Question 1

Pressing Questions

Accepted Answer

Q: We are a fledgling residents’ association, with membership of 12 out of 15 leaseholders in a small block of flats. We were motivated to form the RA in response to a range of shared poor experiences in relation to our management company. We therefore have a number of queries about which we would appreciate your support and advice, of which the most pressing are raised below: Service charge / accounts 1. We have received no financial accounts from the management company since early last year, despite several requests. What would you advise that we do about this? 2. We are aware that several residents are withholding all or part of their service charge payments due to disputes or lack of confidence in the financial management of the property. What would you advise that we collectively do about this? 3. How can we determine whether our service charge is set at a reasonable rate? 4. Can we refuse to pay for service charges that we deem to be either poor value for money or surplus to requirements? 5. If we were to change management companies, how would the current financial problems be resolved / transferred (eg non-payment of service charge, funds being held by the management company to pay for proposed works)? Communication 6. What can we do about poor communication from the Management Company (i.e. phone calls and emails repeatedly being ignored or unsatisfactorily answered)? 7. What information are we legally entitled to receive from the Management Company (eg information on maintenance contactors such as cleaning and gardening)? Proposed external works 8. What is our legal position regarding external works that were not completed satisfactorily (and are therefore being proposed – and therefore charged for – again)? 9. Is it possible to (legally) refuse to pay for external works being proposed by the Management Company? General enquiries 10. Our members are in two different buildings which are being managed as one property. Should residents in one building be responsible for works carried out in the other? 11. How can we determine whether the cost of our insurance is reasonable? 12. What is the process for putting a management company out to tender? 13. How can we determine how much it would cost to buy the freehold of the building? A: FPRA Director Shula Rich replies: 1. There is a legal requirement to supply accounts. Suggest you ask the managing agents which property ombudsman scheme they belong to and threaten to complain. You should also ask what the agents’ internal procedure is for complaints as this needs to be undertaken before going to the property ombudsman. It is a legal requirement to belong to a scheme. If they are not members, then they should not be operating as agents. 2. This is a duty of the agents. It should not hold up essential work as it is the freeholder's duty to do this and reclaim form the lessees. 3. You can ask to see the invoices supporting the accounts. It is a legal requirement that these be made available to you. 4. Yes, but sometimes this can result in legal fees for collection. It is always best to pay what is reasonable. You may deduct what you consider to be unreasonable but must be prepared to defend the deduction at a tribunal if the freeholder instructs the agents to take legal action. Always explain the reason for deductions. You may also consider paying and then going to a tribunal for a refund. The form to look at is 27a - application to decide reasonableness of service charges. 5. Generally, lessees themselves are not able to change agents unless they have the right to manage. Please ask us if you would like to discuss how this is obtained and what it can mean for the lessees 6. See reply to (1) ombudsman schemes. Also, if the agent is a member of ARMA Q - they will have a disputes procedure ending with a reference to ARMA. 7. You may see all the invoices which support the accounts. if copies are required they may make a reasonable charge (say 5-10p per copy) 8. Ombudsman, ARMA Q, appeal to first tier tribunal under S27a - reasonableness of service charge. Right to manage, a procedure which will remove the agents and allow you to either manage the block yourselves or appoint another agent. 9. A refusal to pay service charges or a proportion can only be allowed after an appeal to a tribunal or court if the agents on behalf of the freeholder do not agree. 10. Only if the lease covers both buildings and the service charge is a proportion of the total number of flats in the two buildings. 11. Find out the re-building cost it is based on or obtain your own calculation and then ask other insurance companies. 12. If your lease allows you to appoint an agent, then you can follow any procedure - see FPRA publication appointing an agent - or obtain right to manage. 13. There are calculators on the internet for lease extensions. A rough estimate can be obtained by adding up the cost of each lease extension as this is the opportunity cost that the freeholder will have if you buy the freehold. This will give you a rough idea. Otherwise a professional valuation will be needed for which there is a fee. please come back to us for further details. To obtain the right to manage will always be less expensive although you do not have the right to extend leases. please come back to us for details of this also. Question submitted January 2018

Question 2

Pressing Questions

Accepted Answer

Q: We are a fledgling residents’ association, with membership of 12 out of 15 leaseholders in a small block of flats. We were motivated to form the RA in response to a range of shared poor experiences in relation to our management company. We therefore have a number of queries about which we would appreciate your support and advice, of which the most pressing are raised below: Service charge / accounts 1. We have received no financial accounts from the management company since early last year, despite several requests. What would you advise that we do about this? 2. We are aware that several residents are withholding all or part of their service charge payments due to disputes or lack of confidence in the financial management of the property. What would you advise that we collectively do about this? 3. How can we determine whether our service charge is set at a reasonable rate? 4. Can we refuse to pay for service charges that we deem to be either poor value for money or surplus to requirements? 5. If we were to change management companies, how would the current financial problems be resolved / transferred (eg non-payment of service charge, funds being held by the management company to pay for proposed works)? Communication 6. What can we do about poor communication from the Management Company (i.e. phone calls and emails repeatedly being ignored or unsatisfactorily answered)? 7. What information are we legally entitled to receive from the Management Company (eg information on maintenance contactors such as cleaning and gardening)? Proposed external works 8. What is our legal position regarding external works that were not completed satisfactorily (and are therefore being proposed – and therefore charged for – again)? 9. Is it possible to (legally) refuse to pay for external works being proposed by the Management Company? General enquiries 10. Our members are in two different buildings which are being managed as one property. Should residents in one building be responsible for works carried out in the other? 11. How can we determine whether the cost of our insurance is reasonable? 12. What is the process for putting a management company out to tender? 13. How can we determine how much it would cost to buy the freehold of the building? A: FPRA Director Shula Rich replies: 1. There is a legal requirement to supply accounts. Suggest you ask the managing agents which property ombudsman scheme they belong to and threaten to complain. You should also ask what the agents’ internal procedure is for complaints as this needs to be undertaken before going to the property ombudsman. It is a legal requirement to belong to a scheme. If they are not members, then they should not be operating as agents. 2. This is a duty of the agents. It should not hold up essential work as it is the freeholder's duty to do this and reclaim form the lessees. 3. You can ask to see the invoices supporting the accounts. It is a legal requirement that these be made available to you. 4. Yes, but sometimes this can result in legal fees for collection. It is always best to pay what is reasonable. You may deduct what you consider to be unreasonable but must be prepared to defend the deduction at a tribunal if the freeholder instructs the agents to take legal action. Always explain the reason for deductions. You may also consider paying and then going to a tribunal for a refund. The form to look at is 27a - application to decide reasonableness of service charges. 5. Generally, lessees themselves are not able to change agents unless they have the right to manage. Please ask us if you would like to discuss how this is obtained and what it can mean for the lessees 6. See reply to (1) ombudsman schemes. Also, if the agent is a member of ARMA Q - they will have a disputes procedure ending with a reference to ARMA. 7. You may see all the invoices which support the accounts. if copies are required they may make a reasonable charge (say 5-10p per copy) 8. Ombudsman, ARMA Q, appeal to first tier tribunal under S27a - reasonableness of service charge. Right to manage, a procedure which will remove the agents and allow you to either manage the block yourselves or appoint another agent. 9. A refusal to pay service charges or a proportion can only be allowed after an appeal to a tribunal or court if the agents on behalf of the freeholder do not agree. 10. Only if the lease covers both buildings and the service charge is a proportion of the total number of flats in the two buildings. 11. Find out the re-building cost it is based on or obtain your own calculation and then ask other insurance companies. 12. If your lease allows you to appoint an agent, then you can follow any procedure - see FPRA publication appointing an agent - or obtain right to manage. 13. There are calculators on the internet for lease extensions. A rough estimate can be obtained by adding up the cost of each lease extension as this is the opportunity cost that the freeholder will have if you buy the freehold. This will give you a rough idea. Otherwise a professional valuation will be needed for which there is a fee. please come back to us for further details. To obtain the right to manage will always be less expensive although you do not have the right to extend leases. please come back to us for details of this also. Question submitted January 2018

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