There are few things more unsettling than receiving an unexpected bill for £10,000.00 through your letterbox. It will be no surprise to leaseholders of Hackney ex-council properties that their bills are among the highest in the country.
Most leaseholders are happy to pay their share – but what do you do when you think you are being saddled with an unfairly large bill? Whether your freeholder is a private company or the London Borough of Hackney (whose managing agent is Hackney Homes), there are questions that you need to ask.
Leaseholder case study
Mr X, the owner of a studio flat in a modest building, recently received a building insurance bill from his freeholder’s new managing agents. While the agents used the same insurance company as last year, the bill has since doubled – and whilst Mr X did budget for an increase, he simply does not have the money to pay this invoice.
Check the bill
In comparing this year’s bill with the previous, it appeared that the previous bill covered Mr X’s building only. The new bill covered not only Mr X’s building; it covered a more expensive neighbouring building as well.
It also appeared that the new managing agent calculated Mr X’s share by simply dividing the bill by the total number of flats in both buildings, rather than getting separate quotes for the two buildings and apportioning it on the basis of flat size.
By simply dividing the buildings insurance bill by the number of flats in both buildings, the managing agent was, it was arguable that Mr X was being asked to subsidise his neighbours’ (larger and more expensive flats’) share of the bill.
What does your lease say?
Your lease is your contract with your freeholder and it should explain how charges such as buildings insurance are to be calculated. On checking Mr X’s lease, I found a typical, ‘boiler-plate’ clause requiring the lessee (Mr X) to pay, “a fair and reasonable proportion” for his buildings insurance.
Is this bill ‘reasonable’?
In light of the “fair and reasonable proportion” requirement, I wrote to Mr X’s managing agent, challenging the bill on the basis that the new agents should have asked for separate quotes for the two buildings – and that it was unreasonable in any event for the owner of a studio flat to be expected to pay the the same bill as owners of one-, two- and three- bedroom flats.
Who decides what’s reasonable?
Don’t panic if the freeholder’s managing agent is not persuaded by your argument. Neither is he or she the final arbiter of your bill.
Under the Landlord and Tenant Act 1985, service charges are payable only to the extent they are “reasonably incurred”. As building insurance is a service charge, not only is, “reasonableness” read into the terms of Mr X’s lease, it also gives the Leasehold Valuation Tribunal (LVT) the jurisdiction to determine any legal dispute between Mr X and the freeholder and/or his managing agents regarding calculation of the insurance bill.
Don’t be scared of the LVT, get informed
Nobody wants to get tangled up in expensive court proceedings – and the LVT was created to be ‘user-friendly’ to lay people, with a view to keeping costs down. Having said that, it’s always worth getting advice and considering your options before deciding whether you want to fight.
The Tuesday and Wednesday morning Leasehold Advisory Service’s Duty Scheme at the LVT offices in Alfred Street is there to give leaseholders a steer. From there, you can decide whether you want to fight or pursue other options – and whether you want to get a solicitor or barrister to assist you with your case preparation and presentation.
Kristin Heimark is a Solicitor Advocate at Blavo & Co and volunteers at Toynbee Hall’s Free Legal Advice Clinic.
The above case study is for information only and does not constitute legal advice.
Readers are encouraged to obtain independent and specialist legal advice regarding the specific facts of their case.