QUESTION
We are one of 6 units in a block. We have just received 2015 service charge accounts and the landlord has increased the contingency fund from £1000 per year to £1440 for the year of 2015. Is he allowed to do this or does it fall under section 20 landlord/tenants act? We had no notice at any stage until we saw it in the charges accounts?
The freeholder also wants to charge us £3800 for accounting and bookkeeping. We think this is a huge amount. Previously we have been charged 1/6 of £1000. They are a LTD company, This equates to approx 10% of their turn over? Can I dispute this?
ANSWER
Contingency Fund
Section 20, Landlord and Tenant Act 1985 is about leaseholders who pay variable service charges being consulted before a landlord carries out qualifying works or enters into a long-term agreement for the provision of services.
With regards to the amount of service charge stated in the 2015 accounts, one consideration is whether or not the 2015 budget anticipated an increase in the leaseholders’ contributions to the contingency fund. Alternatively, it is possible the accounts are showing what is held in the contingency fund at the end of the 2015 accounting period; e.g. £440 that was in the sinking fund prior to 2015 and £1,000 paid into the sinking fund in 2015. Another possibility is that the Landlord has put the 2015 surplus into the contingency fund, in addition to the budgeted amount and this might be permitted under the terms of your leases.
Accounting and Bookkeeping
£3,800 for producing service charge accounts and bookkeeping does seem high and it is possible that some of the work is being done on behalf of the limited company, in which case it may not be an expense for which the landlord can recover the cost under the terms of the leases.
Obviously, I have not read your lease but you are welcome to send it to me, if you would like a more comprehensive response.
Shmuli Simon, Director of Legal Services, Integrity Property Property Management
