Staggering leasehold service charge from Southwark Council

[AndyPW]

There is another thread in the Brixton forum on service charges, but this isn't Brixton, so posting here...

Just received an incredible £17,726 service charge bill from Southwark Council on a 2-bed flat, apparently justified by 'major works' happening to the block. The invoice is due and payable in full in February!

Usual service charge is around £1000 per year. For a couple of the years recently it was up to £3000 when other works happened, but £17k is just ludicrous! Do they expect people to have this kind of money?

Have done a bit of research on the relevant legislation, what consultation is mandatory and what is arguable as a 'reasonable' charge. Will also be contacting the other leaseholders in the block, and making the 'observations' on the NOI. However, it really seems like leaseholders are being screwed here, and not sure what I can do.

Anyone have any advice or experience in dealing with this?

 

[Belushi]

People I've known it happen to have ended up having to remortgage to pay the bill. It's a big issue with ex-local authority homes.

 

[scifisam]

People I've known it happen to have ended up having to remortgage to pay the bill. It's a big issue with ex-local authority homes.

Same here. It's the main reason I'd never buy one.

(I wouldn't have any moral objections if the flat is already ex-local authority).

 

[Puddy_Tat]

bit of web searching found this on another forum - may have some useful links.

would agree talk to leasehold advisory service

best of luck

 

[scifisam]

BTW, this looks handy: http://www.fishermeredith.co.uk/wp-content/uploads/2012/05/Service-Charge-Dispute.pdf

 

[AndyPW]

Puddy_Tat Great link, thanks. Has directed me to the Leaserholders Association of Southwark that could be helpful. Cheers.

 

[ViolentPanda]

There is another thread in the Brixton forum on service charges, but this isn't Brixton, so posting here...

Just received an incredible £17,726 service charge bill from Southwark Council on a 2-bed flat, apparently justified by 'major works' happening to the block. The invoice is due and payable in full in February!

Usual service charge is around £1000 per year. For a couple of the years recently it was up to £3000 when other works happened, but £17k is just ludicrous! Do they expect people to have this kind of money?

Have done a bit of research on the relevant legislation, what consultation is mandatory and what is arguable as a 'reasonable' charge. Will also be contacting the other leaseholders in the block, and making the 'observations' on the NOI. However, it really seems like leaseholders are being screwed here, and not sure what I can do.

Anyone have any advice or experience in dealing with this?

TBF, "service charge" in this case is a misnomer. Your service charge is an annual fee for services. What you have there is an estimate notice for a bill for works. It should have been made very clear to you when you bought your ex-local authority flat that when major works are done on a building, leaseholders get charged for a percentage of the work - for example, if the block contains 12 flats, of which 9 are inhabited by council tenants, and 3 by leaseholders, 25% of the cost of the works will be split between the 3 leaseholders.
Much of the time, people take this as a charge on (have the sum added to) their mortgage, rather than trying to stump up cash.

 

[StoneRoad]

Another point - get together with the other leaseholders/tenants, it might be a good idea for someone to do an independent assessment of these repairs - the bill of works could be heavily loaded. (and the alternative could also be true).

 

[Manter]

yeah, I've heard loads of these stories- and the council load the bills onto leaseholders to try and get some money back. plus the way the council does things always seems to be bizarrely expensive. You'll have to pay it, but people usually add it to the mortgage.

But your recourse is probably your solicitor if they didn't tell you this could happen- it is normally in the paperwork.

 

[Onket]

What do people mean by loading bills on to leaseholders?

 

[Manter]

What do people mean by loading bills on to leaseholders?

If the cost of improvements per property is x, leaseholders are often charged 2x with the additional being chalked up to admin, or whatever. If you add the fact councils seem to pay over the odds for any work, you end up paying way over the odds for relatively minor repairs. But caveat emptor, really- it's well known that if happens, it's one of the reasons ex council properties are cheaper.

Not meaning to sound unsympathetic to the OP, it must be very worrying to get a bill like that- but it's not entirely unexpected.

 

[Onket]

You're saying that councils charge leaseholders twice what they are supposed to, to start with?!

 

[StoneRoad]

Looking at the image in the OP - it seems to be a NOI - a proposal to do work with estimated costs. They appear to be inviting responses.
Therefore: I would suggest that the tenants get all the paperwork they offer - there should be a costed (estimated) Bill of Works / Schedule included, and have it checked by a building works professional.
This will cost (a set % of the contract price), unless they can get it done "free" as a gesture of goodwill by a friend. However, such a professional should be able to identify some cost savings - by using alternatives (a bit like buying own label instead of branded products).

 

[EastEnder]

You're saying that councils charge leaseholders twice what they are supposed to, to start with?!

I have no idea if that's true, but I could easily believe it. If the council can get away with charging the leaseholders more (proportionally) then they don't have to find as much money to cover the proportion of the works for which they can't directly charge residents.

 

[StoneRoad]

Oh, and another thing - it is a bit cheeky of the council to want paying "up front" - as it should be deposit / staged payments / final payment (10%) retained for c 1 year (the defects liability period).
I'ld also check their payments record (I'll bet it is 90+ days from month end of the date of the invoice)
See where that money is going ..... not directly to the contractor and their subbies .....

(I used to work in a related field, in case anyone is wondering how I know this!)

 

[Onket]

I have no idea if that's true, but I could easily believe it. If the council can get away with charging the leaseholders more (proportionally) then they don't have to find as much money to cover the proportion of the works for which they can't directly charge residents.

Seeing as it would be extremely easy for a leasholder to challenge their bill on this basis (and possibly end up paying nothing), as well as being fraud, I think it's highly unlikely to be true.

 

[EastEnder]

Seeing as it would be extremely easy for a leasholder to challenge their bill on this basis (and possibly end up paying nothing), as well as being fraud, I think it's highly unlikely to be true.

For the sake of the OP I certainly hope that's the case!

 

[Onket]

I think it's much more likely that the council suddenly has funding to carry out lots of works that probably should have taken place over a longer period, which would have allowed the residents more chance to budget. Decades (or longer) of under-funding and a lack of investment followed by the failed introduction of ALMOs means that this is the case for lots of people in council and ex-council properties at the moment.

Firstly I'd have a look at the description on the letter in the OP which says 'Dry & Safe' works. I sincerely hope that a proper breakdown has also been provided. If not then I'd suggest the OP requests one. The vague description of works could include a massive amount of work. New roof, doors & windows, insulation, cladding, external decoration/sealing, entryphone, concierge, CCTV and all sorts.

As StoneRoad suggested earlier, checking that the estimated figures are there or thereabouts would be a good start. Before doing this you'd need to know exactly which works are proposed.

 

[Casual Observer]

It's worth asking Southwark Council for a 'specification of works' if they haven't supplied one already.

The specification will contain a figure for the total cost of the works so you can check if the share you are being asked to pay is proportionate to the size of your flat within the development and also whether it's consistent with the share of annual service charges that you usually pay.

When a freeholder serves notification of impending major works to leaseholders, they are obliged not only to gather more than one quote from construction companies bidding to do the work but they are also obliged to invite leaseholders to supply additional alternative quotes which must be duly considered before a contractor is appointed. From what you have written, it sounds like the freeholder (Southwark Council in this instance) has not done this.

Freeholders are notorious for bullying leaseholders into paying inflated charges for major works and routine maintenance but it's quite easy to blow them out of the water if you stand up to them and focus your efforts in the right areas.

 

[AndyPW]

Thanks for all your suggestion, guys. Really useful.