Misled and lied to on Service Charges

[KaiM]

I moved in to a Persimmon new build property in January 2023. I was told a service charge of £704 per annum upon reservation. I remember it saying 'estimated'. I have completed and moved in. When the Management company took over 4 months after we moved in (April 23), we then received the final bill £1064 (pro rated) which is a 130% increase on what they told us at reservation, year on year. Upon discussing it with other residents, Persimmon & the Management company have used the 2019 valuations when calculating the service charges and citing additional services for fire, health and safety regulations and inspections. They have refused to give me compensation as we only found out 4 months after moving in. Note that they did know of the increased service charges as residents who had moved in earlier and living on site in December 22 were advised of the increase. That was before exchange and completion at that point. Is there anything I can do to get compensation as I really feel misled here. I do not understand why they could not have told us of the increased service charges in December 22 before exchange but of course, they did not want to risk the sale. Saying 'estimated' service charges, I expect some change but not a 130% increase. It is unconscionable.

It's a 51% increase, which is still a lot. A 130% increase would be £1619.

But they told you it was an estimate so I'm not sure there's anything you can do about it.

Also, are you aware the management company can change and the service charge could change? Freeholders have no statutory right to challenge unreasonable service charges. The government are aware and have promised reform but a quick Google will give you an idea of the scale of the issue. This is also useful https://commonslibrary.parliament.uk/freeholders-estate-and-service-charges/

Buy persimmon, pay the price.... have the completed your snagging list yet??

Are my calculations wrong? Correct if I am wrong:

Estimated Service charges per annum: 704
Actual Service charges (pro ratad for Apr - Dec): 1064
Equivalent to 1619 per annum.

Comparing to other service charges generally, is this normal? Or this at the very high end?

Super, thank you, this is helpful. I cannot believe the scale of the issue!

I have completed the snagging list. One word = disaster.

350 snags for a 2 bed flat.

A lot of it was paint. Some major issues which got fixed. But never should have happened.

You are right, you get what you pay for.

We are trying to create a resident's association with the goal to change management company or manage it ourselves.

However, the management company are saying we can only do that once the development is finished and it has been fully handed over by the builder to them. Which is in a year's time. They are just trying to block and delay us. The audacity.

For a 2 bed flat, that service charge is at the lower end (depending on services provided, etc). You need to look at the breakdown of what is included in the estimate versus the actual to understand why there is a difference. No idea why you think you should receive compensation though! You were told it's an estimate.

IIRC, that’s actually true. We had a similar issue with Bellway about 10 years ago. Fortunately, the shit managing agent got taken over by another one. My advice would be to get a group of residents voted in as directors of the management company. That way, you are better able to work with them to benefit the development and push stuff forward. A lot of it will depend on your account manager at the managing agent - we had a great one, then one who was not as proactive but we kept up communication and regular meetings to hold her accountable.

Do not refuse to pay your ground rent or maintenance fees. Don’t get shouty and arsey with them. Get a group of you together, know your rights and be firm and persistent. You also need to be realistic about what you can achieve. As others have said, you were given an estimate, so I think you will have very little comeback on accusations of the builder lying to you.

FYI, my maintenance fees were 1200 a month for a two bed flat in the south east. If you buy a leasehold flat then maintenance fees are a fact of life, I’m afraid, and they will go up.

I work with service charges in a commercial setting and we pulled out of a new build property due to estate management charges. They are uncapped and you are totally at the mercy of the management company.

Sorry, another thing - be very very wary of anyone who swoops in saying they own a managing agent and promising the earth for lower fees.

We had this happen on numerous occasions. Someone will buy a flat in the development then try to get themselves voted in as a director. They will then try to remove the existing managing agent in favour of their own company which will rip residents off.

No idea why you think you should receive compensation though! You were told it's an estimate.
An estimate should be close to the final figure. A random guess totally pulled out of your arse is not an estimate. A deliberately low figure that bears no resemblance to the actual cost is also not an estimate. Did you miss that part of Year 6 maths?

No need to be so rude. Service charge estimates are usually prepared up to a year in advance and may themselves be based on estimates from other organisations (such as water companies etc) in addition to previous bills. So it's not uncommon for there to be variance, and this can be significant at times if there are macro-economic factors that change during the statement year and/or unexpected items/demands/market shifts. This can also be heavily influenced by whether the service charge includes a reserve fund contribution.

A MONTH?! Did you have a pool/concierge/gym etc?

I'm in central london and pay £2500 a year which is ridiculous for how little i get (nothing)

I have a couple of 1 bed flats in Manchester where I pay close to £3600 a year due to cladding/fire safety issues so count yourself lucky. Service charges increase every year, often by quite a large amount.

I am afraid this is one of the main issue with the leasehold system: the freeholder/management company can get away with charging anything they want...

I used to have a shared-ownership flat in London with a housing association as the freeholder and our service shared was about £80 a month the first year then went up to £150 a month soon after...

There is no incentive for them to get the best deal for repairs and to keep costs down. They simply charge the poor leaseholder for everything and award themselves a large ''management fee'' on top of that.

Maintenance was poor in our building but we had no choice but to pay these outrageous service charge bills.

All you can do when you get your yearly service charge statement is ask them to provide actual invoices/proof of what they are making you pay for in term of repairs and maintenance.

I was sold a new build on a £1 a month service charge in 2004. The charge was to maintain a communal car park... That's all. When the estate was finished, I was told the leasehold car park would be handed to a management company, which "won't be charging much more". All in the contract, so I signed on the dotted line.

When I sold the house 7 years later, I was paying £25pm.

These extortionate year on year charges by management companies have been going on for years. Good luck getting it sorted OP.

Check and see which consumer code persimmon uses. I believe they should have given you a copy when you bought the property. Contact the administrator of code for the version the developer agrees to.

I bought from Barratt/DWH and it was very helpful to word complaints using the same wording as set out in the code that they agreed to adhere to. So successful I didn’t need to use the code as they realised they would be unsuccessful in defending a claim.

In the code that Barratt/DWH agreed to, there was a whole section on charges and what I should have been told in advance.

Depending on how the management company is set up, you may be able to vote additional directors onto the board before the management company is handed over. Not easy, but also not impossible. You need to be organised and have strong, active and coordinated residents to achieve this though. And a thorough understanding of the llc’s incorporation.

Your solicitor should have been on this more before you bought....

Unfortunately you accepted the terms.

I think this is the code persimmon uses. This is a summary of cases/decisions. See if any are similar to your situation and if successful to check the wording carefully

Summary of decisions

Thank you to everyone for all your advice!! I really appreciate all the different points of view and the info of what people are being charged. It is helpful to see where I sit in the range.

We are indeed looking at setting up a resident's association up and appointing Directors. The management company are saying we cannot leave them or set up a resident's association until the development is completely finished and handed over by the builder. So it seems we are at the mercy of them. I am not sure if this correct or if it is a delaying tactic to stop us leaving the management company. The development will be handed over in a year.

I have an initial consultation with a solicitor next week. Because as much I expected some change (yes it is a estimate), a 130% increase is wrong. That is not an estimate, it is 'we have no clue how much we are going to charge and we charge whatever we like due to incompetence and greed.' Sad times.

But like everyone it is estimate so I may not get far, But wow is it a tough pill to swallow.

Doh! I meant per year!

Hi OP. Check the terminology you are using.

The development I bought in worked like this:

There was a “management company” for eg. Shady Pines Estate Management Company, which was a limited company that held the assets of the shady pines estate eg. All the land that wasn’t privately owned eg. Gardens, play area, private roads, and took decisions regarding the interests of the development. It was listed with companies house etc. and had appointed directors. To start with these directors were also the directors of the developer. When the developer finished building “shady pines” and wanted to be shot of it, they called and held a special general meeting to handle the resignations of the developers directors and the voting in of new directors from the property owners.

Shady Pines Estate Management Company retained the services of a property management company eg. Bordeaux Property Management. Bordeaux handled the practical management of The Shady Pines Estate eg. Managed the contract with the garden services company which cut the grass. They also did the invoicing and collection of service charge fees from residents and did things like making sure the communal areas electric bill was paid.

Shady Pines can appoint whoever they like to administer the estate, as long as the hiring and firing is done is accordance with the contract between those companies.

A HOA is something different. We did look at going down that route but it was abandoned when people lost interest/ran out of steam. (Stupid)

However, before we the HOA fizzled, we successfully set up an informal group of residents to monitor the handover. Bear in mind, just as your home needs snagging, so does the entire estate. If the developers lot are still “in charge” of the management company, they can sign off whatever they like and the management company (ie. Shady Pines) can be left carrying the can.

We created an indisputable paper trail with outstanding issues (not relating to individual properties) and pushed back HARD. We went as far as going back through the planning permission to see what conditions had to be met and made sure they were all discharged and signed off by the planning office before we would allow the developer to hand the development over. It look an additional 2 years.

I’m sorry if this is coming out garbled. Combination of late night and phone.

Regarding your issue of the service charge estimate, iirc, there is something about what can be “reasonably expected” in terms of accuracy. This is not persimmons first rodeo and it would therefore be reasonable to expect their estimate to be more accurate, them given their experience and expertise in the industry. Blah, blah, blah.

Your starting point should be the actual figures (before you bother taking legal advice). What is the estimate comprised of? What is the actual amount comprised of? Get breakdowns of both and compare - then ask the management company for an explanation. A decent management company will be able to explain the figures and evidence them if necessary. There may be a valid explanation. You need to understand this before deciding if there's value in going further.