Solicitor says service charge arrears were missed after inherited flat sale

[LBFseBrom]

Good evening.

I recently sold a flat which I inherited, it was more trouble than it was worth and caused me a lot of anxiety. I'm elderly and felt quite ill some of the time, worrying about it.

Anyway at last it was sold, price reduced twice, and I had to pay off the mortgage, council tax arrears and goodness knows what,else, was left with a few hundred!

Nevertheless it was good to have it completed and over.

I have now heard from the solicitor who was handling it for me and she said:

"It has come to my attention that following completion of the sale, the service charge arrears
in the sum of £5,216.01 were omitted from the completion statement. These funds were
sent to you in error as part of the proceeds of sale instead of being paid to the managing
agent to repay the service charge arrears. "

I do have any money at all, I live month to month on pension. I hate pleading poverty, I do manage but what am I going to do? I currently need plumbing and electrical work done in my flat and dental treatment, can't afford any of that, I'm flushing the loo with a bucket of water.

Borrowing on my flat is not an option as it is in an over 60s block (big mistake but that's another story). In any case I couldn't afford monthly repayments, I only just manage to pay the maintenance charges and other bills here every month.

Where do I stand legally?

Thank you very much.

@orangehandles good questions

I mean, some solicitors seem to be so dreadful now. It's mostly what I've read on here, but I'm just astonished at some of the things I hear. I also had to help somebody who got money back off her solicitor and they went bust, actually - so there is a lot of terrible advice around and I hope you get a chance to update us because we might be able to help.

Breeding between the lines, I'm wondering if there was some kind of shared element or if OP was actually named on it already in some way.

These funds were
sent to you in error as part of the proceeds of sale instead of being paid to the managing
agent to repay the service charge arrears.
So you received the funds ?

Something missing here.

Is this sale from the estate of someone who died recently and you were the Executor of the estate and obtained Probate etc? Or, is this a property you inherited many years ago?

If the property was in your name and the debt belonged to you (e.g council tax & fees since ownership was transferred to you) that is your responsibility to pay.

If the estate was still the property owner when it was sold then any debt needs paid from that.

(Also don't understand how funds from the sale of a property have all vanished?)

We definitely need some clarity on when you inherited the flat and whether it was transferred to you before being able to advise.

This is really important nuance.

But I can easily believe that there was no money left - I’d love to sell my flat for the outstanding mortgage amount but it’s in negative equity post Grenfell. It’s totally believable that there was a small amount of equity eaten up by costs.

No this is NOT how it works. The service Charge has to be paid. It is either paid by the seller or by the buyer. So you can reduce your sale price and they settle but the managing agent doesn’t get involved.
There is no mechanism whatsoever for the service charge arrears to simply be written off.
The lease will not be able to be assigned to the new owners until the arrears are cleared.
I think unfortunately it does seem that you will need to pay it.
Its got to be at least a couple of years of arrears though?

Was your name ever on the property deeds or was it sold by the executor as part of the administration of the estate? ASSUMING the latter - You cannot inherit a debt so if there wasn't enough vaue in the estate to pay all the debts of the deceased then the creditors do not have the right to demand any more. You will have to return the few hundred that you received. If that is already irrevocably spent you can acknowledge that you received the residue of the estate incorrectly and will repay the sum of £432 (or whatever it was) but can only manage to do so at a rate of £20 per month as any greater than that would put you into severe financial hardship. Any debt greater than that either died with the deceased, or if the Ts&Cs of the building managers about the service charge cover it, its a charge that the new owners have to pay. No one can claim that it's your debt if it was never your property.

If you were actually the owner for any period then you incurred the debt yourself

It's impossible for anyone to help unless you say whether there would have been enough money from the house proceeds or elsewhere in the deceased person's estate to cover these charges, OP.

Any arrears at death should have formed part of the Estate and should have been identified by the Executors. There is a requirement and a process to follow - Section 27 notices etc. Any debts should then have been settled prior to distribution of the remaining estate.

The Executors are now liable for the debt if this wasn't done. The person who inherited the property would be liable fir the charges from the date the property was transferred.

Who were the Executors and was the proper procedure followed?

I'm no expert, but was always under the impression you can't inherit debt

Beneficiaries can't inherit debt, but existing debts/arrears do not simply cease to exist upon death. They become liabilities of the estate, and is the responsibility of the executor to settle them before any assets can be distributed to beneficiaries.

If an estate's liabilities exceed it's assets then it is insolvent, and the executor/administrator is responsible for applying for an insolvency administration order from the court. There is a strict legal process to be followed with a hierarchy of creditors. Broadly this is similar to bankruptcy; secured debts (eg, a mortgage) take priority, then reasonable funeral/administration costs, followed by unsecured debts (eg, service charges, tax, bills) and so on.

If assets are distributed to beneficiaries prior to all liabilities being settled, then the executor/administrator can be held personally responsible for any outstanding debts, regardless of the estate's insolvency.

If OP was the executor and didn't follow the correct process, they may now be responsible for the full amount of any pre-existing arrears.

If OP was not the executor, they are not responsible for unpaid pre-existing arrears. However, they are responsible for anything accrued from the date that the property was transferred into their name, such as taxes, services charges etc.

When selling a mortgaged house, the seller's solicitor will almost always be responsible for paying back the lender directly from the proceeds of the sale. I suspect in this case they were instructed to pay the service charge arrears too, but failed to do so. The proceeds of the sale were then transferred to OP, who used them to pay off council tax arrears/other debts related to the property, and was left with just a few hundred pounds.

If this is the case then OP is still liable. If the management company is reasonable they may be willing to accept a payment plan. If not, they may take action to recover the debt.