Managing Agents Getting Stroppy Over Arrears


C

CJB

We are Leaseholders of a purpose built block of 36 studio flats in West
London.

Over the last 10 years or so the managing agents (owned by the two Freeholders!!) have delayed or even not bothered sending out Service Charge Accounts (as required by the Lease) or even demands for Ground Rent. On two occasions we know that this was because they didn't want us to find out how much the Sky TV system cost (a luxury not provided for in the Lease); and also the cost of installing and maintaining the CCTV system (which doesn't work).

The upshot is that about 24 flats are in arrears to a total of about
£60,000.

Effectively the company is bankrupt, and we think that it must have an
enormous overdraft with its bank to carry on trading. It is our
impression that the bank is putting pressure on the company to lessen its
debtors.

Whilst are we in the process of applying for 'Right to Manage,' the
company has suddenly issued us all with demands for the arrears to be
paid within days.

And many Leaseholders are elderly or they are young single mothers etc.,
and none of us have that kind of money available at the drop of a hat.

However the company is refusing to negotiate payments.

Some of the demands are for monies already paid to the company - such is
the chaos of its accounting. It refuses to acknowledge payments when they
are made. I and others have made payments last year and earlier this year
but the company has refused to confirm receipt.

Personally I want to pay by Internet Banking, and on the advice of
consumer financial advice organisations I have made a test payment for £1
to see if I have the right banking details. However the company has
failed to confirm receipt - so I really don't know what to do. I really
want to set up a standing order for an agreed monthly payment plan. But
the company refuses to correspond.

Other Leaseholders are paying or have paid by post-dated cheques - and
yet these have all been returned as unacceptable.

So the company is making it next to impossible to pay the arrears, and
yet is demanding total payment in respective lump sums which we cannot
afford.

So what is its likely course of action? Can the company cause the
Leaseholder(s) to forfeit their properties? Or can they take them to
County Court to obtain a Judgement against us?

Some of the more elderly Leaseholders are very worried about being
evicted from their properties; and one elderly gentleman is getting
suicidal.

Many thanks -

C.J.Brady
Leaseholder
 
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R

Robin

I can't help with your question but suggest you post it also to
uk.legal.moderated. There are some people there with relevant
experience - and one barrister who sometimes replies is exceedingly
expert in the area
 
D

David Woolley

We are Leaseholders of a purpose built block of 36 studio flats in West
London.
Head straight to <http://www.lease-advice.org/>, where there is a lot of
information on the leasehold law and government funded free advice to
leaseholders and their freeholders.
Over the last 10 years or so the managing agents (owned by the two
Freeholders!!) have delayed or even not bothered sending out Service
Is the company acting on a for profit basis, or it is it a residents
management company but with only some residents on it? If it is not for
profit, the implications of actually refusing to pay may be complicated,
leaving you without any real management at all.
Charge Accounts (as required by the Lease) or even demands for Ground
Rent. On two occasions we know that this was because they didn't want
At one time, it was mandatory to pay the ground rent whether demanded or
not, but now the law requires a formal demand for it.
us to find out how much the Sky TV system cost (a luxury not provided
for in the Lease); and also the cost of installing and maintaining
Whilst Sky normally subsidise most of the cost, so you would normally
only be paying for electrical safety work, such work, and on normal
private sector leases, any improvement work, cannot be funded from the
service charge. (In practice there are borderline cases, where it is
better to turn a blind eye. The only time that Sky might be legitimate
is if you had a terrestrial TV distribution system, but you no longer
have coverage after digital switchover.)
the CCTV system (which doesn't work).
It is possible to force lease variations where the lease is considered
defective, and security measures are listed as one of the possible
cases, so they could try doing that retrospectively, if the case went to
a tribunal.
The upshot is that about 24 flats are in arrears to a total of about
£60,000.
There are time limits on how long after expenditure is made before it
must be notified or recovered. They are fairly short (two years comes
to mind). If the demand was delayed and you were not notified of it in
time, it may be irrecoverable through the service charge.

Any single contract that comes to more than £250 a leaseholder can be
capped at £250, even if allowed by the lease, unless a proper
consultation process has been followed. At one time this was absolute,
but now the tribunals will consider the loss to the leaseholders, not
the total amount, so if the work needed doing, was allowed by the lease,
and the cost was reasonable for a proper professional job, they will
allow it.
Effectively the company is bankrupt, and we think that it must have an
enormous overdraft with its bank to carry on trading. It is our
impression that the bank is putting pressure on the company to lessen its
debtors.
Service charge funds are held in trust, separate from the company funds,
although this mainly has an effect if you have a reserve in the fund.
Whilst are we in the process of applying for 'Right to Manage,' the
company has suddenly issued us all with demands for the arrears to be
paid within days.
Right to manage is not all it is cracked up to be. The problem will be
in finding people prepared to manage, especially if people decide that
managing agents are too expensive, and also, it very difficult to take
hard action when needed, if you are dealing with your neighbours. You
also need to track the law carefully.

The other option you have here is to force the appointment of manager on
the grounds of mismanagement.
And many Leaseholders are elderly or they are young single mothers etc.,
and none of us have that kind of money available at the drop of a hat.
You will find this everywhere, and it can actually make right to manage
more difficult, as you will be pressured to spend less than you really
need to spend to maintain the property and stay legal.
However the company is refusing to negotiate payments.
If they take you to the county court, they will redirect to the relevant
tribunal. Your service charge demands must have details of the
tribunals (and the £250 limit), otherwise they are void.

The tribunals have a reputation for interpreting leases very strictly.
You can find their rulings online.

The lease cannot be forfeited without the permission of the tribunal.
Some of the demands are for monies already paid to the company - such is
the chaos of its accounting. It refuses to acknowledge payments when they
are made. I and others have made payments last year and earlier this year
but the company has refused to confirm receipt.

Personally I want to pay by Internet Banking, and on the advice of
consumer financial advice organisations I have made a test payment for £1
to see if I have the right banking details. However the company has
failed to confirm receipt - so I really don't know what to do. I really
want to set up a standing order for an agreed monthly payment plan. But
the company refuses to correspond.
Sounds like possible grounds for asking the tribunal to appoint a manager.
Other Leaseholders are paying or have paid by post-dated cheques - and
yet these have all been returned as unacceptable.
Service charge payment deadlines are normally too short for post dated
checks, and many businesses won't take them because of the
administrative hassle. I would ignore this part.
So the company is making it next to impossible to pay the arrears, and
yet is demanding total payment in respective lump sums which we cannot
afford.
If they followed proper process, which seems unlikely here, that is a
possibility that you have to consider. There are circumstances where
large expenditures become necessary at short notice, and, if you don't
have a sinking fund to buffer you, it could be very expensive for you.
So what is its likely course of action? Can the company cause the
Leaseholder(s) to forfeit their properties? Or can they take them to
County Court to obtain a Judgement against us?
A tribunal will need to get involved in any forfeiture proceedings and
the county court will almost certainly redirect to the tribunal, anyway.
Some of the more elderly Leaseholders are very worried about being
evicted from their properties; and one elderly gentleman is getting
suicidal.
Tribunals will generally go by the law, and not take such details into
account. Although benefits law keeps changing, at one stage, if you
were on pension credit, your service charges could be paid for you.
 
D

David Woolley

A tribunal will need to get involved in any forfeiture proceedings and
the county court will almost certainly redirect to the tribunal, anyway.
To ensure redirection, the defence needs to state that the charges are
unreasonable.
 
T

tim.....

David Woolley said:
Whilst Sky normally subsidise most of the cost, so you would normally only
be paying for electrical safety work, such work, and on normal private
sector leases, any improvement work, cannot be funded from the service
charge. (In practice there are borderline cases, where it is better to
turn a blind eye. The only time that Sky might be legitimate is if you
had a terrestrial TV distribution system, but you no longer have coverage
after digital switchover.)
There is absolutely no need to have "Sky" as an alternative to normal
broadcast TV.

A "free" satellite installation is a perfectly sensible alternative. ( I
put the word in quotes because it refers to the ongoing costs of using it,
obviously the installing part isn't free)

I really don't see how it is that the OP thinks that the accounts are
somehow subsidising a "paid for" satellite service. Normally the agreement
to install these things allow individuals to opt out (though obviously if
they do so it will cost them more in the future to opt back in). Even if he
thinks that the leaseholders have tried something underhand, it seems most
unlikely that Sky would have been
Right to manage is not all it is cracked up to be. The problem will be in
finding people prepared to manage, especially if people decide that
managing agents are too expensive, and also, it very difficult to take
hard action when needed, if you are dealing with your neighbours. You
also need to track the law carefully.
RTM does not mean that you actually do the management yourself (though you
can if you wish). It means that you are in control of selecting the person
who does. There are dozens of companies who will provide this service for
you
The other option you have here is to force the appointment of manager on
the grounds of mismanagement.
This takes far too long for the OP's current problems

tim
 
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D

David Woolley

This takes far too long for the OP's current problems
It is going to take a similar amount of time whatever they do, because
the same sort of tribunal deals with non-payment of service charges as
deals with appointment of a manager, or RTM.

My guess is the best tactic here, as well as carefully reading the
information on the web site I quoted, to work out what can actually
legally be charged, is to pre-empt the county court process by going
direct to the the tribunal. Unfortunately, there is a cost in doing
that. Those on means tested benefits are exempt from the charge, but
using them to bring a test case is a recognized abusive practice, and
likely to be rejected by the tribunal.

Unless the freehold company has resources to pay outside the service
charge, the result is going to be messy whatever happens, and I suspect
only the lawyers will win in the end. Having flats without a
functioning freeholder is not a good position to be in.
I really don't see how it is that the OP thinks that the accounts
are somehow subsidising a "paid for" satellite service. Normally
the agreement to install these things allow individuals to opt
out (though obviously if they do so it will cost them more in the
future to opt back in). Even if he thinks that the leaseholders
have tried something underhand, it seems most unlikely that Sky
would have been
The last time I saw Sky's rules for these things, the freeholder will
have to pay for an electrician to earth bond the system, and they may
have to pay if the installation is particularly complex, or Sky don't
get enough takers. I can't imagine the cost of the electrician will be
that high, but, with a typical private sector lease, it would not be
recoverable from the service charge. The CCTV system is more likely to
be significant, but I would be surprised if that broke the £250 limit
for work without consultations, even though it may not be recoverable
for other reasons.
A "free" satellite installation is a perfectly sensible alternative.
(I put the word in quotes because it refers to the ongoing costs of
using it, obviously the installing part isn't free).
It is almost certainly the up front costs that are the issue here.
Whilst you could almost get away with it, if it qualified for Sky for
Flats, it would be very definitely illegal to charge an unsubsidised
system to the service charge assuming a normal, repairing only, private
sector lease. (Generally what is and is not legal here will depend on
what is written in the specific lease, and if the OP wants free legal
advice on that, he should use the leasehold advisory service, not
USENET. They will need a copy of the full lease.)

Incidentally, the running costs wouldn't be free, as there would need to
be a power feed for the multi-switches, as well as the cost of repairing
long term wear and tear, and potentially eventual de-commissioning.
One additional point on consultation. Although the freeholder must
consult, they are only required to "have regard" to the comments. There
is no absolute right to override the freeholder (and in some cases, the
freeholder may be under legal obligations that they cannot ignore just
because of the cost to the service charge).

Under the new case law, the simple case would be if the freeholder
failed to consult properly, then chose a contractor other than the
cheapest bidder. The difference from the cheapest bid might not be
recoverable. I'm not so sure that there is any protection where the
work is required by the lease, but the leaseholders don't want to pay
for it. I don't believe you can consult your way out of spending
outside the terms of the lease; I think that has to be a separate, one
off, contract with the leaseholders.

Generally, though, freeholders don't want to have to deal with
non-payers, so they should endeavour to avoid expenditure that would
force that result.
 

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