Service charges.

[Mrs Dingle]

I am the freeholder of a block of six houses/flats.I bought this back in 2004.The lease states that they all must pay one sixth share.The previous freeholder explained that they had all signed a piece of paper agreeing to repair and maintain their individual properties and he would not collect any further money from them for the "sinking fund".I questioned my solicitor before purchase about this and she said that this was ok if we were happy with it.No money was passed to me and the sinking fund remains at £0.00.I noticed that several of them had already replaced their windows and doors and all seemed ok.I have never seen a copy of this agreement.I will still need to collect money in the future for the communal area (carpark and two short stretches of fencing.I have already replaced one fence and repainted the eaves at my cost as a good will gesture to the leaseholders.

Now I have a problem.One of the leasholders is claiming she has water leak and considers it to be my responsbilty to pay for it.

I can see I am in a catch 22 here.I would like to put this situation right but not sure what to do.
The building is insured as a block as per lease and one sixth charged to each leaseholder.
Any suggestions?

[jeffrey]

This supposed "agreement" is not worth the paper it wasn't written on. You have full right to enforce a proper service charge scheme as prescribed in each lease- not just for insurance premium, as is already happening, but also for every other obligation binding the lessor (= you).

[Mrs Dingle]

Should I send them all a letter explaining this and that I intend to collect money for this purpose?I am anticipating a backlash of disapproval.One of the leasholders has just spent £2100 on replacement windows and doors.

Is there a fair way that I could deal with this.Considering that they have all contributed different amounts of money to the building?

[jeffrey]

Should I send them all a letter explaining this and that I intend to collect money for this purpose?I am anticipating a backlash of disapproval.One of the leasholders has just spent £2100 on replacement windows and doors.

Is there a fair way that I could deal with this.Considering that they have all contributed different amounts of money to the building?
As you will be courting considerable unpopularity at the flats, consider taking professional advice. This will:
a. ensure accuracy in notifying them of resurrection of their legal obligations and your proposed enforcement; and
b. be a buffer between the posse (seeking to rip you limb from limb) and you.

[Mrs Dingle]

Also, am I right in thinking that the previous freeholder may still be holding a considerable sum already collected which belongs to leaseholders?

[jeffrey]

Might. Might not. Why do you think so?

[Mrs Dingle]

One of the leaseholders told me a couple of years ago that the former freeholder used to collect £100 per year from each and spent very little.From about 1990 until they signed this mystery paperwork

[jeffrey]

One of the leaseholders told me a couple of years ago that the former freeholder used to collect £100 per year from each and spent very little.From about 1990 until they signed this mystery paperwork
Could that have been ground rent?

[Mrs Dingle]

It was originally £100 per year paid as a service charge for repairs .I have found some paperwork explaining that £100 per year to be paid rising no more than 15% per year to be place into a "sinking fund". The previous freeholder explained this to me when I asked during the time of purchase.I questioned my solicitor about this as i was concerned about the arrangement.She said it was fine if I was happy about it.The ground rent was treated seperatly and I am still collecting this and I give a receipt for all monies stating what the money is for and what time period it covers.

My understanding (please correct me I'm usually wrong) is that the "sinking fund" should have been passed to me and I should have continued collecting it.The interest added to it.For the purpose of repairs and maintenance as stated on the lease and also I should be issuing the leaseholders with an annual account of the money.

I seem to be at the wrong end of the scale.I have incurred approximately £350 worth of repairs so fund is minus.

Could I now pursue the previous landlord or is it for the long leaseholders to persue him?

[jeffrey]

A reserve/sinking fund belongs to the collective lessees, not to the freehold reversioner or management company (even if that's who holds it in trust for them). On a change of reversioner (from V to P), the fund's contents should be handed over by V to P. What happened to it in 2004, when you acquired the f/r?

[Mrs Dingle]

The freehold titles purchased through my solicitor.I asked both my solicitor and the vendor about maintenance and charges.The vendor said that all leaseholder's had signed a paper to say no more money to be collected but they would do their own repairs and pay for anything else as and when(the property was built around 1990).

I have written to one of the original longlease holders today to ask if they could let me have details about passed payments and when they ceased.

The property contains 6 long lease and 6 shortholds.So I accept that i have to pay half whatever.

I originally had difficulty obtaining money paid for rent to the vendor from the shortholds and also their deposits.These eventually were sorted.The vendor paid me direct.

I have printed out "The Service Charges" --"Summary of Rights and Obligations,and Transitional Provision" which I understand is required to accompany any demand for service charge.

From the information I have given .Should I contact a solicitor a.s.a.p. If so should I go to the original one or change?

[jeffrey]

First, insist that your original solicitor provides (free) a full explanation of what was done (or not done) about service charge fund when you bought. The files should not yet have been destroyed- they have to be kept for at least 15 yrs.

[Mrs Dingle]

I have just spoken to the solicitor who remembers that her understanding was that the previous freeholder collected the charge on an ad-hoc basis and had probaly spent it on repairs.I have asked for any deails about the service charge and she is going to have a look at the files and leases and ring me back in a few days.

I have a copy of one counterpart deed which details the £100 cost etc. This I found atached to only one of the leases.I am suspecting that this signed paperwork may be missing from the other leases.Perhaps removed when the freehold was sold to me.

Thank-you for your assistance.I can see that there is a lot wrong here but struggling to be clear what to do.

[jeffrey]

"Understanding" and "probably" are a bit vague!
The Agreement for Sale and Purchase should be specific on the point. There might also be information in V's solicitor's replies to:
a. Enquiries before Contract; and/or
b. Requisitions on Title.

[Mrs Dingle]

I have search the paperwork that I have been given and found the following:-

May 04 CPSE.1

Question---Please supply a copy of any agreement for the maintenance of any of the boundary features.

Reply----(None.You will see mention of an amenity agreement in the leases of 7 & 9. These agreements dealt with the maintenance of the access way and the boundary fences on the east and west sides of the carpark.The seller ceased to collect payments under these agreements many years ago--believed to be 1993.There is no copy correspondence or other agreement in existence in relation to this.I am told the long Leaseholders and the seller agreed to suspend payment and receipts under these Amenity Agreements and they are now redundant.)

______________________

CPSE.2---Is use and maintenance of the common parts governed by any arrangements other than the terms of the Tenancies of the let units? If so,please provide details.

Reply---Similar reply as above but with (the lessees given to understand that they would have to pay for these items in the future jointly between them.There is no documentation concerning this in existence.)

________________________

An extract from a letter from the sellers solicitors reads:-The lease r.e. No. 9 mentions an Amenities agreement.A copy of this is enclosed but the sellers many years ago stopped collecting payments under the Amenity Agreements and it was agreed with the lessees that if any work referred to in the Amenities Agreement needed doing,then each would pay one twelth of the cost.There is no documentation to support this.


_______________________

The above information was from the period (2004)when I purchased the freehold of one of the blocks(7-12)( 2 blocks both identical in build)

The second block not purchased untill Dec 05 ( because of long delays due to tenants having the right to be offered the freehold.

________________________

In 2005 I asked my solicitor again about this amenity agreement and she wrote the following :-I regret that it will not be possible to restore the sinking fund in circumstances where effectively this has been abandoned and indeed the Lease to you of No.2 ( purchased at the same time as the first block)did not mention at all the amenity agreement.However,the tenants are still responsible for one twelth each of the cost of any works or repairs to the common areas and this can be collected on an ad-hoc basis which we can discuss further in due course.

_________________________


All the long leases state one sixth of the repairs and maintenance of their block and one twelth of the common areas.

I estimate that the carpark surface (tarmac) is going to cost around £3500 to replace.My understanding is that I couldn't in fairness bombard the tenants with a sudden share of this size and I would like to find a way to set up a fund for this and also a seperate fund for the maintenance of the buildings.

Sorry for the long winded post.I would really like to be sure If should return to my original solicitor and ask her to sort this out for me or change to another one .I can see that this a long term problem if I don't get it sorted soon and its not something i want to tackle myself.Too complicated.

[jeffrey]

I still think that the lease procedures need to be re-started. Previous cessation does not change what they say.
To avoid mutiny, convene a meeting with lessees and explain to/at them. Each bought a leasehold in full knowledge (actual or imputed) of what obligations would be binding on leaseholder.

[jeffrey]

...and what provisions appeared (in Contract or Transfer or both) re service charge funds?

[Mrs Dingle]

There are only two of the original lessees left.Probaly the only two with the amenities agreement attached to their leases ( It was a seperate document).The leases explain their financial obligations of the repair and maintenance but nothing about how or when it is collected.

There is another part I don't understand. ( from time to time as occasion shall require during the term at the lessees expense well and substantially to renew repair uphold support maintain cleanse amend and keep in good and substantial repair and condition the premises and all walls sewers drains cisterns cables wires fixtures and appurtenances now or at any time during the term hereby created forming part thereof in good and tenantable repair and condition and to maintain the structure of the premises in a such a state of repair and condition as shall at all times hereafter ensure the maintenance of support and protection to the other maisonettes in the property etc)

Then further on in the lease it states (at all times to contribute one sixth of the cost of maintaining repairing and renewing

(a) the roof and timbers of the property.
(b) the foundations of the property
(c) the gutters pipes and other things for conveying rainwater from the property

(d)the water pipes cisterns sewers drains conduits electric wires and other installations in under or upon the premises and the property enjoyed by the lessee in common with the owners or occupiers of the other maisonettes in the property.

a,b,c I understand but where is the line drawn between the first statement and (d).

I have an ongoing dispute with one of the leaseholders which is pushing me to sort out the service charges.Each property has its own water main and water meter.So not enjoyed by all but only each lessee.If it fails is it one sixth cost or the expense of that lessee.I could split the bill between 6 and send it to them but I'm not sure that they are responsible.

I agree that there should be a meeting.Except that the leaseholder I'm having trouble with is a problem.Already they have threatened my husband whilst he was up a ladder (26ft) painting the eaves( told him he wasn't safe up there while they were at the bottom).He painted them all except the problem leaseholders eaves.No charge was made to any tenant.

I would like to put a letter together to inform them all of the position but I need to be correct and I don't want to confuse or worry them.

[Mrs Dingle]

In Contract or Transfer. I don't know.As far as I can see there is nothing mentioned in one of the contracts(second block). Maybe my solicitor will be able to answer this when she contacts me.

[jeffrey]

There is another part I don't understand. ( from time to time as occasion shall require during the term at the lessees expense well and substantially to renew repair uphold support maintain cleanse amend and keep in good and substantial repair and condition the premises and all walls sewers drains cisterns cables wires fixtures and appurtenances now or at any time during the term hereby created forming part thereof in good and tenantable repair and condition and to maintain the structure of the premises in a such a state of repair and condition as shall at all times hereafter ensure the maintenance of support and protection to the other maisonettes in the property etc)

Then further on in the lease it states (at all times to contribute one sixth of the cost of maintaining repairing and renewing

(a) the roof and timbers of the property
(b) the foundations of the property
(c) the gutters pipes and other things for conveying rainwater from the property
(d)the water pipes cisterns sewers drains conduits electric wires and other installations in under or upon the premises and the property enjoyed by the lessee in common with the owners or occupiers of the other maisonettes in the property.

(a),(b),(c) I understand but where is the line drawn between the first statement and (d).
The first statement relates to items within/serving one flat only. (d) relates to items serving all flats ['in common'].

[Mrs Dingle]

So, is the mains water pipe supplying an individual dwelling the sole responsibility of that dwelling.All dwellings have their own meter and supply pipe.Nothing shared.

[jeffrey]

So, is the mains water pipe supplying an individual dwelling the sole responsibility of that dwelling.All dwellings have their own meter and supply pipe.Nothing shared.
Yes. It's not used 'in common', so service charge does not cover it.

[Mrs Dingle]

Thank-you for your help in this matter.The reason for asking about this pipe is that the leaseholder is claiming a leak and that I should pay.I am trying to sort out the service charges ,ammenitiy charges etc before contacting them all.Further complicated by the fact that 3 leaseholders are about to put theitr leases on the market and i will have to respond to solicitors with correct information.I would like to get agreements/communication with them before that time.

[tenant29]

It is normal practice to prepare an annual budget statement for the service charge account to send out with the service charge invoice to each flat . The budget would show details of expected expenditure - for example :

Service charge 2008 budget for Flats 1-12 at 68 Green Lane.

Building insurance cover ( say) 1000
Electricity for communal areas 300
Garden maintenance 200
Sinking fund ( external painting) 800
carpark re-surfacing 3500
Accountant 500

Total 6300.

The money collected should be paid into a separate bank acount.

[Mrs Dingle]

Thanks for that information tenant29.That is an arrangement I would like to put into place.The previous landlord stopped collecting any money at all.So none of the leaseholders have been paying any money into a service charge account for the building or sinking fund for the ammenities.They have been happily funding their own repairs.Except for the ground rent and insurance which I collect when due.

I should have sorted out the annual charges sooner.One of the leaseholders is continually trying to claim on the insurance,refusing to pay insurance,refusing to pay ground rent ,parking on the common area and generally causing distress to all.

I think I'm getting there. Asking questions and reading other posts on this website is extremely helpful.It is good to read the comments of leaseholders.

[Mrs Dingle]

I have received a call from my solicitor and during discussion we have come to the conclusion that I have copies of all the paperwork .She also agreed like you that the mains water supply to one of the leaseholders was their resposibility.

I discussed the "sinking fund " issue and she agreed that it would be correct to send a letter explaining the obligations and suggesting a way forward.I thought that to ask for a share of the carpark works of £3500 would be unfair.She replied yes but that unscrupulous landlords would just send the bill and would probaly have trouble collecting it but in the end they would have to pay because of the lease.

So,back at the ranch I'm putting a letter together.Encouraging the leaseholders to work together for the better.