An apartment owner risks losing her home due to unpaid service charges of £5,500

Economy
By Liam

An apartment owner has told of her pain at the prospect of losing her apartment due to unpaid service charges of £5,499.80.

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

Last year she paid her service charges in full, but then disputed the charge with her manager at a so-called First Tier Tribunal.

Mrs Hawkins and her neighbors won £9,783.18 at the tribunal but says she has yet to receive any of the money from the manager.

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

That’s why she decided not to pay the service charges in full this year because she thought the manager still owed her money and was spending too much money on the work being carried out in the block.

Speaking to MailOnline Property and This is Money, Ms Hawkins said: ‘I told them you still have £1,273.19 of my money – which was my share of the profits – and then I paid another £1,000 towards my last service charge bill .

“These were more than they were worth, but I wanted to look reasonable when we go back to the First Tier Tribunal.

‘I’m being bullied and claiming they can’t take my flat because they haven’t paid for my services, even though I’ve already won a case against them at the First Tier Tribunal.’

At the time of the exchange, Miss Hawkins discovered that the service charge was much higher than originally anticipated

At the time of the exchange, Miss Hawkins discovered that the service charge was much higher than originally anticipated

She went on to explain its impact on her health, saying, “I’ve been in therapy for the past year and this situation is ruining my life and taking up so much of my time.”

‘We would like to move, but we can’t. Nobody is going to buy an apartment above a shop with €5,500 in service charges.’

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

She said: ‘I was initially told by the agent that the service charge was £600 per year, and later during the purchase my mortgage broker said the amount was £1,200 per year. It was a shock, but manageable for £100 a month.

‘At the time of trade-in I found out that the service charge was £1,900 per year. The lawyer said he forgot to send me the management package. That law firm is now bankrupt.’

This year Mrs Hawkins decided not to pay the full service charge and paid £1,000

This year Mrs Hawkins decided not to pay the full service charge and paid £1,000

At this point, Ms. Hawkins says she felt pressured to complete the sale because she feared she would lose her deposit.

‘I sent £35,000 to the lawyer as a deposit when I first saw that £1,900 figure. I was in danger of losing my deposit so I went ahead with completion and moved in.

‘I got into discussions with the other flat owners and discovered that there were major problems with the roof that had not been disclosed to me at the time of the sale, as my seller has already paid £1,400 apart from the service charge for the roof repairs.

‘And then I get service costs later in the year, which includes the costs for the roof repair.

‘So the £5,500 is the excess spent from last year, plus the 2024 estimate, including repairs to an electrical box and drain that we didn’t even know had taken place.’

It comes as the Leasehold and Ownership Reform Act is currently passing through Parliament.

The bill aims to make it cheaper and easier for more leaseholders to extend their lease, buy their property and take over the management of their building, and ban the sale of new leasehold properties.

The service costs of a leasehold home are separate from the canon.

A ground rent is a periodic payment to a leaseholder of a leasehold property as a condition for the lease agreement. The ground rent only applies to leasehold properties.

It is the fee charged for renting out the land on which the leasehold property is located. It does not cover the costs of any additional services that the owner might provide; these are included in the service costs.

The increase in service costs has become an increasing problem in recent years. As the government begins to restrict other income streams for freehold land and developers, such as ground rents, service charges are a proven way for investors to make money.

If an apartment owner refuses to pay the service charge, he risks losing his home through a process known as forfeiture.

Forfeiture occurs when the landlord exercises his right to regain peaceful possession against the will of the tenant.

This is usually the case when the tenant has breached a term of the lease or breached a covenant.

Have you recently experienced a sudden increase in your service costs? Contact: editor@thisismoney.co.uk

What is the legal advice on unpaid service charges?

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

Service charges are the way the landlord can recoup its costs for providing certain services (as set out in your lease) to the building.

The service charge usually covers costs such as general maintenance, lifts and cleaning of communal areas.

The landlord or his manager then calculates the amount owed by each apartment in the building and demands the apportioned amount from each leaseholder.

It is important to note that the property manager acts on behalf of the landlord to manage and collect the service charges and therefore does not have the authority to take your property away from you.

The service charge is variable in nature to take into account the increase in the cost of services in line with inflation and to take into account the varying level of repair work required by the building from year to year.

However, the service costs must be reasonably incurred and the work must be carried out at a reasonable level.

We recommend that you first check which service costs the amount of €5,500 relates to and when they were incurred.

If it concerns services performed before you purchased the apartment and this amount was not disclosed to you, you may have a claim against the seller.

Please check your transfer papers to verify this as we note that you were expecting £600 per year.

If £5,500 relates to costs incurred after you took over the property, you should consider the following: (1) does the lease allow the landlord to charge you for these types of services; (2) If so, were these costs reasonably incurred?

If the costs of work on the building are recoverable through the lease, the landlord must discuss with you if the estimate of these costs exceeds €250 for a contributing leaseholder (or request an exemption for this).

There is also a deadline for submitting service charges. If the charges were submitted more than 18 months before the request, you will not be liable.

If you wish to dispute the case, it is important that you do not admit that you owe the amount owed.

If the landlord wants to obtain possession of your apartment, he must use a process called forfeiture.

The landlord cannot forfeit your lease on the basis of non-payment of the service charge without first serving a notice under section 146 of the Law of Property Act 1925 specifying the breach.

For ‘disallowed’ service charges, your landlord will need the First Tier Tribunal (Property Chamber) to determine whether the amount was due and that you were in breach before issuing a section 146 notice.

These legal barriers make it difficult for the landlord to take possession of your apartment.

Our advice is therefore not to panic and seek legal advice if you believe that the claim may not be properly payable.

If it is affordable, we recommend that you contact your landlord or property manager to try to agree a sensible payment plan.

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