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Service Charge Building Works

Postby tekken » Tue Mar 20, 2018 12:48 pm

Hi,

First and foremost I am grateful for anyone who takes their time to offer a reply and advice on this so thank you in advance.

I live in a large managed block of flats. In 2018 our service charge increased by 10% and we were told this was to help prop up the sinking fund which was inadequate for major works. The flat was bought in 2002 and the managing agents for over a decade were NONAMES and they mismanaged the place. Ok, fast forward to now we now have an RTM who manage things and this in itself was a great step forward as the building has 330 flats. However the RTM then stated that the external refurb works which need to be done in 2018 / 2019 had a choice of being paid as a one off fee ( around £ 6K a flat ), 60% in 2018 40% in 2019 or spread over the monthly service charge payment, this was done as an online vote and the result was the 60% in 2018 and 40% in 2019. The demand for payment states that £ 3500 must be paid by April 1.

I am selling my flat. Do I have to pay this amount that they are asking for 2018 in one whole go or can I pay say the flat sells in April, 4 months of the 2018 year. I know the freeholder has a right to get the works done as per the schedule and can ask for all the money upfront in essence but they have not so far.

I am slightly grieved to pay the entire amount they are asking - do I have a position to pay for the months in 2018 that it takes to sell the flat or do I have to pay the whole amound being requested. I understand if previous managers have misappropriated funds then you can go to tribunal - I believe that the 10% increase to back up our reserve fund was one punch enough but to then ask for money for the works when sinking funds should cover such things is the fault of previous management. Ok i understand the reality is nothing will get done for free so we have to pay but I am selling the place hence the ask.
Last edited by atticus on Tue Mar 20, 2018 2:03 pm, edited 1 time in total.
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Re: Service Charge Building Works

Postby tph » Tue Mar 20, 2018 1:55 pm

It would depend on what your lease for the flat says. Usually the amounts payable are due as a lump sum on a fixed annual date.

I would have thought that the matter will be raised by solicitors when you sell the flat and most buyers would want to deduct any outstanding amounts from the purchase price.
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Re: Service Charge Building Works

Postby atticus » Tue Mar 20, 2018 2:04 pm

Agreed. You will need to disclose all this in the conveyancing process.
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Re: Service Charge Building Works

Postby dls » Wed Mar 21, 2018 5:31 am

The lease is well worth understanding.
Sinking funds arenecessary and in the long run helpful, but they do not sit happily within the conveyancing process and differ widely.

Also teh exact form of demand can make a difference.
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Re: Service Charge Building Works

Postby theycantdothat » Wed Mar 21, 2018 9:11 am

dls wrote:...they do not sit happily within the conveyancing process...


Indeed, especially when major works not covered by the sinking fund take place in the financial year of completion or notice of them has been given. A seller will argue that the buyer has/will have the benefit of the works and the buyer will argue that the deterioration occurred before he will have bought and ought to be covered by contributions made by the seller or his predecessors. As stated, the OP will have to make a full disclosure. I think I can safely say that any proposed buyer, having made his offer, will baulk at the prospect of having to cough up several thousand pounds. Theoretically, the sale price of a leasehold flat should reflect the condition of the property just as on a freehold sale, but in practice it is more complicated. The OP will have to engage in a bit of horse-trading. It is important that whatever is agreed is covered by some tight drafting in the contract to avoid later disputes.
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Re: Service Charge Building Works

Postby dls » Wed Mar 21, 2018 10:20 am

Many sinking funds are grafted onto a leasehold estate after it was set up. They sit there as happily as your wardrobe would welcome a third arm.

There may be no perfect answer for this. As TCDT says, understanding the documents, effective negotiating, and tight draftsmanship will be required.
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