Non Payment of Leasehold Property Service Charges

[Snoopy1948]

I live in a leasehold flat, 66 in the block, no right to manage at the moment but managed by a local management agency. We have had a section 21 advice for extensive rendering cleaning ( first time this has been done as the property was only built in 2010 ) and initial tenders are in the region of £330,000 although through a recent meeting between residents and managing agents we have agreed to look at cheaper options.

MY question is what happens if some of the leaseholders fail to pay, either through simple objection or unaffordability, and the matter goes to legal action, who actually pays (1) the managing agents additional work per leaseholder to push for payment, and (2) who pays for any subsequent legal work where a solicitor is involved?

My obvious concern is do the rest of the leaseholders have to pick up any of the tab, excluding of course the capital sum being chased?

[CLL1]

Re: Non Payment of Leasehold Property Service Charges

I'm not sure what you mean by s21 advice. This sounds like major works, and so should be proceedings under the consultation process under s20.

If the tender is agreed and works commence, the service charge fund foots the bill and the agent will instruct solicitors to recover the s20 major works. If this takes time, you'll see a deficit in the next FY demands.

[Snoopy1948]

Re: Non Payment of Leasehold Property Service Charges

Yes, you are right, it was a s20 I was talking about.

My major concern was that with 66 leaseholders and only a 30% turnout on meetings, I fear a lot of people will neither have the funds to pay or wish to pay for something that may arguably not be totally necessary. My concern therefore is who actually pays for the extended work that may be done by managing agents and freeholder's solicitors to pursue non payment by others? Will all such costs actually land on the overall service charge bill, i.e. down to everyone including those who pay on demand?

[Diana M]

Re: Non Payment of Leasehold Property Service Charges

If the property was only built in 2010 I'm surprised it needs extensive rendering already. Who built it, and did it not come with a 10 year warranty for defects?

The first issue is that the works must be necessary for repair and maintenance purposes not 'improvement or enhancement' which would not be covered under the terms of the lease.

Who suggested these works? Was it the Managing Agent who will be charging a fee (often a percentage of the project so it's in their interests to recommend them at the highest possible price) and/or a RICS surveyor known to the Managing Agent (who will get paid to supervise the works)?

I'm cynical when it comes to the way some Managing Agents take advantage of lessees to line their own pockets. I've challenged section 20 works twice at the Property Tribunal and won both times (as a leaseholder not as a lawyer).

Take a look at some of their Decisions to give you an idea of what is considered 'chargeable' to a lessee (scroll down in this link) http://decisions.lease-advice.org/tribunal

Everything hinges on the terms of the lease. If it's not in the lease then the flat owner doesn't have to pay it. There's usually a term in the lease which allows the Freeholder to recover the costs of pursuing unpaid service charges including solicitors.

However there is new case law on 'affordability' being a reason not to pay (in certain circumstances).

Is there any provision in the lease to create a sinking fund? This can be really helpful when it comes to budgeting for both the Freeholder and the Leaseholder. Unless these works are essential then if they could be scheduled for next year or even the one after, there would be time for the money to be collected in instalments in advance.

No contractor in their right mind would start a job as big as the one you describe (£330k) unless they were assured that the funds were in the bank first.

In my experience as both a Freeholder and a Leaseholder it always pays to keep the lessees onside and not alienate them. It is, after all, their (and your since you are a lessee too) money being spent so they have every right to feel involved in the decision making.

Section 20 requires two quotes and also gives the lessees the right to nominate any contractor they know to be considered for the job.

Di