Freeholder not supplying any receipts for service charges

[SophiePYT]

Hi there

For a second year running the woman who owns the freehold to our flat is not supplying any receipts of the charges she is charging us all.

Instead, she is has put together a Word document saying that electricity costs X amount, bank charges X amount, stamps X amount  etc.

SHOULD THEY BE ATTACHING RECEIPTS AND INVOICES WHEN ASKING FOR SERVICE CHARGE PAYMENT?

Thanks

[Richlist]

No, not in my experience.

You have rights and obligations associated with service charges. In brief......

1. A summary of those rights and obligations for variable charges must by law, accompany a demand for service charges. If there is no summary of your rights and obligations you may withhold the service charge.

2. You have the right, within 6 months of receiving a written summary of costs, to require the landlord to provide you with reasonable facilities to inspect the accounts, receipts and other documents supporting the summary and for taking copies or extracts from them.

3. You have the right to ask an accountant or surveyor to carry out an audit of the financial management of the premises.

Hope that helps.

[Grampa]

Under Sections 21 and 22 of the Landlord and Tenant Act 1985 (LTA 1985) you have the right to request a summary of the service charge account and to inspect receipts, accounts etc in relation to the last accounting year, or where accounts are not kept by accounting years, the past 12 months preceding the request.

You need to write to your landlord or managing agent and request a summary under Section 21 LTA 1985. The summary should be provided within one month of your request (or within six months of the end of the accounting period whichever is the later) and should be certified by a qualified accountant if there are more than four dwellings.

Once you have received the summary, you have the right under Section 22 of the LTA 1985 to inspect documents as a follow-up to provide more detail on the summary. Within six months of receipt of the summary you may write to the landlord or managing agent requiring them to allow you access to inspect the accounts, receipts and any other documents relevant to the service charge information in the summary and to provide facilities for them to be copied. Facilities for inspecting the documents should be provided within one month of your request and should be available for two months.

[SophiePYT]

Thank you both for your responses.

I will be emailing her now and asking for the receipts and invoices.

To me, it isn't good enough to send out a Word document with what she has supposedly spent money on. For all I know, she could be adding a bit of money here and there and making herself a nice profit.

Thank you for your help again

 

[Grampa]

Be careful for what you wish for. If the freeholder is managing the block themselves they may not be charging a management fee. If they then decide its too much hassel they could instruct a management agent who is likely to charge between £150 - £500 PER UNIT/FLAT which will be added to the service charge.

This happened to a landlord of mine who was also a self managing freeholder. He got fed up with late payments arguments over every expense (which were reasonable) so he gave to me to manage for which I charge £300 per flat. So they shot themselves in the foot.  

It isn't standard practice to provide evidence/receipts unless formally requested. 

[SophiePYT]

Thanks for your feedback again.

I noticed in her Word document she is charging a 500 pound management fee [including of office costs] which is to be split between all the flats.

I am not necessarily doubting her honesty with all these charges but to me it makes sense to provide evidence to everyone that such monies have been spent.

To me it isn't acceptable to claim on her Word document that a Fire Assessment for example cost 1,700 pounds without providing an invoice.

Thanks for all your help. Appreciate it

 

 

[Grampa]

How many flats in the block? I find a fire risk assessment costs about 350-500 but it does depend on the size etc of the building 

[SophiePYT]

Five flats converted from a Victorian house.

Here are her other charges as per her Word document - 

 

Expenditure 1/1/16 - 31/12/16

Electricity £124.20

Bank Charges £66.00

Accounts £310.50

Management (incl office costs) £500.00

Asbestos Survey, 20/3/16 £276.00

A M Fire & Security Contract, 14/2/16 £233.40

Ballcock repair in roof, 18/1/16 £60.00

Fire Risk Assessment, 7/11/16 £207.00 £1,777.10

Less Service Charge invoiced 1/1/16 (5 x £200) £1,000.00

 

 

Any thoughts?

 

Thanks

[Grampa]

Expenditure 1/1/16 - 31/12/16

Electricity £124.20 (sounds about right but a tariff change will likely save 20%)  

Bank Charges £66.00 (depends on the bank but is similar to client accounts i have)

Accounts £310.50 (about right)

Management (incl office costs) £500.00 (cheap for 5 flats if total amount)

Asbestos Survey, 20/3/16 £276.00 (about right but only has to done about every 4-5 years as a guide unless works, extensions, major repairs going on which might reveal something) 

A M Fire & Security Contract, 14/2/16 £233.40 (about right)

Ballcock repair in roof, 18/1/16 £60.00 (about right)

Fire Risk Assessment, 7/11/16 £207.00 £1,777.10 WHY TWO FIGURES??? what was the £1777.10 for? It could be to resolve highlighted issues from the report. 

Less Service Charge invoiced 1/1/16 (5 x £200) £1,000.00

 

I would ask the question why a sinking/reserve fund isnt budgeted for. If I was managing the block i would be looking at adding at least £500 pa to build up an emergency fund.

What if the roof is damaged and emergency repairs are needed but only 2 out of the 5 owners have the funds available for their share????? 

[Richlist]

I agree with all that's been said.  One additional factor to keep in mind.......people buy freeholds in order to make a profit and they are entitled to make a return on their investment.

If all the charges are legitimate then £500 management charge is incredibly low. Just think about it......paper, postage, telephone, printer ink, time, effort, travel etc.

The total charges equate to £710 per flat or £59 per month. Some of my flats are £1200-£1500 pa

You have no reserve funds for emergency repairs or external redecorating. What about buildings insurance ?

.......and you cannot expect to be provided with the receipts and invoices. You are only entitled to view them but not to have them sent to you or for you to take them away. She will be entitled to charge you for copies etc.

[Grampa]

i consider any service charge under 1k pa and you are doing well.

[Richlist]

My lowest service charge is £678 pa but its only that low because the managing agents allow the residents association to handle day to repairs & maintenance.

If I were the op I certainly wouldn't be rocking the boat.

[Grampa]

my lowest one it £360 but we own the freehold. (block of 6) I would be happy to pay a bit more to built up the reserve fund but the other owners are not keen. 

I guess it makes up for having to pay £1250 pa on 2 others 

[SophiePYT]

Just wanted to thank you all for your feedback and comments.

The Freeholder has now sent all receipts and invoices which is good and we shall therefore go ahead with payment.

And yes this service charge is relatively cheap but there isn't much needed for the property anyway!

We are about to buy another flat and that's a whooping 1500 pa service charge!

Thanks again everyone

[Richlist]

Most of us know developments that look run down, scruffy, lacking in maintenance, require a coat of paint/ hedges trimmed/ trees cut back etc etc.

My experience is that in the main, low service charges = low maintenance. This in turn negatively affects property values.

Don't get hung up on saving a couple of hundred pounds from your service charge account. The money will often be more than compensated for in property values.

........and before anybody complains, there are always going to be a few exceptions to the rules.

[Eve]

On 1/10/2017 at 12:47 PM, Grampa said:

Be careful for what you wish for. If the freeholder is managing the block themselves they may not be charging a management fee. If they then decide its too much hassel they could instruct a management agent who is likely to charge between £150 - £500 PER UNIT/FLAT which will be added to the service charge.

This happened to a landlord of mine who was also a self managing freeholder. He got fed up with late payments arguments over every expense (which were reasonable) so he gave to me to manage for which I charge £300 per flat. So they shot themselves in the foot.  

It isn't standard practice to provide evidence/receipts unless formally requested. 

Well that is not correct as firstly it depends what the lease says as some leases require an accountant or surveyor to approve the accounts this is a condition precedent so its not that straightforward and yes freeholders have been prosecuted for not providing information ...make an application  to the FTT under section 27A L&T Acts and tell them FTT that you need disclosure of all the invoices and receipts to narrow the issues and section 19 whether costs are reasonable

[Grampa]

On 7/31/2021 at 6:36 PM, Eve said:

Well that is not correct as firstly it depends what the lease says as some leases require an accountant or surveyor to approve the accounts this is a condition precedent so its not that straightforward and yes freeholders have been prosecuted for not providing information ...make an application  to the FTT under section 27A L&T Acts and tell them FTT that you need disclosure of all the invoices and receipts to narrow the issues and section 19 whether costs are reasonable

Well regarding the accounts its only "not correct" if the lease states otherwise and I have never seen a lease that does however, I acknowledge its possible. There is no requirement I believe to provide accounts if the building is 5 or less units (though most agents will) anything over take a look at note 3 ICEAW Service Charge Accounting 2011.

And as I stated earlier  It isn't standard practice to provide evidence/receipts to leaseholders unless formally requested/asked. I know of no Managing agent who sends copies of receipts and invoices to leaseholds on the yearly basis without a request.  

[Richlist]

4 minutes ago, Grampa said:

Well regarding the accounts its only "not correct" if the lease states otherwise and I have never seen a lease that does however, I acknowledge its possible. There is no requirement I believe to provide accounts if the building is 5 or less units (though most agents will) anything over take a look at note 3 ICEAW Service Charge Accounting 2011.

And as I stated earlier  It isn't standard practice to provide evidence/receipts to leaseholders unless formally requested/asked. I know of no Managing agent who sends copies of receipts and invoices to leaseholds on the yearly basis without a request.  

Quite agree.

My experience is that annual accounts are signed off by an independent  accountant......something I have been involved in, in the past. These are then sent to individual leaseholders. In recent years it's been acceptable to issue a summarised version of the annual accounts but even this can be quite difficult to understand and not in enough detail for some. Only the profit & loss sheet would provide a high level breakdown of expenditure.

Its entirely usual and legally acceptable for managing agents to require individuals who wish to inspect in more detail to make an appointment to view the detailed documents, receipts, invoices etc at their offices. They would be most unlikely to provide sight of detailed documents on any other basis and in any case there is no legal requirement for them to offer any alternative.

[Carryon Regardless]

I get a summary of costs.

The lease states  that if I require the accounts to be audited then they should be. Regardless the freeholder has the accounts audited and then charges on for that.

I argued in court that as I don't require the audit I should not be liable for the cost. My argument gained no sympathy.

Due to my arguing that the overall charges were excessive, and trust me they were, I was given copies of all invoices. Their in house solicitor then charged his hourly rate for that 'service'.

The eventual legal costs claimed against me far outweighed the original costs. There can become a point where the costs to defend might add to the claim being made so it becomes a gamble as to if paying for a professional is intelligent. We get the justice we can afford.

[Grampa]

1 hour ago, Carryon Regardless said:

We get the justice we can afford.

Quite right. Justice I have learnt is not black and white but whom (to an extent) has the better (and likely most expensive)  legal counsel. 

Same as the Police in my skewed eye view from my experience . As far as I'm concerned they dont want justice at all, they are only interested in is a "result" to get their numbers up. 

My cynicism seems to increase with age. 

 

[Carryon Regardless]

I find that, while my cynicism is certainly no less, my apathy has increased.

I've taken on a few battles, and ignoring the financial aspect (which is difficult), it's a part of life I'll not get back.