We own a freehold house but have to pay estate charges that have rocketed from £6,000 to £16,000 a year: How can we challenge them?
We own a freehold house, but have to pay estate charges that we disagree with.
They have risen sharply from £6,000 per year in 2018 to a bill for £16,068 annually now.
We seem to being charged for maintenance visits to communal areas that we don’t get, for electricity to courtyard lights that do not work, and for the upkeep to a play area that is open to the public.
Our home is on a fairly standard estate and is not a high-priced property. Can we challenge these and if so, what is the best way to do this?
Freehold property owners can sometimes find that they have to pay for significant estate costs
MailOnline Property expert Myra Butterworth replies: The high service charges that some leaseholders have to pay is well document.
But here is a case of a someone who owns a freehold property with a demand for maintenance costs and rising charges.
These include the management company’s own charges that have increased more than 165 per cent in four years, from £6,000 to just over £16,000.
We speak to a legal expert about the homeowner’s options and the best way to challenge the rising costs.
Stephen Gold ex-judge and author, explains: You thought you were hard done by, didn’t you? That is those of you holding long leases and condemned to pay an arm and a leg for service charges.
Spare a thought for house and flat owners on estates who own their freehold and who are legally obligated by their deeds to contribute towards such items as the upkeep of communal gardens, play areas and roads which have not yet been adopted by the local authority and premiums for public liability insurance.
Stephen Gold is a retired judge and author
You as leaseholders can challenge your service charge demands before a tribunal.
No such luck for freeholders faced with a demand for maintenance they regard as outrageous and which normally comes hurtling through their letterbox from the developer’s managing agent.
No mechanism for them for a tribunal challenge and often a case of paying up what is asked for, with a smile – very sickly – on their face.
The Government is committed to bringing in new laws that would put freeholders in England on a par with leaseholders to challenge these charges, including contesting that services charged for are unreasonable in amount, were not reasonably necessary in the first place or were not carried out to a reasonable standard.
Tomorrow? No, ‘when parliamentary time allows’. The recent Queen’s Speech was silent on the topic. In Wales, the same could happen.
This does help our questioner who along with most, if not all, of the freeholders on her estate is up in arms about the maintenance charge demands that have come her way.
Individually, the charges are modest but there are what appear to be legitimate complaints about various matters.
Typically, the deeds set out what can be charged for and how the management company can go about charging it.
If this scheme is not followed by the management company, then it will fail in any attempt to enforce payment. Here are the lines of attack that our questioner and her neighbours can mount.
The demand for payment
As soon as practicable after each calendar year the management company must notify the freeholders of the actual costs incurred for that year and the estimated costs for the new year.
In my judgment, until they have done both, any demand for payment based on both those years is invalid.
Here, details of the estimated costs for 2022 have been provided to our questioner but not the actual costs for 2021. All that can be gleaned for 2021 is our questioner’s alleged personal liability for 2021 and not details of the actual total heads of expenditure incurred for the 250 homes concerned.
The management company should be told to send to everyone individually the actual total costs in a similar format to the 2022 statement of estimated costs before following up on unmet demands.
The management company’s charges
Any challenge to the reasonableness of items of expenditure is problematic.
However, sums claimed to have been paid out must have been paid out and management company services charged up must have been performed. This takes me to the management company’s own charges.
On the face of it, they are now excessive, taken in the context of the overall budget.
In 2018 they were £6,000. Now, they are claimed at £16,068, an increase of 167.8 per cent over four years.
For that £16,068, the management company estimates it will be controlling expenditure of just £9,598 to others. How can such a charge be justified? Is the company hiring former Government ministers to make the tea and lick the stamps with the central heating and electric lights on full blast during every working hour?
The company should be asked for an explanation of the basis on which their charges have been fixed.
Management of land not within the estate
There is a dispute as to whether the management company has been spending money on some land for which it does not have responsibility and which is within the ownership of a third party.
The dispute should be resolved by reference to the deed plans and text.
If management is not the obligation of the company according to them, the company cannot charge up for doing what it has chosen to do.
Any dispute about calculation of the maintenance charge has to be arbitrated by a chartered surveyor. The deeds say so. This rules out a county court small claim unless both sides agree to it instead of arbitration although a county court claim about whether the management company has been doing all it should by way of maintenance – and homeowners have a number of complaints in this respect – does not appear to be caught by the arbitration requirement.
But the deeds also say that the management company can add to the maintenance charge the costs incurred by it in bringing or defending proceedings and in steps taken to recover a maintenance charge.
This sort of wording is not uncommon with freeholds but is harsh and makes all but straightforward court proceedings rather unattractive to freeholders because, win or lose, everyone can end up indirectly paying for the company’s expenses through an addition to the next year’s maintenance charge.
For leaseholder disputes, tribunals have the power to disallow this sort of wording taking effect.
Subject to how the management company responds to further representations coupled to everyone individually threat to take matters further, a test case – through arbitration or a small claim – can be considered by our questioner or another homeowner on the development.
After all, the company’s own charges show no sign of coming down in future years and action should flush out details and documentation showing what had been behind that massive increase in those charges.
The least risky course would be to exhaust the company’s internal complaints procedure and, if still dissatisfied, complain to the Property Redress Scheme to which the company appears to be signed up. This is free and does not preclude other action such as a small claim if the complaint fails.
Stephen Gold is an ex-judge and author of ‘The Return of Breaking Law’ published by Bath Publishing. For more on service charges, go to breakinglaw.co.uk