Dispute with Management Company Over Fees / Fee Increase

[jonnyBoy1975]

Ok so we are going to request evidence from the management company that they are complying with clause 12.7 in our TP1 doc.

The doc outlines the following:
12.7 Management Company’s Covenants
The Management Company covenants with the Transferee as follows:
12.7.1 To provide the Services subject to payment by the Transferee of the

Transferee’s Proportion of the Service Charge when due;

12.7.2 To keep or cause to be kept proper books of account with respect of:
12.7.2.1 all sums of money expended and all costs incurred by the
Management Company in the provision of the Services and of the
exercise of its powers under this Transfer or under any other
conveyance of the Dwellings;

12.7.2.2 all sums of money, credit or other consideration (if any) received or
to be received by or on behalf of the Management Company from
the Transferees of the Dwellings in respect of the Service Charge
or any sinking or reserve fund or otherwise; and

12.7.2.3 all such other expenditure and receipts (if any) including the
expenses of collecting the Service Charge or such other expenses
incurred generally in the management of the Estate for the benefit
of the transferees of the Dwellings whether by managing agents or
otherwise including the cost of borrowing (which is hereby
authorised where necessary) and the cost of employing caretakers
or other staff, all of which together with any such other costs and
expenses as the Transferor or the Management Company shall
incur generally in connection with the management of the Estate

LRTP1/17

including (if applicable) the costs of employing managing agents.
12.7.3 At least once in every year prepare an account showing the expenditure
specified in paragraph 12.7.2 and to procure that on the basis of the
said account and after taking into consideration all other facts
considered relevant by the Management Company or its auditors or
accountants (if any) there is certified the amount which in the opinion of
the said Management Company, auditors or accountants (if any) the
Management Company should charge in respect of the Property and
other Dwellings;

12.7.4 Without prejudice to the generality of the Transferee’s covenants to pay
the Service Charge the meaning of the Service Charge shall be
deemed to include reasonable provisions for the future in respect of:
12.7.4.1 periodically recurring items whether recurring at regular intervals;

and

12.7.4.2 the replacement of renewal of items the expenditure on which

would fall within the Service Charge.

12.7.5 Upon request and upon receiving such funds on account of costs as it
may reasonably require to enforce against the Transferees of the other
Dwellings the covenants on the part of those transferees contained in
the transfers of such Dwellings and for the avoidance of doubt in this
case it shall be reasonable for the Management Company to seek
security for those costs and liabilities from the Transferee before
beginning to seek enforcement of the Transferee’s covenants. If the
enforcement of the Transferee’s covenants is required by the majority
of the Transferees of the Dwellings for the benefit of all of them of the
Estate generally then the enforcement shall be regarded as a service,
the cost for which shall be met through the medium of the Service
Charge;

12.7.6 From time to time to issue Estate Regulations to all Dwellings on the

Estate;

12.7.7 To comply with all fire regulations (whether imposed by statute or
otherwise) and the requirements of insurers in respect of the Estate;
12.7.8 To insure and keep insured the Common Parts in the joint names of the
Transferor and the Management Company with reputable insurers
directed by the Transferor against the risks and for the cover stated in
paragraph 12.8.1.1 so far as cover is available at normal insurance
rates for the locality and subject to reasonable excesses and exclusions
and will take reasonable steps to ensure that the premium is not
uncompetitive;

12.7.9 The Management Company’s insurance will cover third party and public
liability insurance and insurance against liability under the Defective
Premises Act 1972;

12.7.10 The Management Company shall procure that the insurance policy shall
contain a general provision noting the interest of the Transferor and all
transferees, tenants, subtenants and mortgagees of the whole or any
part of the Estate so far as it is possible to do so in the United Kingdom
insurance market;

12.7.11 On request (but not more than once in any 12 month period) the
Management Company will give to the Transferor and the Transferee
particulars of the policy and evidence from the insurer that it is in force;

LRTP1/18

12.7.12 No party will do or omit anything which would have the effect of causing
the insurance of the Estate to become void or voidable or the insurance
monies withheld in whole or in part and the Management Company, the
Transferee and the transferor shall undertake with the other to comply
with all the insurer’s requirements.


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That seems to me the best place to begin this battle if we are going to have one!

[atticus]

You should find the definition of "Services".

[jonnyBoy1975]

Found that, this is listed as follows:



“Services” shall mean

a) the maintenance, repair and renewal of the Service Media (except where they comprise part of the Property, the Dwellings or other lettable areas on the Estate), boundary structures and gates (if any);

b) the provision, replacement, renewal, repair, maintenance and cleaning (as the case may be) of the Common Parts, the water and sewerage supplies and the external lighting;

c) Providing methods for the collection and disposal of waste;

d) In the employment of such persons as the Management Company may in its absolute discretion consider desirable or necessary to enable it to perform or maintain the said Services or any of them for the proper management or security of the Estate;

e) Provision of such other amenities that the Management Company deems reasonable or necessary for the benefit of the Estate;

f) Provision of accounts;

g) Any road charges payable in respect of any unadopted access to the Estate.

h) the maintenance, repair and renewal of the Communal Private Lighting
-----

These are the charges they have provided us on a summary sheet for the year Jan 1st 2023 - Dec 2023. (note, no work has been carried out to date) us per property (each property has diff amounts. The insurance prices look suspicious to me and conveniently rounded.)

Insurance - Directors & officers		£215.00
Insurance - Public Liability		£1,000.00
Grounds Maintenance		£1,056.00
Road / Path Maintenance		£100.00
General Repairs		£100.00
Postage / Couriers		£50.00
Accountancy - General		£540.00
Accountancy - Preperation		£180.00
Company Secretarial		£540.00
Health & Safety Risk Assesment		£499.20
Management Fee - Fixed		£2,402.40
Bank Charges		£144.00
General Reserve		£250.00
SUDS, Swales & Attenuation Basin Maintenance		£150.00

[R0b]

Based on what you have supplied so far, I think I can summarise my opinion as this:

1. The management company (I'll refer to as the MC) has the right as highlighted by Atticus under 1.4.1 that it can request an estimate amount for the coming year.

2. I think you are right to be concerned about the costs being asked if no work has been done and it is not unreasonable for you to request evidence of the work that has been carried out as listed in that table. Reference to the specific clauses of 12.7 of the TP1 Agreement should be made, namely 12.7.2.

3. According to the definition of services, I might be inclined to question some of those charges they are seeking to claim. For example:

(i) what is the management fee related to? On the face of it, nothing in the definition of Services suggests a management fee can be recovered. Maybe they are claiming management fees under (d) but then if they are, why is it fixed? I don't know the answer but they need to explain that cost.

(ii) Bank charges, why are those listed and what do they relate to? Are they charges incurred due to mismanagement or negligence in failing to pay bills on time. Again, nothing in the definition suggests bank charges could be recovered unless the closest match would be provision of accounts.

(iii) Maybe I am being pedantic here and showing my lack of knowledge on estate charges, but under what category are insurance policies covered? Nothing suggests this is covered but again any close match might be found under (d) or (f) at a stretch.

In each of the line items you should ask for copies of the receipts that have been incurred to verify that those costs have been expensed. Until they decide to provide you with a reasonable explanation and evidence to back it up, I would think it would be arguable that any demand for service charges is invalid. On the flip side, the MC may argue that the year of 2023 has not yet ended so there is still time for those listed works to be carried out.

5. Where is the definition of Service Charge, have you found that and what does it say? I'm still waiting for you to provide the section that talks about your fixed fee that was agreed by your solicitor, or are you now conceding that point?

6. Is there anything within the TP1 agreement that sets out a procedure to challenge the estate charges, whether that's escalating to a surveyor or independent third person to resolve disputes or is that silent? You may also want to search for any reference to paying the MC's charges for bringing or defending legal proceedings as that might scupper you in the event you take action against the MC.

7. Final point, if you are looking to go down the legal route, you and the rest of the estate who are disputing these charges might want to consider clubbing together to get some paid legal advice for the benefit of everyone who is in the same position. The cost of doing it that way might end up being a £100 each or slightly more depending on how many wish to be involved. It would be sensible to have a nominated person as the key spokesperson but make sure that fees and charges are given up front before engaging with the law firm. Nobody wants to foot the whole bill if people suddenly decide to back out.

[jonnyBoy1975]

Thank you so much for this. I'm looking into those other areas.
we do have signed completion forms that state the annual service charge (as what we expected) and they were signed by us and the development company.

We also have a spreadsheet with the entire development service charges per plot that were also shared with us. Each of these documents show a cost in line with what residents were told it would be and what was used as part of their completion of sale

[jonnyBoy1975]

I have received a response from the management company in regard to requests made about seeing receipts etc, it is as follows:

"
Management Fee - Fixed: - The fee is provisioanlly charged to manage the site on behalf of its residents, the management company & its eventual board of Directors.
Bank charges:- The bank charges are exactly that, bank charges. They relate to charges the bank charge the management company in order for the Stables to have a bank account the Service Charge payment go into & any reserve fund

In relation to the remaining invoices you seek & or receipts of the items shown in the budget. I must reiterate again, we have next to no funds in the account to pay for the insurances both PL & D&O, we haven't paid the gardener again due to no funds. The list goes on, it is impossible for me to send your receipts, H&S reports when these items are yet to be paid for."

[jonnyBoy1975]

Update.

I've received a complaints procedure form from them, in this it states that if our complaint isn't successful, then we can take it to an independent ombudsman listed at no cost to us. So I guess this is good news regarding a path to follow with a complaint etc.