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Help and advice The ARMA Surgery

Bruce Maunder Taylor, a chartered surveyor and member of ARMA’s Council, provides answers to readers’ questions. If you have a query, email it to (all names and addresses are withheld).

Question: I am keen to get myself set up for our 2011 accounts. I am used to submitting our accounts in the standard company accounts format as a limited company. We are a self managed company and, as far as I can see, the only asset that will need to be shown in the company’s accounts is the share capital. Would you agree with this?

Answer: Companies House publish leaflets for management companies such as you describe. Providing you do not collect ground rents or make any capital sales (eg, lease extensions) it is possible that, if you follow the right procedures, you could make dormant company returns. It is possible that the share capital is the only asset to be shown, subject to you not having had to purchase the freehold interest in the first place by enfranchisement or other process. You should not therefore have to provide standard company accounts (merely a simplified balance sheet) and for management purposes, need merely provide an income and expenditure statement to the lessees. It is good practice to include a balance sheet demonstrating that all income, less all expenditure, matches up with the money held at the bank.

Question: We have heard from unofficial sources that the management committee have decided, without consultation with the individual flat owners, to put parking restriction signs around the buildings and employ a private company to issue £80 fines to anyone parking outside their designated areas. The management of these flats is done by a committee composed of owners of individual flats. The freehold is owned by the ground landlord, who has not

been seen or heard from for seven years and has not billed anyone for ground rent during this time.

In the lease, residents are asked

to use the car park and to park so as not to inconvenience other residents. There is no implied threat should anyone not “play the game”. Currently the only designated area is the car park, which is not big enough for everyone. Parking is informally permitted in front of your own garage provided that it does not obstruct access to any other garage or the driveway. My question is: - Is this legal? Can they do this without the full agreement of owners and tenants?

Answer: If the management is an informal committee without any rights or responsibilities, then it is overstepping the mark and has no power to enforce action against a properly mounted challenge. If the management committee is a management company with rights and responsibilities, then it may be able to do what it is doing and has probably taken competent advice before putting this system in place, but you are quite right to look carefully at the terms of the lease, and will need to look at a good deal more than is contained

in your question. Car park problems can give rise to major issues these days. In the situation you describe, some sort of control is probably necessary otherwise people will be blocked in and some unpleasantness can arise. If your leases do provide designated areas, then it is probably correct that all other areas are for access and not for parking. Disputes about that have come before the Courts and it has been held that access includes the right to stop while setting down or picking up, but no more than that. Informal understandings are good so long as they work. When they cease to work, then procedures have to be put in place. Fines are unpleasant, but an unfortunate fact of life for many blocks of flats which have experienced parking abuse of one sort or another.

Question: I live in a block of 32 apartments over five storeys. There are differing sizes of apartments in the block. On the top of the block are four penthouse apartments that are approximately twice the size of the apartments below and which have terraces.

you an idea of scale, immediately below the top four penthouses are eight apartments.) Most of the lower rear apartments have balconies. My apartment is the smallest in the block and without a balcony. All 32 leaseholders pay the same percentage of service charges based on the percentages set out in the leases. My query is:

Is it possible to challenge the percentage applicable to

my (smallest) apartment on the basis that it may not be fair and reasonable for me to be expected to pay the same service charges as larger apartments?

Answer: Your lease is your contract between yourself, the freeholder, and any other intervening parties.

If that contract effectively states that

all 32 flats will pay the same proportion of service charges, then that is the contract which the original lessee accepted when the lease was signed, and which you accepted when you bought the flat. The natural inference is that, at those two times, all parties considered that the fairest way to apportion the liabilities was on a per unit basis and not a floor area basis. Many other flat development schemes have followed a similar principle, I accept that there are also many other schemes which have apportioned service charge liabilities according to rateable value, or floor area, or some complicated formula as to usage of particular services.

It is not unusual for the owner of the smallest apartment to

feel unfairly treated when service charge proportions are not based on floor area or size.

It is a problem which gives rise to many complaints

and disputes. There are provisions in the Landlord and Tenant Act 1987 (S.35 and S.37) for applications to be made to an LVT for a variation of service charge proportions in certain circumstances. The LVT has discretion and is not bound to order a variation. Possibly more important from your point of view is that, if you were successful in challenging your proportion through those statutory provisions, the lessees who would then find themselves having to pay a larger proportion than is contained in their contract (their lease) would also be able to apply to the LVT for compensation based on the financial damage they will suffer in the future for having to pay more than they thought they would have to pay when they bought their flat. The short answer to your query is that the possibility of mounting a challenge exists, but LVTs would be overwhelmed with work if such a challenge was considered to have a strong chance of

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