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Service charge exceeded budget


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Any help/advice on the below would be much appreciated.

I received a letter earlier this week from the new managing agents for a block of flats in which I let out one property - the new agents took over on September 1st. They have said that the old agent has exceeded the costs that were set out in the annual budget. Apparently they have spent for the year, as of September 1st, £67,321.45, when the actual budget for the period was £39,365.60. They are thus saying that there is a deficit of £27,955.85 that needs to be recovered in order to maintain the building for the rest of the year, without carrying the debt over to the next financial year. They have calculated that each flat must pay an interim serice charge of £735.68. They have also enclosed an expense report for the year detailing all expenditure. I can't see one item that is dramatically more than the budget, just that most of them have been exceeded by September 1st., with obviously 4 months left still to go until the end of the year.

I am obviously happy(ish) to pay the service charge, but am not very happy that the budget has been exceeded by so much. And I also appreciate that this isn't the new managing agent's fault.

What are people's thoughts on this? Is there any case for mismanagement by the old agent in the current year? They had managed the block since the end of 2008. I wouldn't mind if there was one obvious cost that had been incurred due to, for example, a large repair, however it just seems to be that the old agent wasn't particularly tight on controlling costs.

Would be good to know what other people would do in the same position - but I know I'll be paying it in the next couple of weeks anyway! Moan over...


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I have a lot of leasehold property and pay service charges. Often at the end of the year the budget has been exceeded and a surcharge is levied.....usually quite a small amount, never more than say 5%-10%.

In your shoes I'd seek professional advice. I wouldn't go overboard and rack up lots of expense because I suspect there isn't any chance of recovering any money. Its been spent and the chance of proving anything untoward and getting a refund will depend on many things.

Perhaps the leasehold advisory service or other official leasehold service/ organisation can direct you towards your best route. A web search should identify a few.

I assume they were a limited liability company and if so you should at least expect fully audited accounts in due course.....although they will be some way off.

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Thanks Richlist.

I appreciate that the annual budget is an estimate for the upcoming year and so yes expect it to never be wholly accurate - its just the amount that they've overspent that bugs me.

Thanks, I might look into the leasehold advisory service or similar organisations for help, but as you say, don't really want to spend anything as I guess I know the money is rightly or wrongly owed, so it would be a bit of a fruitless exercise.

Yes, the old managing agent was a Ltd company - estate agents, lettings, block management etc. Perhaps not block management now though!!

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In addition to above advice:

Do you know who owns freehold? I would suggest you check your deeds to find out and/or consult Land Registry.

Freeholders have legal responsibilities to leaseholders regarding management tasks, charges etc.

It may even be that you are a freeholder, as part of owner group (e.g. after developer sell-out). This information should be included with your deeds.

As an owner group freeholder you may be in stronger position to deal with managing agents and budgets.

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