has been very unreasonable and threatening but in December the Fh announced he would no longer be using them (maybe as he was worried about huge costs he was incurring).

 

Now the original claim was for only £2000 legal costs so the FH asked to amend to try and recover the further £20K odd, I wrote application to oppose, quoting CPR, proportionality and recent Mitchel case where Judge takes a hard line on endless amendments and mistakes.

 

The outcome was amendment disallowed , so the Fh has effectively lost £20K at a stroke !

 

Its now back to the very original claim, as SC and GR have been paid this only leaves legal costs of £2000 which he is trying to recover using forfeit clause, I dont think he has any chance of success, worth poinjting out the LH has made numerous offers to settle which he turned down, this would of saved him a lot of money had he agreed.

 

This is a tale of another greedy/pig headed FH who wont back down just to try and save face.