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Issue No. 107 Winter 2013


Federation of Private Residents’ Associations Newsletter


9


tax issue arising. Because it is being done now, the Revenue may seek to claim that the shareholders are receiving a benefit from the company by buying an extension lease for less than the market value and make a tax charge accordingly. The company would therefore need to seek Revenue clearance for the lease extensions before granting the new leases. The Revenue would need to see clear evidence of the intention of the participating tenants at the time of the purchase. A specialist solicitor should be consulted.


Q


Going to Court? We are experiencing problems with the freeholder of our development . Essentially the freeholder/landlord of the building is an estate agent turned developer, who built our nine unit block of apartments. Currently three flats are sold (so three leaseholders) and the remaining six are rented out by the freeholder as he struggled to sell them when the three of us bought ours from new at the end of 2010. The main problem is that instead of employing a experienced management company who know what they are doing, the developer has utilized the services of his own estate agency, to manage the development and unfortunately their management of the accounts and affairs of the building has been absolutely appalling. When I found out earlier this year that another leaseholder had been given a £242.33 discount off his 2011 service charge because he received a summary of costs for the 2011 account period (whereas I didn’t) and complained about the excessive costs of lift repairs of £2178.00, that was the last straw for me and since being in receipt of the 2012 demand (invoiced to leaseholders in May 2012) I have held back from paying my service charge until the management company substantiate all associated costs and charges (thus far the demand is in breach as it does not include summary of our rights and obligations). I have found out that leaseholders’ money was not held in trust at least for the first year and a half after we bought our flats. Excessive repairs valued at £2178 were undertaken on the new lifts without our being informed, I was not provided with a summary of costs for the 2011 accounting period as they are obliged to do according to my lease, they have not provided me with outstanding documentation I have requested back in July to substantiate costs pertaining to the 2012 account period etc etc, the accounts are all over the place and do not stipulate clearly what surplus monies, if any are being carried forward to year etc etc. As of yesterday the freeholder has instructed the management agency to no longer communicate with me and have threatened to take me to the small claims Court. I think under the circumstances it is an inevitability that I was eventually going to submit an application to the leaseholder advisory service as the more questions I asked about the service charge the more aware I became


A


of their obvious mismanagement of the accounts and the more defensive they became. The management agent have now stooped to new lows and making completely false statements about fictitious credits given to each of the leaseholders/tenants to compensate for monies paid towards the 2011 lift repair costs. Also are they allowed to authorise significant works valued at £2178 ie repairs to the lifts, in one service charge account period, without notifying us first? I have attached a letter which itself contains a series of attachments which I have sent to the freeholder today which I hope succinctly summarizes the majority of my concerns. I am also sending a copy of my lease and invoices for the lift repair costs in 2011. If they are intending to carry out their threat and apply to the small claims court, is it best that I submit my own application to the lease advisory service before they do this? FPRA replies:


As you are aware, if you believe the service charge being charged are excessive you are entitled to make an application to the First Tier Tribunal (FTT) for a determination on the issue. The FTT has a good website and downloadable application form on their website: www.hmctsformfinder.justice.gov.uk. The key to any application challenging the level of service charge is good evidence. For example, if you are being charged for things that have not been done, photographs and/diaries are all good evidence to present to the Property Chamber. If the landlord does issue proceedings in the county court for the recovery of the debt you will be entitled to request the matter be transferred to the Property Chamber in any case as it is a service charge case. Usually all service charge cases get automatically transferred in any case. If at all possible it would be advisable to keep away from proceedings being issued in the county court.


In terms of the division of the current service charge, you would need to read the lease to see if it covers “developer voids” i.e. an obligation on the landlord to contribute towards the arrears in the event the flat is not on a long lease. Typically developer leases do not contain such a provision which is not helpful.


In terms of the Section 20 consultation threshold, this is triggered if any leaseholder is required to pay more than £250 towards the costs of the works/repairs etc.


The letters above are edited.


The FPRA only advises member associations – we cannot and do not act for them. Opinions and


statements offered orally and in writing are given free of charge and in good faith, and as such are offered without legal responsibility on the part of either the maker or of FPRA Ltd.


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