Recently Brady Solicitors received an enquiry from a leaseholder who owned a property within a large block in South East England, who was acting on behalf of themselves and 40 other leaseholders within the block. The leaseholders were interested in changing their managing agent, due to their high service charge and the poor level of service they were receiving. They had also become aware of criminal convictions relating to directors of their freehold, which provided further motivation to change their agent.
Right to Manage case
When Bradys received the initial enquiry, the leaseholders were part way through the process of going to tribunal to register a recognised residents association, as they believed it would enable them to gain greater control over the block. However, Bradys advised them to stop proceedings as they would not have been successful due to not having the majority of leaseholders involved, and even if they were successful, establishing a residents association would not have provided them with the level of control over their block that they envisaged.
Upon the lead leaseholder achieving commitment from the majority of leaseholders within the block, Bradys swiftly submitted the claim notice and proceeded with the RTM process. Following this the RTM proceedings went smoothly and without delays, largely due to the combination of the expertise of Bradys and the determination of the leaseholders. This meant that the RTM company was setup and the leaseholders chosen managing agent took over the running of the block within a few months.
Service Charge Reasonableness case
During RTM proceedings the leaseholders involved alluded to some discrepancies between documentation detailing the costs of works carried out, with the amount that they had been charged by their managing agent. Due to this, Bradys litigation team were instructed to proceed with a service charge reasonableness case whilst the RTM case continued.
Bradys began by going to tribunal for disclosure of financial documentation from the freeholder for the block, such as the accounts. Upon receipt of this, Bradys were able to confirm that the leaseholders had grounds the challenge the reasonableness of their service charges. It was also established that a reserve fund of circa £40,000 had not been adequately accounted for, seemingly having disappeared at one point. Finally, it was identified that on account demands for services, including a £100,000 cleaning bill, did not match the costs incurred by the managing agent and was not supported by invoices. All of this led to the total amount of service charge payments challenged being approximately £400k over a 6-year period.
All of the findings mentioned were included within Bradys case to challenge the reasonableness of the service charge at the block, which was subsequently successful. The outcome of the case has meant that substantial credits will be going back on file for each individual leaseholder and means leaseholders may not need to contribute towards upcoming service charge payments.
Summary
Whilst further questions still need to be considered and answered in relation to the managing agent, there is no doubt that the successful simultaneous completion of the RTM and service charge reasonableness cases will have a significantly positive impact on the leaseholders within the block. Not only will they have much greater control of the management of their block, but having also successfully challenged excessive service charges and obtained credits for the excessive sums paid, the leaseholders will be much better off financial going forward.
These cases show the importance of instructing specialist leasehold solicitors in these scenarios, as they will not only increase the likelihood of a smooth process and successful outcome, but they’ll be ideally placed to assist with any further work that is unearthed during proceedings.
