Excessive service charge increase - Any advice?

Mekrel

Mekrel

Mekrel

Soldato
Joined
2 Aug 2004
Posts
8,375
Location
Buckinghamshire
I bought a new build property, completing back in March this year. At the time, the service charge communicated for the year was £1,047 and I paid this pro-rata for March to December - no issues.

I've just received a new invoice for next year's charges and I've discovered they're raising the service charge 41%. The detail provided is limited as they've provided a breakdown of this years costs, but have not provided the breakdown for last year or any commentary and therefore it's not clear what's driving this increase. I have the breakdown from last year's budget so I could try and understand this myself, but I would still be lacking the commentary.

Now, I'm a reasonable guy and I'm new to the property ladder so I call the accounts team at the management company to understand more and they informed me that the Director of the company (the landlord, essentially) has approved said budget the management company has put to them.

Correct me if I'm wrong, but I believe I have the following options open to me:
  • Mediate with the management company/landlord
  • Take to a First-tier tribunal
  • Apply for right to change management (Would need other flats/lease holders support)
  • Apply for the right to manage (Would need other flats/lease holders support)
I know the second two require a solicitor and would also (probably) be more painful to implement and manage.

I've drafted a letter to put through my neighbour's post boxes to understand their views, what conversations they've had with the management company regarding the proposed costs and if they would like to collectively do something about it.

Does anyone have any experience with successfully getting a management company to review their costs? I completely appreciate inflation and wage growth will mean additional costs, but not every year and not to this extent.

What I'm struggling with here is there's no representation from any party who has the tenants interest at heart? The management company basically wants to turn profit and the Landlord wants to keep their building/land/investment in good shape, with the leaseholders paying for that to happen.
 
Im sorry I cant help but that increase seems crazy without something out of the norm causing it.

Id be the same as you and would take it further, I hope your neighbours do
 
I'm sure your neighbours must be thinking along the same lines as well. To pay an extra £400 after a single year seems extortionate. I'd be more worried that after next year that increase hasn't jumped to £2k!

Frankly I think it's wrong for the management company to expect to turn a profit. They're there solely to manage the building and their costs should be absolute without a single penny made in profit. i.e. If they underspend then the bill should be reduced the following year.

@Skillmister might be able to give you some idea of what you can do.
 
Basically, new build flats are a complete con and I work in the industry. Thankfully Government are working on some major industry changes which will have a positive effect on leaseholders. For now however check the the reason for the increase carefully between the budgets to make sure the management company isn’t charging you to fix developer mistakes. The common one is badly installed lifts / door access. Cladding is a newer issue and unfortunately it’s falling on (private) leaseholders to fix.

Can you post the existing budget with confidential info removed?
 
Thank you for all your responses so far everyone.

@Shoza - Please see below
fSTskmN.jpg.png


The cleaning fee is ridiculous because the common areas are tiny, there's literally a stairwell with just about enough landing space for entry to each property. I also have no idea why we're being charged for water all of a sudden as there's nobody using the communal tap and it's certainly not being used for gardening!

Everyone is really disappointed in their purchase and the independent developers couldn't care less now they've sold the properties. Below is some of the issues people have experienced:
  • Floors that sound travels through easily. I'm on the top floor so this doesn't impact me really, but another flat has been told test was completed where sound was measured from a flat when a special hammer was used in the flat above and the test passed. The developer has ignored request for paperwork regarding this test.
  • Four flats have had issues with washing machines. My washing machine was extremely loud as it wasn't level and ended up walking itself from under the countertop, two flats have had leaks (one resulting in mould as the leak wasn't noticed until after a while) and another flat had their unit sat on a beam. The developers solution to the beam issue? Turning the unit around so it's facing into their living area from underneath the breakfast bar.
  • The handrail coming away from the wall where the wall plugs have not been installed correctly or the wrong ones used.
 
Mekrel said:
Thank you for all your responses so far everyone.

@Shoza - Please see below
fSTskmN.jpg.png


The cleaning fee is ridiculous because the common areas are tiny, there's literally a stairwell with just about enough landing space for entry to each property. I also have no idea why we're being charged for water all of a sudden as there's nobody using the communal tap and it's certainly not being used for gardening!

Everyone is really disappointed in their purchase and the independent developers couldn't care less now they've sold the properties. Below is some of the issues people have experienced:
  • Floors that sound travels through easily. I'm on the top floor so this doesn't impact me really, but another flat has been told test was completed where sound was measured from a flat when a special hammer was used in the flat above and the test passed. The developer has ignored request for paperwork regarding this test.
  • Four flats have had issues with washing machines. My washing machine was extremely loud as it wasn't level and ended up walking itself from under the countertop, two flats have had leaks (one resulting in mould as the leak wasn't noticed until after a while) and another flat had their unit sat on a beam. The developers solution to the beam issue? Turning the unit around so it's facing into their living area from underneath the breakfast bar.
  • The handrail coming away from the wall where the wall plugs have not been installed correctly or the wrong ones used.
Click to expand...
Absolutely shocking, I would be absolutely raging if I bought a brand new house with all those issues and then rubbing salt into the wounds with a 40% rise in service charge.
 
Those are shocking but don’t expect much shift in the fire stuff - people making a lot of money from Grenfell.

I would challenge the water, cleaning and management fee but ultimately for now the only way to win is Right to Manage and good luck setting that up. Once you get it up and running it’s not bad but the management company will try anything to stop it.

For info significant unexpected, unexplained increases in service charges are part of the Government consultation currently, so it is being looked at. Expect news middle of next year on that.
 
Those fees do sometimes look quite high. In my area most of the management fees for flats are around £100 a month, so £1200 a year, but I think they are reasonably static at those sorts of levels. It is a downside of owning a leasehold flat.

For putting work out to tender for cleaning for example, can they explain why it's 77% higher this year compared to last year? If the cleaning schedule has changed, or the cleaning company has changed, maybe they can justify why they've accepted paying 77% more, or adjusted how often they are cleaning. If the cleaning company has upped costs then they should look at getting a few quotes and going with someone else.

Water seems excessive, as you said it wasn't charged for last year. Can they provide meter readings for the water and an explanation as to what the water is being used for?

What are they checking for with a "fire check"? That along with a fire alarm service (not sure what a vent test does) are adding up to a fair whack of your fees. I totally get not wanting to have your house burn down, but most fire alarms are good for years, and if dual powered with mains and battery backed, would moan at you loudly if they had a problem or needed attention.

What work are they doing for satellites/aerials? Once installed these aren't going to need attention unless there is a problem. Can they provide any evidence for what you are getting for £100 here?

Why is the management fee 32% higher? that's a bigger than inflation increase and doesn't seem to have any real justification.

Just collectively badger them about the fees and dig into things, especially if they are going up unreasonably. They may then learn they can't get away with just charging whatever they feel like.
 
My gut feel is they are budget for last year and they under estimated some of the numbers, so the actuals were higher.
If this is the case you could be behind on some lines, so this next year it could be you are recovering from a previous underbudget and your paying say 150% of what a normal year should be

You basically need the actuals as well as the budget, that way you can assess last years budget vs actual, and then you can understand if the current year is a fair amount.

As far as management fees, without knowing how they share this, its possible they are spending more time than expected, or they lost another property and are allocating more time here rather than addressing the real issue (both most likely cases) however there are a multitude of issues it could be.

First task, ask for actuals for last year.
 
Semple said:
I'm sure your neighbours must be thinking along the same lines as well. To pay an extra £400 after a single year seems extortionate. I'd be more worried that after next year that increase hasn't jumped to £2k!

Frankly I think it's wrong for the management company to expect to turn a profit. They're there solely to manage the building and their costs should be absolute without a single penny made in profit. i.e. If they underspend then the bill should be reduced the following year.

@Skillmister might be able to give you some idea of what you can do.
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More of a contentious issue and not something I deal with unfortunately.

Typically though, the lease should state what obligations the management company have in terms of repair/maintenance/insurance and how this should be charged back to the tenants. Normally they have to give a budget in advance which the charges are based off, then at the end of the financial year they have to get proper accounts done and any surplus from the advance payments returned to the tenants or added to a reserve fund to pay for big works (roof repairs etc) in the future. Or if there is a shortfall they can make additional demands to make up the amount. Problem is these accounts might take the best part of a year after the financial year ends to materialise!

Management fee and cleaning sound like BS. As Shoza says above, you may well get shafted on fire checks at the moment as I'd imagine all companies are booked up with testing and making changes to cladded buildings. At least one ones I'm dealing with at the moment there seems to be anywhere between 6-12 month wait for fire inspections and material tests to be carried out :eek:
 
https://arma.org.uk/leaseholders/the-right-to-manage

Only way forward .

Difficult to do as it involves all tennants putting there hand in there pockets . We almost got there with one of my leaseholds , development of 213 flats .

It gets worse as well , building society’s are also not lending on leaseholds with " Onerous Ground Rents " and silly leases where management company’s can do what they like .As in everything read the small print .
 
Bald-Eagle22 said:
https://arma.org.uk/leaseholders/the-right-to-manage

Only way forward .

Difficult to do as it involves all tennants putting there hand in there pockets . We almost got there with one of my leaseholds , development of 213 flats .

It gets worse as well , building society’s are also not lending on leaseholds with " Onerous Ground Rents " and silly leases where management company’s can do what they like .As in everything read the small print .
Click to expand...

"onerous ground rents" only really applies to the ridiculous doubling clauses which should never have slipped through the net in the first place. "normal" ground rents should be fine for most lenders (not that this makes them a sound purchase though, in my view)
 
we used to live in a flat and our fees went up from around 750 in the first year to just over 1000 in the 5th. Glad we got out and would recommend against it to anyone.

are you just one block of flats? our service charge covered 4 blocks then divided amongst the 30 odd flats. so if anything happened in one of the other blocks we would all foot the bill.
 
In my apartment block we agree to clear our own areas in the communal areas, so far this works for us and saves us a fortune. Also I would be contesting the management fee increase.

Our management fees have just gone up this year purely due to the grade 2 listed building is going to need some work in the next 5 years.
 
Skillmister said:
"onerous ground rents" only really applies to the ridiculous doubling clauses which should never have slipped through the net in the first place. "normal" ground rents should be fine for most lenders (not that this makes them a sound purchase though, in my view)[/QUOTE


Why not , I’ve done ok with 4 of them?
Click to expand...
 
@Bald-Eagle22 So have thousands of other people but I've seen how bad they can be and I wouldn't be prepared to take the risk.

Unfortunately a lot of people are blissfully unaware of the potential problems until its too late because they weren't advised properly at the time of purchase.
 
Do you have a residents association?

We managed to change our factors because they were useless. Same with any other contractors. If you have a proactive RA then these issues can be sorted via them.
 
The problem with a lot of these leasehold blocks , well newish builds , are that the tennant s in situ are not not the owners .

Trying to arrange residents association and right to manage schemes are a logistical nightmare and the lease holders can if gone unchecked create havock.
 
Thanks everyone for your responses. To give you an update: we’ve not made any progress directly with the Management company and the Landlord has washed his hands of us Leaseholders. I reached out to the Landlord on email, I was polite and asked for his support and wanted to understand if it was he who signed off extra cleaning and the budget increase of 40%. He didn’t respond but did forward my email to the Lease management company.

Outside of the direct contact with the lease company, I’ve had positive responses from 4 other flats (so 5 out of 7) that want to challenge this together. We’re meeting on Saturday and we’ll either leave the meeting with clear actions to gather what we need to challenge (quotes etc) and how far everyone is willing to go in terms of tribunal and or right to manage.

Today I’ve had some success with a company who can offer one of the services we’re being charged for. I won’t say which as you never know who is reading and I don’t want to prompt them on what we’re doing as it gives them time to find an excuse. The contact I spoke to at the company in question has over 10 years experience in their area and it’s also relating to communal residential areas. When I told him the cost for the expense in question, he baulked at it. This guy is visiting the building to confirm and will provide a quote - all in his own time.

I’ve also emailed my MP, I’m not expecting them to help in my case but I essentially said I was concerned about consumer protection in this area and I understand it’s currently under consultation but better protection needs to be legislated sooner rather than later.
 
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