How to Avoid Disputes Over Service Charges During Collective Enfranchisement

If you are involved in organising the collective enfranchisement process for your block of flats, the chance to buy your freehold can be both exciting and draining. The sheer volume of work needed to push the process to conclusion can seem daunting. There are however some issues which can hold up the process, but which can often be easily avoided.

Collective Enfranchisement and the Problem with Service Charge Disputes

Often one of the most contentious issues that cropped up during the collective enfranchisement process can be around ongoing problems with service charges.

Residents’ Associations can easily have tunnel vision when it comes to purchasing the freehold, and residents become unhappy over what they see as excessive service charges.

It is very important that these arguments are laid to rest as soon as possible to allow the lease enfranchisement process to carry on as smoothly as possible. Getting mired in countless fights with the freeholder over the service charges will just prolong the whole process – and could easily lead the Residents’ Association into endless battles.

Freehold Purchase – Focus on What You Want to Achieve

Any solicitor who has plenty of experience in collective enfranchisement [ and it’s worth noting that there are very few of them in England and Wales] should be able to make clear that Residents’ Associations who expend time and effort pursuing cases over service charges with claims and counter claims will very rarely have success in completing a collective enfranchisement case.

In most cases this sort of challenge is a waste of everyone’s energy; energy which could be far better spent on pushing through the collective enfranchisement process itself.

Trying to keep everyone’s eyes on the final goal can be difficult when working with large groups of leaseholders or Residents’ Associations as these groups can easily lose focus. This makes the process far less efficient than it could be.

The Importance of Careful Accounting

Even if you are not aware of any arguments about service charges at the start of the collective enfranchisement project, chances are you may soon come across some.

During the freehold purchase process, the leaseholders have to pay to the freeholder any outstanding service charges as they are buying all of the legal rights to the building, including all assets or liabilities.

It is very important that someone manages the cash flow carefully to make sure that everyone is aware that this money is due to be paid, and that there is money available to pay off the service charges when the freehold is transferred over to the new company owned by the participating leaseholders.

Collective Enfranchisement – Get a Written Agreement Right from the Start

It is also a good idea to get agreement in writing at the outset of the process that the Residents’ Association will not get involved in any disputes over service charges during the collective enfranchisement process, and that each leaseholder involved will take responsibility for their own service charges. The document should also state that the sole focus of the Residents’ Association should be the collective enfranchisement, and that time should not be wasted on other issues. Often, some leaseholders will not be happy to agree to this as they have problems with what they think are unfair charges, but if everything is set down in black and white at the start of the process, it could keep things running far more smoothly than without any written agreement.

Buying your freehold – the Importance of Ongoing Communication

When dealing with any large group of people and with a complex legal process such as collective enfranchisement, communicating the correct advice can be difficult.

Making sure that you appoint the right solicitor who specialises in collective enfranchisement work can really save you a lot of stress and money over the long term.

The right solicitor will help a Residents’ Association make sure that you have all of the correct information at your fingertips, and can also offer advice on how other Residents’ Associations have dealt with the process in the past.

Your Collective Enfranchisement – Worried About Service Charge Disputes? Call Our Specialists

Exercising your Right to Enfranchise involves a really difficult of law, and the whole process becomes much more difficult if one or more of the residents challenges any outstanding service charges  – so it’s critical that you get the right expert advice.

Wherever your block is situated in England or Wales, our specialist team can help.

For a FREE initial phone consultation from an specialist in Enfranchisement

  • Call us today on FREEPHONE 0800 1404544 or
  • email us using our contact form for FREE initial advice and a FREE quote.

Explaining Service Charges

Service charges are the cause of the majority of disputes between leaseholders and freeholders. Freeholders levy the charge to recover the cost of servicing the leasehold property but some unscrupulous freeholders will charge huge sums for unwarranted major works leading to disputes.

From a freeholder’s point of view, the service charge is fair because it makes improvements to the property which in turn improve it’s value and that if the leaseholder owned a freehold house for example they would incur the costs anyway.

However, a leaseholder might respond by saying that if they owned a house they would be free to choose what they repaired therefore saving money.

Leaseholders are only compelled to pay the service charge if the charges are reasonable and directly match up to services or maintenance which the freeholder has a legal duty to provide as stated in the Landlord and Tenant Act.

The cost of any work costing more than £250 can only be reclaimed if an agreement has already been reached with leaseholders, the works is needed urgently or the following criteria are met:

  • Two or mote estimates from different companies (in which the freeholder has not got a vested interest) are obtained for the work
  • The quotes are then displayed for all leaseholders to see or distributed to them
  • Leaseholders are sent a notice detailing the work which will be done and encouraging feedback from leaseholders within 4 weeks
  • Proper consideration must be given to leaseholder objections are responded to explaining reasons for pressing forward

In many cases, freeholders do not meet these criteria and should they fail to do so, leaseholders would be within their rights to refuse to pay the service charge in line with section 20 of the Landlord and Tenant Act.

Furthermore, leaseholders can apply to the Leasehold Valuation Tribunal to ask for a different insurer to be chosen if they are dissatisfied with the insurer nominated by the freeholder.

Get in touch with our leasehold property experts today for service charge advice

Looking for advice over service charges or service charge arrears? Whether you are a leaseholder or freeholder, our specialist property dispute team have the experience and expertise needed to help you.

  • Call 0800 1404544 today, or
  • Fill out the contact form below to get in touch.