Leasehold Service Charges

[zacklesMum]

Can anyone advise: We own the leasehold of one of 2 flats above a shop. In the past, the building owner had no connection to the shop and the shop paid half of all the service charges, and the flats paid a quarter each. That seemed fair.

Now the building has been sold and the new owner is also going to set up shop downstairs, as the previous shop went out of business (Threshers). Suddenly we (each of the 2 flats) are being asked for half of the considerably increased service charge, while he pays nothing. Is this allowed?

The service charge will also now include a large sum to go towards a reserve fund, something we never previously had. All this money will benefit the shop too.

And does over £3000 pa sound reasonable? Previously it was just over £1000 (for us). It's a 2-bed flat in a small town.... Ouch, ouch, ouch. We're discussing moving.

[PanicMode]

What does your lease say? Each part of the building should pay its fair share of the service charge and it's not right that the shop pays nothing at all - given that they are responsible/occupying a % of the building. It should be specified in the lease what percentage each flat/property should pay, given that you all have a shared responsibility for your foundations and roof etc.

It isn't unusual to have a sinking fund (reserve fund) but it's not right that you pay into it and the shop gets the benefit of it, no. You may need to get your solicitor to draw up a proper contract between the three of you with regards to this sinking fund provision - where does the interest go, what happens on sale etc.

I have no idea if £3k is reasonable without knowing where the building is, what sort of state of repair it's in - if it's in Chelsea, then perhaps it's ok, but if it's in a small market down, then maybe not!

[Zimm]

Panic mode is correct - you need to check your lease, it will specify your percentage. It may also specify allowed % increases in the overall charge year on year. £3000 PA = £250 PCM!! That's a massive amount.