Obtaining a new block to manage is generally good news for a managing agent, but inherited service charge disputes can be difficult to deal with if you don’t have the necessary handover information.
Brady Solicitors’ Sumi Begum explains.
Many managing agents carry a ‘balance brought forward’ in respect of a leaseholder’s service charge account, without being able to correctly account for it.
The balance brought forward details the service charge balance at the close of the previous service charge year. Problems can then arise if a leaseholder refuses to settle their service charge arrears because of a query on a previous balance brought forward.
Issuing recovery proceedings for outstanding service charge arrears can also be problematic when the statement of account provides for a balance brought forward. The Courts can be unsympathetic and may even dismiss a claim if the sums being sought are not justified.
In our experience, leaseholder service charge disputes tend to fall into one or more of the following categories:
- The freeholder/managing agent has failed to comply with their obligations under the lease;
- Maintenance or repair works are unsatisfactory or not carried out at all;
- The amount of the service charge is excessive;
- The property is in disrepair;
- Service charge demands have not been received or are incorrect.
When taking over a new block there are certain documents and details you need to obtain so that you can understand the balance brought forward and ensure you can deal with leaseholder queries.
Handover documents and details to obtain:
- Any service charge demands that have been sent to the leaseholders. Have these demands been issued correctly and in accordance with the lease?
- Is the service charge collected in advance or in arrears?
- Copies of the annual service charge expenditure account.
- Copies of all invoices relating to expenditure incurred by the previous agents.
- Documents relating to any section 20 major works activity. Has the correct procedure in relation to consultation been undertaken?
Obtaining the correct handover information does not mean that the leaseholders will not raise issues with the service charge account. However it does enable you, as the newly appointed managing agent, to answer leaseholders’ service charge queries and to resolve service charge disputes before they escalate.
Additionally, should a service charge dispute reach the county court or first-tier tribunal, a complete set of documentation, including invoices relating to expenditure, could prove vital.