New freeholder: wrongly over-collecting service charge

[wellsbourne]

My block of flats has a new freeholder that is demanding service charge payments.
All the flats have paid up in full to the previous freeholder until the end of september 09, but the new freeholder is insisting that we all start paying to him from the start of July 09, even though he's had all the proof to show we are all paid up.
The previous freeholder left the accounts a little messy, as he hadn't been collecting reserve fund money from us, so as far as we are concerned, this is the only outstanding amount, which the new freeholder has decided not to collect this owed money.
But he is looking for double payments on the buildings insurance, 1 years worth in advance to be paid now, and then 1/4 payments, with oct being the first payment.
The lease states that the accounts should be made up at the end of January, which the previous freeholder didn't stick to, and it appears this freeholder doesn't want to either.
My question is can he demand money now if we all feel that we're paid up until the end of september? and how can we make him do the accounts at the proper time?
Is there anything I can put in a letter to him to stop him from harrassing me for money?
Any responses are much apreciated.

[andydd]

My block of flats has a new freeholder that is demanding service charge payments.
All the flats have paid up in full to the previous freeholder until the end of september 09, but the new freeholder is insisting that we all start paying to him from the start of July 09, even though he's had all the proof to show we are all paid up.
The previous freeholder left the accounts a little messy, as he hadn't been collecting reserve fund money from us, so as far as we are concerned, this is the only outstanding amount, which the new freeholder has decided not to collect this owed money.
But he is looking for double payments on the buildings insurance, 1 years worth in advance to be paid now, and then 1/4 payments, with oct being the first payment.
The lease states that the accounts should be made up at the end of January, which the previous freeholder didn't stick to, and it appears this freeholder doesn't want to either.
My question is can he demand money now if we all feel that we're paid up until the end of september? and how can we make him do the accounts at the proper time?
Is there anything I can put in a letter to him to stop him from harrassing me for money?
Any responses are much apreciated.

It looks like the answers to most of your questions should be within your lease, for example, does it oblige payment of service charges in advance ?

Andy

[wellsbourne]

Hi Andy
I'm not sure? we've always paid the full years worth of service charge in advance. The lease does mention interim payments, do you know what that means?

[jeffrey]

I'm not sure? we've always paid the full years worth of service charge in advance. The lease does mention interim payments, do you know what that means?
Interim payments are made on account (and in advance) of the current year's outgoings. After the year ends, they are adjusted:
a. upwards, if there was an under-collection; or
b. [more rarely!] downwards, if there was an over-collection.

[andydd]

Hi Andy
I'm not sure? we've always paid the full years worth of service charge in advance. The lease does mention interim payments, do you know what that means?

As Jeffrey pointed out interim does indeed mean in advance, my landlord demanded interim payments too but on closer inspection the lease didnt oblige it, which in effect has meant that about 10 years of threats of foifeture not to mention admin charges and interest are all invalid.

Does your lease mention a reserve fund too ?

Andy

[wellsbourne]

The lease does mention a reserve fund. Which I am happy to pay into.
The first freeholder never collected anything into it, and the new freeholder wants to build up the reserve, but does not want any back dated payments from any of us.
Could you clear something up for me about the interim payments please?
If we've paid the full service charge in advance of the year, are we then obligued to pay quartly payments as well during the year, or should the full payment be all that's required for the year?
thanks

[jeffrey]

You never have to pay more than 100% of the amount properly due and demanded. Why would L want:
a. 100% in advance; PLUS
b. quarterly payments too?
Is there more to this than meets the eye?

[wellsbourne]

just having a look at the lease it says:

"'interim service charge instalment' means a quartley payment on account of the final service charge which is £112.50 until the landlord gives the tenant the first service charge statement (mentioned below) and after that is a quarter of the final service charge on the latest service charge statement"

this confuses me, and further down the lease it says:

"on each day on which rent is due under this lease the tenant is to pay to the landlord an interium service charge instalment"

-which also confuses me!

(there are 4 properties that this lease applies to)

[jeffrey]

The £112.50 is presumably a first year estimate only.

[wellsbourne]

Jeffrey
This is what I don't understand either. there really is nothing more to it!! honest!

We paid the previous freeholder a years service charge in advance including b.insurance in sept 08. so we assumed no more demands until sept 09.
But the new freeholder has put in a demand for 1 years worth of buildings insurance now, (well, the demand came through in late June, I've been questioning him about this ever since) plus a quartley service charge payment for 01/07-30/09 which also includes within it a payment for buildings insurance. I'm then presuming come the 01/10 we'll all recieve another demand for a quartley payment.
It feels like he's trying to store up money for next years buildings insurance.

It's driving us mad! he won't let us see the accounts this service charge is based on either, despite being asked 4 times (in letters) as he says there isn't any, to which I've asked him why there is a £100 cost for an audit in the service charge!

[wellsbourne]

The £112.50 1st year thing makes sense.
I think he thinks that that cost is a continual quartley cost and we should still be paying it now, rather than basing it on true costs.
I honestly don't beleive he knows what he's doing, and has perhaps taken on more than he can deal with, and so, is trying to claw back money from the leases!

[jeffrey]

The £112.50 1st year thing makes sense.
I think he thinks that that cost is a continual quartley cost and we should still be paying it now, rather than basing it on true costs.
I honestly don't beleive he knows what he's doing, and has perhaps taken on more than he can deal with, and so, is trying to claw back money from the leases!
No, I think that- after year1- the £112.50 is irrelevant.

[jeffrey]

"'interim service charge instalment' means a quartley payment on account of the final service charge which is £112.50 until the landlord gives the tenant the first service charge statement (mentioned below) and after that is a quarter of the final service charge on the latest service charge statement"
Attempted re-write by guesswork:
1. In Year1, the service charge shall be £112.50 as an estimate.
2. In Year2, the service charge shall be a quarter of Year2's estimated service provision costs subject to an adjustment for Year1 to reflect any over-collection or under-collection by reference to the £112.50 demanded and payable in Year1 as against Year1's actual service provision costs.
3. In Year3, the service charge shall be a quarter of Year3's estimated service provision costs subject to an adjustment for Year2 to reflect any over-collection or under-collection by reference to the amount demanded and payable in Year2 as against Year2's actual service provision costs.

[wellsbourne]

thank you for your help on this Jeffrey.
I have another letter to write to him yet again explaining why I'm not paying his july-sept service charge. Hopefully this breakdown will clear things up, but I'm not going to hold my breath! I just need something definitive to get him of my back about this service charge. It's been almost 2 months since we originally received the demand, and I'd like to put this to rest fairly so I'm not waiting on another letter from him.
-Incidently, we have offered him a quarter payment at the start of Oct, to cover the oct-jan period, which will take him up to the proper service charge due date (31st jan). we thought this fair, but he's ignored the offer of this money. The b.insurance is also due in sept, which I have offered to pay my full years proportion to him then for this, again, this offer has been ignored.
what can I do, I feel like I'm being reasonable, or am I not?

[jeffrey]

Yes, you are; but there is still not a meeting of minds over:
a. what the clause means; and
b. how it's supposed to work.

[wellsbourne]

how do I move forward on this?

[jeffrey]

A letter should be sent to L, from either you or your solicitor, explaining to him what I've explained to you.

[wellsbourne]

Thank you Jeffrey, I'll send a letter out today to him.

[dominic]

Did the previous freeholder confirm in writing you were fully paid up as of that date?

[wellsbourne]

Hi Domonic
We have nothing from the previous freeholder to say that we are fully paid up. (we thought he might sell the freehold at some point, but he didn't tell us that he had) I have my service charge demand from sept 08, and I sent chq's to cover the full amount of the demand. Which is why we presume we are covered until the end sept 09, is this not necassarily the case?

[jeffrey]

The reason for asking whether you had fully paid stems from s.45(2) of the Law of Property Act 1925, as below. A clear (= unqualified) receipt for rent connotes that there are no subsisting breaches of covenant. Service charge is often explicitly stated to be reserved 'as rent'.

Where land sold is held by lease (other than an under-lease), the purchaser shall assume, unless the contrary appears, that the lease was duly granted; and, on production of the receipt for the last payment due for rent under the lease before the date of actual completion of the purchase, he shall assume, unless the contrary appears, that all the covenants and provisions of the lease have been duly performed and observed up to the date of actual completion of the purchase.

[wellsbourne]

I'm sorry, I don't understand. What does this mean in laymans terms?
Should I see if the previous freeholder will issue me a receipt to say I'm fully paid, or does this mean that it automatically assumes that all leasees are fully paid up, unless it is stated by the old freeholder?

[jeffrey]

An unconditional rent receipt issued by L impliedly confirms that T has kept all leasehold covenants. It protects a purchaser from later problems.

[dominic]

Also, if your lease was granted after 1 January 1996, s.23 of the Landlord and Tenant (Covenants) Act 1995 may help you.

For all LL's demands for service charges which relate to any period prior to the date of assignment of the reversion to the new LL (i.e. the date when the new LL became your LL) - you as lessee are not liable to the new LL but instead the old LL.

[andydd]

Jeffrey
This is what I don't understand either. there really is nothing more to it!! honest!

We paid the previous freeholder a years service charge in advance including b.insurance in sept 08. so we assumed no more demands until sept 09.
But the new freeholder has put in a demand for 1 years worth of buildings insurance now, (well, the demand came through in late June, I've been questioning him about this ever since) plus a quartley service charge payment for 01/07-30/09 which also includes within it a payment for buildings insurance. I'm then presuming come the 01/10 we'll all recieve another demand for a quartley payment.
It feels like he's trying to store up money for next years buildings insurance.

It's driving us mad! he won't let us see the accounts this service charge is based on either, despite being asked 4 times (in letters) as he says there isn't any, to which I've asked him why there is a £100 cost for an audit in the service charge!

You are legally entitled to view the accounts and the paperwork (quite clearly something must exist) they can charge you a fee for copying etc but nothing to actually view the documents, I believe its an offence to not allow you, although i think the difficulty lies in what to do next if the landlord doesnt allow you to inspect them or just ignores you.

Request to inspect supporting 22 accounts &c
This section applies where a tenant, or the secretary of a recognised tenants’ association, has
obtained such a summary as is referred to in section 21(1) (summary of relevant costs),
whether in pursuance of that section or otherwise.
(1)
The tenant, or the secretary with the consent of the tenant, may within six months of obtaining
the summary require the landlord in writing to afford him reasonable facilities—
(2)
for inspecting the accounts, receipts and other documents supporting the summary,
and
(a)
(b) for taking copies or extracts from them.
(3) A request under this section is duly served on the landlord if it is served on—
(a) an agent of the landlord named as such in the rent book or similar document, or
(b) the person who receives the rent of behalf of the landlord;
The landlord shall make such facilities available to the tenant or secretary for a period of two
months beginning not later than one month after the request is made.
(4)
[F1(5) The landlord shall—
where such facilities are for the inspection of any documents, make them so available
free of charge;
(a)
where such facilities are for the taking of copies or extracts, be entitled to make them
so available on payment of such reasonable charge as he may determine.
(b)
The requirement imposed on the landlord by subsection (5)(a) to make any facilities available
to a person free of charge shall not be construed as precluding the landlord from treating as
part of his costs of management