The number of disputes across the country over service charges is rising fast, with the last official tribunal figures showing a 25% increase in cases. Critics say challenging a property management company or freeholder through a tribunal can be legally demanding and personally exhausting. But there are lots of resources now available to assist leaseholders, from government-funded independent bodies and campaigning groups through to commercial organisations, that will help oust existing property managers – if you appoint them instead.
Get together Call a meeting of fellow leaseholders, assess the level of concern, and find out who is (really) willing to assist in a challenge. Try to establish who the other leaseholders are (many properties will be sub-let) and form an association. You can obtain formal recognition as a "Recognised Tenants' Association" (RTA), which can be set up by apartment blocks of any size and have the right to be consulted about such things as proposed works, contractors etc. The Federation of Private Residents Associations can be contacted on 0871 200 3324.
Identify excessive charges Just because a service charge is high, that isn't grounds in itself for a challenge. Legally, leaseholders have to prove the charges are "unreasonable". Naomi Raymond, a solicitor at the independent Leasehold Advisory Service, says: "If you believe you are being overcharged – say, for example, the charge for garden maintenance is too high – then get like-for-like quotes from other providers. For the building insurance policy, do the same. Get a like-for-like quote that includes the same level of cover. It's all useful documentary evidence to challenge a service charge."
But don't just stop paying, as you'll expose yourself to county court action and potentially huge costs.
Try complaints procedures Bigger managing agents have formal procedures for making complaints, and if they are members of the Association of Residential Managing Agents (Arma), they are required to follow the Royal Institution of Chartered Surveyors' Service Charge Residential Management Code. But at Age UK, housing policy officer Joe Oldman says: "We have issues around self-regulation in this sector. Many managing agents appear not to comply with parts of the code. We want to see Arma police it more effectively."
Mediation can offer a quick means of settling a dispute – try the National Mediation Helpline at 0845 6030809.
The Housing Ombudsman Service may deal with a complaint if the problem is not so much the level of the charges but the way they are delivered. It will only hear complaints about landlords or managing agents who are members of the service.
Obtain a "determination" This is the next step after all of the above have failed. Your first port of call should be the Leasehold Advisory Service or call 020 7383 9800. It's free and has teams of advisers able to guide you through the jargon and legalese. Its website also has numerous downloadable advice guides.
You start the process by outlining your case in the "Application for a determination of liability to pay and reasonableness of service charges", referred to as Form 27 at the Residential Property Tribunal Service.
Once your case is accepted, a Leasehold Valuation Tribunal (LVT) will make a "determination" about the charge. There is, of course, no simple definition of "reasonable" but the LVT will look at whether works undertaken were required, properly tendered and so on. It will look at things such as buildings insurance costs, and whether it could be found elsewhere at a lower premium.
Get legal help The tribunal is intended to be a relatively informal way of resolving disputes, but it helps to be represented by a solicitor. Residents who have challenged service charges, talk of being bamboozled by documents from the other side and having to square up to teams of barristers and solicitors employed by the managing agent.
The Leasehold Advisory Service has a list of solicitors who are specialists in this area of law. Naomi Raymond says: "You have to focus entirely on the legal issues, yet it's very easy to get caught up emotionally. It's good to have some legal knowledge and we can, of course, help out with case law."
Action group Carlex, the Campaign Against Residential Leasehold Exploitation, points members towards a group called the Leasehold Expert, who are solicitors that specialise in solving problems with excessive service charges and bad property managers. They hold legal surgeries around the UK (the next one is in Chichester, West Sussex, but there are only a few seats remaining) which cost £30 to attend.
Costs and court appearances The initial application fee is from £50 to £350 depending on the size of your claim, and may be reduced if you are on benefits. At the LVT itself, the maximum fee is capped at £500. But you may have to spend a considerable amount of time preparing your case, and you can't recover that if you win. Look out for a potentially huge sting in the tail from the other side if you lose. They can't load you personally with costs, but the lease may allow them to take their costs from your block's contingency fund. Carlex says it has heard of cases where leaseholders have seen thousands of pounds taken from their contingency/reserve funds after losing at an LVT.
Another frequent complaint is that property managers use lawyers who dump hundreds or even thousands of pages of documents on leaseholders days or even hours before a hearing. Procedurally, documents are supposed to be handed over a minimum of six weeks before a hearing, but sometimes LVTs give permission for late disclosure.
Oust your existing manager If you feel you'd rather just find another manager than face battles year in, year out, then you have what's called the Right to Manage (RTM). Legally, it's a relatively straightforward procedure, according to the Leasehold Advisory Service: you serve notice, the landlord may try to challenge it, but as long as your original notice is valid the RTM tends to be awarded to the leaseholders. But the tough bit is getting leaseholders on board: to qualify as a valid notice, it has to be supported by more than 50%. And if commercial property makes up a significant part of the block, you can't apply. The Right to Manage Federation has lots of useful guidance.
An alternative is to apply for something called Appointment of Manager, which doesn't require a majority of leaseholders, but is tougher to get, as you have to prove to the LVT that the existing manager is at fault.
If this all sounds a bit daunting, there are a number of property managers keen to grab your business and help you through the LVT process, while promising reductions in service charges of as much as 30%.
Steve Wylie set up Urban Owners (0845 527 6478) after battling with his own managing agents. His gripe is that agents just don't understand that their client should be the leaseholder, not the freeholder. His firm now administers 110 buildings, and has eliminated hated aspects of service charges such as commissions on insurance policies. "We will review a block and assess its likely success at an LVT. Our success rate so far has been 100%."
Leaseholder Bob Suvan was so fed up with paying excessive charges he set up Blocnet (020 3318 3051), which also helps tenants go through the LVT process. "We take away the hassle and manage the entire right-to-manage process for you," he says.
Carlex recommends holding a "beauty parade" of at least three different managing agents before selecting one. It is also building a list of accredited agents at carlexuk.wordpress.com.
Legitimate expense or bare-faced cheek?
It's a strip of land just a couple of feet wide, running about 60ft along the edge of an estate built 15 years ago in Stechford, Birmingham. Since then the fence has never been replaced, and the grass, residents say, was not cut once last year. Yet they are billed as much as £6,500 a year by the management company for maintenance and repairs.
Stephen Hockey, who lives nearby, has regularly complained to Solitaire Property Management, now under the control of Peverel OM, without success.
"It really is just a strip of bare earth," he says. "Last year I took a photograph of it every month, and it's clear that nothing was done throughout the year. Every January I write to them complaining but they do nothing."
The bill for the year to 31 December 2010 specifies £1,900 for "maintenance of landscaped areas", to which Solitaire adds a "management fee" of £3,255. Other items on the bill include £253 for "audit fees", £120 for "health and safety costs" and £290 for "public liability insurance".
"All that just for a small patch of dirt. You do wonder what on earth we're paying public liability insurance for," says Hockey, who works in the local car industry.
Disputing the bill can be costly. Hockey held back a payment in protest but when he came to remortgage his home, Solitaire blocked the transaction; he had to pay £250 to get it unblocked.
"In 2008 my neighbour lost his job. Although OM can't manage this strip of land very well, they are slick at chasing their fees," says Hockey. "He had late payment charges and a debt collection agency on to him."
Hockey says he can't take the matter to a Leasehold Valuation Tribunal as he is one of the few freeholders on the estate. The rest of the properties are controlled by a housing association. "I've tried to get the housing association involved, but they won't play ball," he says. "Maybe they regard it as just small potatoes."
After Guardian Money raised the matter with Peverel OM, the next day he was sent a new bill amounting to less than half last year's. Peverel says its head of compliance is now investigating charges levied by Solitaire (which it acquired in 2008) all the way back to 2001 and adds that the actual service charge for 2010 is likely to be below the estimated figure in the bill sent to Hockey.
