A flat owner, Nicola Hawkins, shares her distress over the possibility of losing her flat due to an outstanding service charge of £5,499.80. Hawkins purchased her Romford flat in 2022 for £215,000, situated within a block converted in 2018. Despite fully paying her service charge last year, she contested the amount with her managing agent through a First Tier Tribunal. While Hawkins and her neighbors were awarded £9,783.18 through the tribunal, she asserts that she has not yet received any portion of the money from the managing agent.
Nicola Hawkins purchased her Romford flat in 2022 for £215,000. Presently, she faces the threat of losing it due to an outstanding £5,499.80 service charge.
This year, she opted not to settle the service charge in full, citing her belief that the managing agent still owed her money and was overspending on block maintenance. Speaking to MailOnline Property and This is Money, Miss Hawkins explained, “I informed them that they still owe me £1,273.19, my share of the tribunal award, and then I contributed an additional £1,000 towards my latest service charge bill. While it exceeded their current worth, I aimed to appear reasonable for our return to the First Tier Tribunal. I feel targeted and maintain that they cannot seize my flat for non-payment of service charges, especially after winning a case against them at the tribunal.”
At the point of exchange, Miss Hawkins discovered that the service charge exceeded her initial expectations significantly.
This year, Miss Hawkins has chosen not to settle the service charge in full and instead has made a payment of £1,000.
At that juncture, Miss Hawkins expressed feeling pressured to finalize the sale out of concern for potentially losing her deposit. “I was transferring £35,000 to the solicitor as my deposit when I first encountered that £1,900 figure. Fearing I might forfeit my deposit, I proceeded with the completion and moved in.”
“After conversing with other flat owners, I discovered significant issues with the roof that were not disclosed to me during the sale. Apparently, my vendor had already paid £1,400 separately from the service charge for roof repairs.”
“Subsequently, I received another service charge later in the year, which included charges for the roof repairs. Therefore, the £5,500 encompasses last year’s overspend and the estimated costs for 2024, covering repairs for an electricity cupboard and drainage issues of which we were previously unaware.”
Today on the Leasehold Bill Committee.
The @RFAssociation, who represent the big landlords, tried to persuade us that Ground Rents were justified & pension funds would suffer if they were abolished.
Sorry. Not buying it! pic.twitter.com/e9DnBA4jao
— Barry Gardiner (@BarryGardiner) January 18, 2024
The Leasehold and Freehold Reform Bill is currently under consideration in Parliament. This legislation aims to streamline the process and reduce costs for leaseholders seeking to extend their lease, acquire their freehold, and assume management responsibilities for their building. Additionally, it seeks to prohibit the sale of new leasehold houses.
It’s important to distinguish between service charges and ground rents for leasehold properties. Ground rent is a regular payment made to the freeholder of a leasehold property as stipulated in the lease agreement. It covers the rental of the land on which the property is situated and does not include additional services provided by the freeholder, which are covered by service charges.
Recent years have seen a rise in service charges, particularly as the government tightens regulations on other revenue streams such as ground rents. Service charges have become an attractive avenue for investors to generate income.
Failure to pay service charges can lead to forfeiture, where the landlord regains possession of the property against the tenant’s wishes. Forfeiture typically occurs when the tenant breaches a lease condition or covenant.
What is the legal advice concerning unpaid service charges?
Joanna Hill, an expert in leasehold law at Irwin Mitchell, provided insight into this matter:
Service charges serve as a means for landlords to recuperate expenses associated with providing specific services outlined in your lease for the building.
Typically, service charges encompass expenditures such as general maintenance, elevator maintenance, and cleaning of communal areas.
The landlord or their appointed managing agent computes the amount owed by each flat within the building and requests the corresponding sum from each leaseholder.
It’s crucial to understand that the managing agent acts as an intermediary for the landlord in administering and collecting service charges and lacks the authority to seize your flat.
Service charges are subject to fluctuations to accommodate the escalating costs of services in line with inflation and to cater to the varying degree of repair work the building necessitates annually.
Nevertheless, it is imperative that service charges are reasonably incurred, and any maintenance work is carried out to an acceptable standard.
We recommend commencing by scrutinizing which services the £5,500 sum pertains to and when these expenses were accrued.
If the charges are associated with services predating your acquisition of the flat and were not disclosed to you, you may have grounds for a claim against the seller. We advise reviewing your conveyancing documentation, especially considering you were anticipating an annual charge of £600.
If the £5,500 relates to expenses incurred subsequent to your ownership, it’s essential to ascertain: (1) whether the lease permits the landlord to levy charges for such services; and (2) if so, whether these costs were reasonably incurred.
If the costs of building works are recoverable under the lease, the landlord must consult with you if the estimated cost exceeds £250 for any contributing leaseholder (or seek dispensation for exemption). Moreover, there is a time constraint on making service charge demands, and you are not liable if the cost was incurred over 18 months before the demand was issued.
It’s crucial not to acknowledge the sum as owed if you intend to contest the matter. For the landlord to pursue possession of your flat, they must follow the process of forfeiture. This involves serving a notice under section 146 of the Law of Property Act 1925, specifying the breach, before attempting to forfeit your lease based on non-payment of service charges.
With ‘unadmitted’ service charges, your landlord must obtain a determination from the First-tier Tribunal (Property Chamber) regarding the sum’s liability and your breach before issuing a section 146 notice based on it. These statutory safeguards make it challenging for the landlord to reclaim possession of your flat.
In light of this, our advice is to remain composed and seek legal counsel if you suspect the demand may not be legitimately payable. If it is deemed payable, we recommend engaging with your landlord or managing agent to negotiate a reasonable payment arrangement.
