Building insurance dating back two years - do I have to pay?

[mrsb2b]

Hi,

After not hearing from my managing agents for two years, except for one bill for annual ground rent last year, I have suddenly received a bill out of the blue for £3,000 for building insurance and service charges.

I understand they have to bill us for service charges within 18 months otherwise we are not obliged to pay. Does the same count for building insurance? They included building insurance in the service charge statement, but then they took it out and invoiced separately in the demand for payment.

Any help would be much appreciated.
Many thanks.

[siva]

I understand they have to bill us for service charges within 18 months otherwise we are not obliged to pay. Does the same count for building insurance? They included building insurance in the service charge statement, but then they took it out and invoiced separately in the demand for payment.

Yes, if the lease says you must pay towards the building insurance then it qualifies as a service charge.

It is when the LL incurred a charge that is important for the 18 month rule. This is the date when it becomes payable by the LL. This is normally when he receives an invoice but if there is an agreement between supplier and LL, that defines when work or services become payable,then this will be the date the cost was incurred.

I would ask for copies of invoices, receipts and contracts.

[Interlaken]

..........yes and ask for time to pay and ask why this has come about so late in the day.

[andydd]

As mentioned above, insurance IS a service charge, what does the rest of the service charge consist of ?, if it relates to building works of more than £250 then the S20 consultation process should of been followed, even amounts not caught out by the 18 month rule could still be disputed on terms of reasonableness/amount.

Andy

[leaseholdanswers]

One twist, as most practitioners have caught onto this - though I have done this for years- is that in accounts there are often accruals/prepayments where the amount in accounts straddle two accounting periods.

Where you have annual contracts especially chunky ones like insurance, if the accrual starts in the year prior, then the rule of thumb- get it out within 6 months after the year end- is out the window.

If say you have a March Annual payment with a December year end, the 3 months into the current period means that they have to be notified or demanded within 3 months of the current year end, not 6, as they were incurred more than 18 months prior.

[mrsb2b]

Hi everyone, thanks so much for your posts, they're much appreciated.

Andy, I have only been sent the service charge statement for June '11 to June '12 so I have also requested June '10 to June '11 as I have never been sent these. But for the 11-12 period, most of the cost is things like emergency lights (£222), five year electrical installation periodic test (£312), fire alarm assessment (£199) and fire alarm testing (£100), plus the insurance (£835) and management fees (£666). The property is a period house split into three flats so this cost is divided by three.

Leaseholdanswers, could you please clarify for me? The year runs June to June and, according to the service charge statement, the insurance starts 1 July. Would I have to pay for the June '10 to June '11 period?

Thanks again.

[andydd]

Hi.

Well you could perhaps dispute the lights, the testing, etc..its unlikely the lease allows such costs but it may be possible an LVT deems them recoverable as they are required by various health & safety laws.

The amounts dont seem too excessive, my insurance is about £1500 for a small 2 flat property qhich is clearly a rip off.

But it may well be the 18 month rule has effect, this will depend on what your lease says about payments, dates, in advance, etc

Andy

[siva]

Hi everyone, thanks so much for your posts, they're much appreciated.

I imagine everything in accounts to the end of June 2011 should be unrecoverable but it's best if you try and get hold of the invoices before mentioning the 18 month rule. Anything incurred by the LL more than 18 months before you received the demand cannot be recovered by the LL unless you had been notified in writing about the expected charge. If the LL received their insurance demand more than 18 months before he sent his demand to you then he won't be able to recover the cost.

If you start questioning in terms of the 18 month rule you may well find that the LL's invoices have later dates on them! Especially the managing agent fees which may be a connected company.

Ask for access to copies of the invoices including use of photocopying facilities. Quote section 22 of the Landlord & Tenant Act 1985.

[mrsb2b]

Thanks siva,

The only payment I am querying is buildings insurance. Our insurance runs from July to July and the date of the insurance payment on the statement of account is 1 July 2010. As our year runs from June to June, I'm of the understanding that the landlord should have demanded this payment (or written to let us know he would be demanding this payment in future) by the end of 2011.

They have also billed me for insurance for the years 2011-2012 and 2012-2013 which I am not disputing and will pay. It is just the year 2010-2011 that I feel I can use the 18 month rule on.

[andydd]

But what does the lease say about payments ? Does it require advance payments or payments after costs have been incurred ? You may find more costs were incurred more than 18 months ago and therefore theoretically not recoverable too.

Andy