Freehold Enfranchisement and service charge arrears

[dman]

Hi can anyone help please?

4 leaseholders including myself are about to complete a collective enfranchisement of the freehold to our property.
Our solicitor has just got back with some figures from the freeholder and they have included a service charge of around 2500.00 which runs from March-August 2009.
Our solicitors advice is that we should pay it and get it back after we have completed but I don't like the idea of that, and I thought that it wouldn't actually be able
to stop the enfranchisement being completed anyway - can anyone confirm this?
Dman

[kikuyu]

Hi can anyone help please?

4 leaseholders including myself are about to complete a collective enfranchisement of the freehold to our property.
Our solicitor has just got back with some figures from the freeholder and they have included a service charge of around 2500.00 which runs from March-August 2009.
Our solicitors advice is that we should pay it and get it back after we have completed but I don't like the idea of that, and I thought that it wouldn't actually be able
to stop the enfranchisement being completed anyway - can anyone confirm this?
Dman

I would imagine that there will be service charges due upto the time of completion and for which you will need audited accounts.

Have you being paying interim s/c thus far? If that is the position, then what amounts did you pad into the s/c account for the year ended 2008/9 and how do the present figures compare with the previous year's figures? Are there any extraordinary items included in the latest account? Maybe the sum demanded includes insurance premium?

If you are not happy with the same then you should query the charges and if need be, you can apply to the LVT at a later stage.

I am not a solicitor, but I am positive that before the F/H's interest is transferred to the new Company then all the outstanding monies must be paid. In that respect I would think that your solicitors have given you proper advice.

[jeffrey]

Remember that service charge payment is an obligation of a lessee. Unless V is merely demanding lessees' arrears, no such payments are due on the lessees completing a collective enfranchisement.

[Geoffrey]

In our case the freeholder insisted on the reversioner company paying all arrears before the deal could go through. This it did but failed to get confirmation that the leaseholders in question were really in arrears. They weren't, so the new company ended up taking unjustified legal action against some of its new tenants. Not a good start - and the legal ramifications roll on three years later.

SO your solicitor's advice is probably sound but make sure the arrears are genuine and really are unpaid when the money is handed over.

[Gordon999]

Before completion, you need to get proper statements from present freeholder to confirm the payment status of ground rent and service charge for all 4 flats.

1. If ground rent has been paid in advance ( a normal situation ) , there will be an apportionment of the total ground rent up to the completion date and there should be a handover of ground rent to new freeholder ( for the period from completion date to end of normal ground rent year).

2. The service charge money ( until spent , legally belongs to the lessees ) should be kept a separate trustee bank account and you should demand to see up to date statement and handover of account balance to new freeholder.on completion date. The electricity bill may be outstanding and building insurance may be paid in advance - may be a reason for wanting to collect the Mar-Aug service charge. But you can enquire into the situation first.

3. Ask for confirmation that all 4 counterpart leases will be handed over and also building insurance current policy and details of past 3 years claims if any.