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Dispute with Management Company Over Fees / Fee Increase

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  • Dispute with Management Company Over Fees / Fee Increase

    Hello, i'm writing here to see if anyone has any guidance or help with the following matter:

    We have recently had a troubling experience with a management company of our new build estate, the company in question is HML Group. When we purchased our property, we were quoted and agreed upon a certain fee structure which we have in writing and a copy is with our solicitors. However, we have recently been blindsided by a demand for a fee that is four times the original amount we agreed to.

    Some background on our development site, this site is still in an incomplete state from the original builders (Stewart Milne) and has been since 2017, however in the last 3 months they have finally tried to make efforts to finish the roads and common areas and i'd say are perhaps more than 90% complete now. Many of the shared landscape areas are run down and or not completed. During this time we have had an agreement with SM that no management fees or annual charges would be taken from residents until the site is completed and handed over to the council. In this time (the last 3 months) SM have engaged with a management company called HML. (we believe this arrangement was actually in place since the beginning of the property development, but they are for some reason pretending that it wasn't... despite having proof on companies house that the management company was appointed at the beginning of the development).

    So ... this ordeal began when we received a demand for a payment that was five times the initial fee from an annual fee of 267 pa to 1,209 pa. After querying this outrageous increase, the demand was adjusted to twice the original amount (453), but still without a reasonable explanation of why the error in the first place and how this new figure has been calculated. The management company has not provided a satisfactory breakdown of these new fees, vaguely citing "Management Fees" as a line item. Since this company has been involved every step of the way has been plagued by poor communication, for example, holding a residents meeting without residents' knowledge and then sending out a residents meeting invite 4 days after the event happened. We believe that this is all part of the ongoing tactic of inflating costs with letters and comms. Invoicing residents for an entire year of work when they are only now on site (In October), and also informing us they will be invoicing again at the start of the year for another years work.

    We are freehold property owners and have always been diligent in paying our bills. We are more than willing to pay fees that align with what we were initially told and have previously been billed for and paid. However, the actions of this new management company raise concerns about their transparency and fairness. They have even gone so far as to threaten legal action and debt collection with residents.

    An overwhelming majority of residents, at least 80% (that's around 190 properties), have declared their intention not to pay the inflated fees due to this unjustified increases and lack of work being done on site.

    We feel that the situation is not only unfair but also borders on predatory. Therefore, we are trying to get some guidance on how to address this situation legally and collectively.

    What actions can we take to halt this unreasonable demand? Are there any legal avenues we can explore to stop these seemingly arbitrary and unfounded fee increases? Any advice or shared experiences would be greatly appreciated as we navigate through this distressing situation.

    Thank you for your support.
    Tags: None

  • #2
    PS. Sorry for how long this message is - there is so much to share but this is the cut and thrust of it all ^

    Comment


    • #3
      Anyone any ideas on what we can do or where we should start?

      Comment


      • #4
        The starting point has to be the documents. You need to look at the covenants in your purchase documents. Those set out the parties' rights and obligations.
        Lawyer (solicitor) - retired from practice, now in academia. I do not advise by private message.

        Litigants in Person should download and read this: https://www.judiciary.uk/wp-content/..._in_Person.pdf

        Comment


        • #5
          I have looked through our TP-1 agreement and pasted a few areas that may be of interest. I do realise that this area is very complex but I guess I wanted to know is are there any areas we can challenge based on the following things we have learned :
          • Unreasonable Fees: we believe the fees to be inflated, can we challenge this?
          • Lack of Transparency: There has been a distinct lack of transparency and inadequate documentation regarding how the fees are calculated or what they are for.
          • Service Not Rendered: Work on the site has yet been completed due to the state that the developer has left the site. We believe that the work that is currently been applied should have been done before a handover or the work contract was accepted.
          • Error in Calculation: Prior to latest fee presented our previous invoice was considerably higher (4x) the amount we were led to believe and had paid. This error was rectified but no clarity on the breakdown of what the new fee covered or how the error happened in the first place.
          • Variation from Original Estimate: Our original fee from SM (the developer) and charge taken when we completed the sale was significantly different from this price.
          • Disproportionate Costs: As we have no breakdown of how the fees were generated we feel that this could support our view that the current fee is Disproportionate.

          Here are a few sections from our TP-1 covenants:

          1.3.2 The Management Company covenants with the Transferee that it will:-
          (i) Subject to the payment by the Transferee of the Service Charge (a) provide procure and perform the services referred to in the Transfer and (b) enter into a Deed of Covenant in the terms of this Deed

          1.4 The Transferee covenants with the Management Company that he will:-

          1.4.1 Pay to the Management Company in advance on the 1st day of January in every year the Service Charge estimated by the Management Company as being required to enable the provision of the Services as defined in the Transfer during that year and forthwith upon demand to pay to the Management Company any underpayment in respect of any previous calendar year.

          1.4.2 Observe and perform all of the covenants on the part of the Transferee contained in the Transfer

          1.4.3 Not transfer the property to any person or persons or company without first procuring that any transferee has entered into a Deed of Covenant with the Management Company in the form hereof


          Very much appreciate any help, or any experience people have with dealing with management companies. We are considering seeking legal representation but I guess wanted to get a sense of what this looks like legally before committing... as I'd imagine this could get costly.

          Comment


          • #6
            Originally posted by jonnyBoy1975

            1.3.2 The Management Company covenants with the Transferee that it will:-
            (i) Subject to the payment by the Transferee of the Service Charge above....
            1.4.1 Pay to the Management Company in advance on the 1st day of January in every year the Service Charge estimated by the Management Company as being required to enable the provision of the Services as defined in the Transfer...
            What are the terms of the provisions relating to (a) Services and (b) Service Charge. Note the reference to estimates by the Management Company. You need to get your head around a lot of text! Understand these and you can then see whether and how you can bring your various points to bear.
            Lawyer (solicitor) - retired from practice, now in academia. I do not advise by private message.

            Litigants in Person should download and read this: https://www.judiciary.uk/wp-content/..._in_Person.pdf

            Comment


            • #7
              Ok will read through, thank you for your help so far.

              Comment


              • #8
                With a possible near 200 homes involved why are they consulting solicitors must be easier and quicker than drip feeding info on to here?

                Comment


                • #9
                  Because we were not sure whether we had any legal ground to stand on, and many residents were already getting fleeced by this management company and obv. want to avoid more costs if not a lot can be done. I just wanted to get a sense before we engage with a solicitor. I thought I would ask.

                  Comment


                  • #10
                    You need clarity in understanding what services are to be provided and how. You can then do things such as check that the things for which you are being charged are things for which you have agreed to pay.
                    Lawyer (solicitor) - retired from practice, now in academia. I do not advise by private message.

                    Litigants in Person should download and read this: https://www.judiciary.uk/wp-content/..._in_Person.pdf

                    Comment


                    • #11
                      Thanks, so far no work has actually been done on the development. They have charged for a year though...

                      Comment


                      • #12
                        See 1.4.1 as quoted by you.
                        Lawyer (solicitor) - retired from practice, now in academia. I do not advise by private message.

                        Litigants in Person should download and read this: https://www.judiciary.uk/wp-content/..._in_Person.pdf

                        Comment


                        • #13
                          Thanks yeh I can see that, the point is in question due to no actual services have taken place this year Jan-Dec23 so far. And the management company have informed us they intend to invoice again in January 2024 for that year, despite work not happening in 2023.

                          Comment


                          • #14
                            We are at last getting to some clear and valid questions.
                            Lawyer (solicitor) - retired from practice, now in academia. I do not advise by private message.

                            Litigants in Person should download and read this: https://www.judiciary.uk/wp-content/..._in_Person.pdf

                            Comment


                            • #15
                              So do you think its advisable to find a solicitor regarding this? or are we going heading into a world of hurt? I've heard so many horror stories about new build development management companies doing whatever they want and charging whatever they want. I've also read we have even fewer rights as we are Freeholders, not Leaseholders.

                              Comment

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