Home Money Flat owner risks losing her home due to unpaid £5,500 service charge

Flat owner risks losing her home due to unpaid £5,500 service charge

by Elijah
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Nicola Hawkins bought her Romford flat in 2022 for £215,000 and is now at risk of losing it amid an unpaid service charge of £5,499.80.

A flat owner has spoken of her pain at the prospect of losing her flat due to an unpaid service charge of £5,499.80.

Nicola Hawkins bought her flat in Romford in 2022 for £215,000. It is in a block that was converted in 2018.

Last year, he paid the service charge in full, but then disputed the charge with his managing agent in what is known as First Level Court.

Miss Hawkins and her neighbors won £9,783.18 in court but says she has not yet received any of the money from the managing agent.

Nicola Hawkins bought her Romford flat in 2022 for £215,000 and is now at risk of losing it amid an unpaid service charge of £5,499.80.

So this year he decided not to pay the service charge in full because he believed the managing agent still owed him money and was spending too much on the works being carried out on the block.

Speaking to MailOnline Property and This is Money, Miss Hawkins said: “I told them they still have £1,273.19 of my money, which was my share of the profit, and then I paid another £1,000 towards my last bill of charges service”.

‘This was more than they were worth, but I wanted to appear reasonable when we returned to the First Level Court.

“They are intimidating me and I maintain that they cannot take the flat from me for not paying for my services when I have already won a case against them in the Court of First Instance.”

At the time of the exchange, Miss Hawkins discovered that the service charge was much higher than initially expected.

At the time of the exchange, Miss Hawkins discovered that the service charge was much higher than initially expected.

She went on to explain the impact it was having on her health: “I have been in therapy for the last year and this situation is ruining my life and taking up a lot of my time.”

‘We are desperate to move but we can’t. Nobody is going to buy a flat above a shop with a service charge of £5,500.’

She bought the flat for £215,000 and her current mortgage payments are £685 a month, having taken out the home loan before mortgage rates rose.

She said: ‘At first the estate agent told me the service charge was £600 a year and then during the purchase my mortgage broker said the figure was £1,200 a year. It was a shock, but manageable for £100 a month.

‘At the time of the change, I discovered that the service charge was £1,900 a year. The lawyer said that he had forgotten to send me the management package. That law firm has since closed.

This year Miss Hawkins has decided not to pay the service charge in full and has paid £1,000.

This year Miss Hawkins has decided not to pay the service charge in full and has paid £1,000.

At this point, Miss Hawkins says she felt pressured to complete the sale because she feared losing her deposit.

“I was sending £35,000 to the solicitor as a deposit when I first saw that £1,900 figure. I was going to lose my deposit so I continued until I completed it and moved out.

‘I spoke to the other owners of the flat and discovered that there were major problems with the roof which were not disclosed to me during the sale as my seller had already paid £1,400 in addition to the service charge for roof repairs.

‘And then I get a service charge later in the year and the charges for the roof repairs are included in it.

“So the £5,500 is last year’s overspend, plus the estimate for 2024, including repairs to an electrical cabinet and drainage that we didn’t even know had happened.”

It comes like the Tenancy and Freehold Reform Bill It is currently pending in Parliament.

The bill aims to make it cheaper and easier for more tenants to extend their lease, buy their freehold and take over the management of their building, as well as ban the sale of new leasehold homes.

Service charges in a leased apartment are independent of the ground rents.

Ground rent is a regular payment made to the owner of a leased property as a condition of the lease. Ground rent applies exclusively to leased properties.

It is the charge that is applied for the lease of the land on which the leased property sits. It does not cover the costs of any additional services the owner may provide; These are covered by the service charges.

Increases in service charges have become a growing problem in recent years. As the Government begins to clamp down on other sources of income for owners and developers, such as ground rentals, service charges are a proven way for investors to make money.

If a flat owner refuses to pay the service charge, they may risk losing their home through a process known as forfeiture.

Forfeiture occurs when the landlord exercises his right to recover peaceful possession against the tenant’s wishes.

This usually occurs when the tenant has breached a condition of the lease or breached a covenant.

Have you had a surprising increase in your service charge recently? Get in touch: editor@thisismoney.co.uk

What is the legal advice on unpaid service charges?

Joanna Hill, tenancy law expert at Irwin Mitchell, provided legal advice on unpaid service charges. Here is what she said:

Service charges are the landlord’s way of recovering costs by providing certain services (as set out in your lease) to the building.

The service charge will normally cover costs such as general maintenance, lifts and cleaning of common areas.

The landlord or his manager will then calculate the amount owed for each apartment in the building and demand the prorated amount from each tenant.

It is important to note that the managing agent acts on behalf of the landlord to manage and collect the service charge and therefore has no power to take your apartment away from you.

Service charges are variable in nature to take account of rising service costs in line with inflation and to take into account the varying level of repair work that the building will require from year to year.

However, the service charge must be reasonable and the works must be carried out to a reasonable standard.

We suggest you start by checking what service charge the £5,500 sum relates to and when it was incurred.

If it is for services incurred before purchasing the apartment and this amount was not disclosed to you, you may have a claim against the seller.

Please check your conveyancing paperwork to verify as we noted that you were expecting £600 per annum.

If £5,500 relates to charges incurred after you took possession, you should consider: (1) does the lease allow the landlord to charge you for this type of service? (2) If so, were those costs reasonably incurred?

If the costs of works to the building are recoverable through the lease, the landlord must check with you whether the estimate of this cost is more than £250 for any contributing tenant (or apply for a waiver to do so).

There is also a time limit on making service charge claims and if the cost occurred more than 18 months before the claim was attended to, you are not liable.

It is important that you do not admit the amount owed if you wish to dispute the matter.

In order for the landlord to claim possession of your apartment, he or she will need to use a process called forfeiture.

The landlord cannot forfeit the lease for non-payment of the service charge without first giving notice under section 146 of the Property Act 1925 specifying the default.

With ‘unadmissible’ service charges, your landlord would need the First Tier Tribunal (Property Chamber) to determine that the sum was payable and you were in default before you could serve a section 146 notice on that basis.

These legal barriers make it difficult for the owner to take possession of his apartment.

Therefore, our advice would be not to panic and seek legal advice if you feel that the claim may not be payable properly.

If it is payable, we suggest you contact the owner or managing agent to try to agree a sensible payment plan.

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