Question 1

Putting Service Charges Right

Accepted Answer

Q: My question is with regard to Service Charges for both our blocks, A built circa 1985 and B circa 1987. At an AGM of the subject company dated 6 July 1988 it was agreed that A and B shareholders would each be responsible for their own service charges etc. The service charges, dependent on the work in each house, have been carried separately by the shareholders in each house since then. In the leases the service charges are apportioned by the number of flats: A has seven flats (one of which is considered as two flats as it's a penthouse); B has 11 flats (one of which is also considered as 2 flats as it's a penthouse). So in essence there are 20 shares and each shareholder is responsible for five per cent of the overall service charges The service charges are apportioned depending on planned work to each block, and are detailed by each block in the annual returns of the company financial statements. The question that's been raised is that the July 1988 AGM minutes were not sufficient to change the service charge payments and the leases should have been updated accordingly. Therefore, the way service charges have been apportioned since 1988 is incorrect, and each shareholder should only pay five per cent of the total Service Charge for A and B irrespective of the service charges for each house. Therefore the question is, are the AGM minutes in conjunction with the leases sufficient to satisfy requirements, or if the procedures haven't been correctly followed, what do we need to do to put things right? FPRA Committee Member Mary-Anne Bowring replies: Sadly, you have fallen foul of the misconception that company resolutions can change leases. This is NEVER the case, so the minutes and intention are not enforceable in law. An AGM should consider only the company accounts to be filed with Companies House. Sservice charge accounts are a matter of contract law and unless BOTH PARTIES agree to vary the contract the minutes and resolution have no effect. To vary the contract other than by both parties’ agreement (which means changing leases by way of a deed of variation to reflect this) then it is void If 75 per cent agreement were achieved, (Section 37 of the 1987 Landlord & Tenant Act) then you could apply to the First Tier Tribunal to change the leases [Submitted February 2017]

Question 2

Putting Service Charges Right

Accepted Answer

Q: My question is with regard to Service Charges for both our blocks, A built circa 1985 and B circa 1987. At an AGM of the subject company dated 6 July 1988 it was agreed that A and B shareholders would each be responsible for their own service charges etc. The service charges, dependent on the work in each house, have been carried separately by the shareholders in each house since then. In the leases the service charges are apportioned by the number of flats: A has seven flats (one of which is considered as two flats as it's a penthouse); B has 11 flats (one of which is also considered as 2 flats as it's a penthouse). So in essence there are 20 shares and each shareholder is responsible for five per cent of the overall service charges The service charges are apportioned depending on planned work to each block, and are detailed by each block in the annual returns of the company financial statements. The question that's been raised is that the July 1988 AGM minutes were not sufficient to change the service charge payments and the leases should have been updated accordingly. Therefore, the way service charges have been apportioned since 1988 is incorrect, and each shareholder should only pay five per cent of the total Service Charge for A and B irrespective of the service charges for each house. Therefore the question is, are the AGM minutes in conjunction with the leases sufficient to satisfy requirements, or if the procedures haven't been correctly followed, what do we need to do to put things right? FPRA Committee Member Mary-Anne Bowring replies: Sadly, you have fallen foul of the misconception that company resolutions can change leases. This is NEVER the case, so the minutes and intention are not enforceable in law. An AGM should consider only the company accounts to be filed with Companies House. Sservice charge accounts are a matter of contract law and unless BOTH PARTIES agree to vary the contract the minutes and resolution have no effect. To vary the contract other than by both parties’ agreement (which means changing leases by way of a deed of variation to reflect this) then it is void If 75 per cent agreement were achieved, (Section 37 of the 1987 Landlord & Tenant Act) then you could apply to the First Tier Tribunal to change the leases [Submitted February 2017]

Putting Service Charges Right

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