Share this content

Who picks up the slack?

Who picks up the slack?

Didn't find your answer?

I'm preparing a Service Charge a/c for a property management company, where only two of the five flats are let.
Insurance costs are based on actual premiums so the amount of the charge equates with the amount paid, but what happens with other shared costs?
Repairs of (say)£2000 were paid out but only £800 will be recovered from tenants, the balance being unrecovered. Who pays?

Replies (8)

Please login or register to join the discussion.

Stepurhan
By stepurhan
20th Nov 2013 11:49

Who owns?

Only two flats are let, but who owns the other three? Presumably not the property management company itself, which would normally own the freehold of the building as a whole. Normally it would be leaseholders, regardless of whether they are tenants or not, who would pay. Are you saying that on those three flats there are no leasehold owners?

Thanks (0)
Euan's picture
By Euan MacLennan
20th Nov 2013 12:00

Who pays?

Who has provided the money to pay the £2,000 of repairs?  It must have come from somewhere.

As there are only two tenants, the repairs must have been done for their benefit.  Why are you so adamant that they will contribute only £800 of the full £2,000?

However, I agree with stepurhan that the leaseholders of the other three flats would normally be liable to stump up the service charge, even though they have not managed to sub-let their flats.  Or if this is a new build and the developer has not managed to sell the other three flats, the developer as the owner of the three unsold flats would normally pay their share of the communal costs by way of a service charge.

Thanks (0)
avatar
By pawncob
20th Nov 2013 18:06

It's never that simple is it.............

Three flats remain unsold and as the freeholders are not leaseholders, (and not shareholders) they have no legal liability to contribute to the maintenance costs. The £2000 was paid from existing reserves, but most expenses are paid by the freeholders and then recovered from the company.

Thanks (0)
avatar
By catlady
20th Nov 2013 19:48

Do you have access to the copy leases? Usually, they state the proportion of shared costs that the leaseholder should be charged. Then, I would imagine that the freeholder will have to suffer the balance.

Thanks (0)
Stepurhan
By stepurhan
20th Nov 2013 20:56

Benefit but no cost

What sort of deal did the freeholder cut with the company, because they must be laughing themselves stupid. They get the benefit of repairs to a building containing three flats they still own, but don't have to pay a penny of the costs. Either someone has been exceptionally foolish when setting the company up or the freeholders are liable for the flats they still own. Check all the documentation to find out which it is.

Thanks (0)
avatar
By pawncob
21st Nov 2013 10:43

Too good to be true

Many thanks for opinions. There's no agreement between Company and Freeholders. Company's M&A doesn't specify only charging leaseholders, so I guess it should bill freeholders as well.

Thanks (0)
avatar
By Tomazaan
25th Nov 2013 13:27

Freeholders and leaseholders

You need to take a step back and think about what is happening.

The freeholder owns the building and thus like any owner is responsible for paying for the repairs.  If the freeholder grants someone else a lease (as he has done for two flats), then the freeholder can reclaim the cost of part of the repairs from the leaseholders provided that this is included in the lease.  So in your example, the freeholder is responsible for paying £2,000 but can claim back £800 from the two leaseholders.  It sounds as if the freeholder has set up the property management company to deal with the day to day issues re the block of flats and it may be that once all the leases have been sold, the freeholder will give the freehold to the company.

A leaseholder is similar to any other tenant in that the leaseholder only owns a right to occupy someone else's building.  Obviously there is now much legislation to regulate what freeholders and leaseholders can and cannot do and what is agreed in the lease is also very important.

Thanks (0)
avatar
By Robert Clubb
06th Dec 2013 17:18

Bit Late ..............

Only just catching up with this thread.

Most of the points have been covered by other correspondents. However, the position seems to be that the freeholder (possibly a builder) grants a Right to Manage to the company. Usually te company is set up by the developer originally.

If not all the leases on the flats are sold by the freeholder then, surely, the freeholder stands to pay for a fair proportion of the costs of running the site. If all leases have been sold, then the leaseholders pick up a far share, even if they haven't found tenants.

I  believe its as simple as that.

Thanks (0)
Share this content