Unpaid service charge by previous owner of my flat

[stargirl04]

Hi,

I bought a flat in May last year and moved in in June. What I didn't know was that the previous owner had not paid their monthly final service charge to the management company.

I'm still not registered on Land Registry records as the owner of the flat because of this issue. The previous owners, a young couple, are still registered as the owners.

I don't fully understand the procedure but my solicitor cannot complete the post-sale details and register me as the new owner with Land Registry until they get a certificate from the management company upon payment of the outstanding debt. I have not been asked to pay the service charge as yet but the money is going into a separate account every month in preparation for when I receive an invoice.

My solicitor had mentioned the possibility of getting the vendors' solicitor to pay the money out of its client account and for them to bill the couple themselves. But I have yet to hear about any follow up. My solicitor said earlier that she hoped to update me by the close of business today, but I have yet to hear back.

The management company say they have sent eight letters to the previous owners requesting payment but no payment has been made. They also point out that legally I won't be able to sell the flat until the debt is settled and they are unwilling to write off the outstanding service charge.

The young couple also had a dispute with British Gas over their outstanding bill at my property and I frequently get letters addressed to them from credit card companies.

I don't think they have any intention of paying this charge, which is £113. I am surprised as they had seemed very nice people. The woman works for an insurance company and seemed a respectable woman with a good job. Her husband is also employed.

Of course, I could pay the £113 myself, but I am loath to do it on principle.

Does anyone have any advice or knowledge about this situation please?

Thanks for reading

Your solicitor should have ensured that it was paid before you completed. Thats where you should be directing your attention.

You should not have completed with this outstanding. Yes, it's a small amount, but your solicitor has messed up here.

Any mail for the previous occupants, just return to sender. Repeatedly 'not at this address'.

Chase your solicitor daily to get this resolved. It's really not on.

Thanks guys. I am a first-time buyer (so clueless, really) and had no idea this charge was outstanding, otherwise I would have insisted on it being paid before completion.

I am resigned to the fact that I will most likely have to pay it myself.

No don't pay it yourself! Your solicitor or their solicitor should pay.

OK you shouldn't have to, but I'm surprised you are putting off registering the deeds for £113.

Your solicitor cocked up here. Your solicitor should pay out. The solicitor should not have released any funds to the vendors without verifying that there were no further barriers to you assuming the title to the property, and could have paid the debt from those funds very easily before handing the rest over. It is solely this error that has brought this problem.

Your vendor will have been asked to complete a Sellers Property Information Form (SPIF) as part of the process and if I remember correctly, it asks whether the seller has to pay any charges relating to the property (eg to a management company). Your solicitor should have seen this form, and therefore taken note of its contents. Also, it is pretty standard that flats come with a service charge and its a standard part of the process for the solicitor acting for the buyer to ask the vendor's solicitor if it is up to date. If not, your solicitor should have said you would not complete until it was.

You really need to tell your solicitor that they have failed to ensure everything was in order before you completed. Give them 7 days to remedy the situation or tell them you're referring them to the SRA.

Yes, your Solicitor should have made sure this was paid before completion and, if not, the outstanding amount should have been retained from the proceeds of sale by the Seller's Solicitors.

Phone your solicitor's office and ask to speak to a senior partner. When asked what does it concern, just say it's a serious complaint you want to make and you're not speaking to anyone else except a very senior partner. You may have to stand your ground a while but do 'back down' and eventually tell the person at the other end your issue. I bet your solicitors will pay the debt themselves and recoup it from the other side but that's their problem, not yours.

..and follow up the phone call with a complaint IN WRITING.

you paid these people to protect you against this.

and paying the outstanding service charge arrears is a totally separate issue to registering your name at the Land Registry. Please speak to your Solicitor about the registration as this needs to be done as a matter of urgency. If you have a mortgage, the Solicitors will be in breach of their rules and regulations.

Don't pay! Threaten to make a formal complaint if this is not resolved by them. www.lawsociety.org.uk/get-in-touch/complaints/

Sorry, wrong link.
www.lawsociety.org.uk/for-the-public/faqs/complaining-about-a-solicitor/

Also, encourage the management company to take debt collection action to collect this sum.

The debt travels with the property. So whoever is registered as owner is liable for the debt. Get it cleared before you issue your notice of transfer/assignment otherwise they will (perfectly rightly) start pursuing you for it.

Has your solicitor arranged a retention against the service charge accounts as well, in case there's a deficit on the current financial year? They should have.

The next letter you will receive will be from the council tax office ( that's if you haven't already had one )
Your name is still on the land registry for that property.
This happened to me last year because the paper work involving the lease extention on my last flat was not completed (don't ask !!)
My case got to the stage of me being summoneds for non payment.
I only got it sorted one week before the court date!!!

Thanks for all this good advice folks.

LBOCS - apologies for my ignorance in these matters, but could you explain in dunce's layman's terms - what you mean by my solicitor "arranging a retention against the service charge accounts, in case there's a deficit on the current financial year?"

Many thanks LBOCS and everyone else.

So far I've only ever been pleasant and thankful in my dealings with my solicitor so I guess I'm going to have to change my attitude.

Basically, the service charges are used to pay for the upkeep on the building, any repairs, gardening, cleaning, insurance, etc. This expenditure tends to be budgeted for in advance, so bills will go out with an anticipated expenditure on them, and that's what they collect - for example, you'll get the bill for the money they need in Jan for a Jan-Dec service charge year.

At the end of the year, the management company have to produce a set of accounts, to show where your money has gone. Now, obviously, in a perfect world the budgeting will be good and nothing untoward will have happened, but this isn't always the case and sometimes there is a deficit shown - I.e more money was spent than collected. If this is the case, then a bill is likely to be issued to all leaseholders to recover those costs. Your solicitor should have taken a retention against that happening. Because if (for example) you're moving in in jan, and the S/C year runs from Jan-Dec, the 2014 accounts won't be prepared yet. If there's a deficit, you'll get a bill in c. 6 months, relating to the 2014 expenditure - which you didn't benefit from as you didn't own the flat at that point. Usually, a retention is taken from the previous owner against this happening - and if it's unspent, it gets released back to them. Because the debt travels with the flat, the fact that you didn't own it at the time is no defence and you would be liable to pay it if they haven't done this.

Thanks very much for explaining this LBOCS. I'll ask the solicitor about it.

No problem :)

Hello stargirl04,

Do you have an update of your situation?

I purchased an apartment in January 2015, prior to completion my solicitor received confirmation from the vendor's solicitor that all outstanding charges had been paid up to date, yesterday I received confirmation of my Land Registry and was informed of outstanding service charges (amounting to over £2,500!), apparently the previous owner had not paid the outstanding fees as declared.

I have seen sight of the statement of service charge from the Management Company - which is very misleading as it states current balance 'nil/zero' but Tenant Balance shows a minus x amount - this is the amount still owed apparently (all who have seen agree it is misleading).

Given that the statement from the Management Company is unclear and that my solicitor received confirmation that all outstanding fees had been paid who should be liable? All other examples I have come across seem to have the finger pointed at the buyers solicitor but mine actively checked prior to completion? Would the Vendor's solicitor be liable?

Any comments would be gratefully received.

Many thanks.

Sue the vendor - misrepresentation. Does your solicitor have it in writing from the vendor's solicitor there was no outstanding balance.

The solicitor acts on the instruction of the vendor that's why I would sue the vendor.

I have a copy of the vendors solicitor letter stating that the vendor 'only owes' £450 and that will be cleared upon completion.

Would this serve as adequate evidence?

Yes. Get some advice from the solicitor who acted for you on the purchase.

Thank you ever so much, truly appreciated.