In a leasehold block like Northwood Hall, the freeholder is responsible for keeping the building clean, safe, and in a good state of repair.
In turn, leaseholders are obliged to pay lawful service charge bills that go towards the running and maintenance of the building.
But at Northwood Hall we haven’t seen any legally payable service charge bills for several years.
You may have heard some leaseholders saying that we have a ‘moral’ obligation to pay our service charges so that the cost of things like the cleaning and gardening can be covered.
But the only moral obligation leaseholders have is to pay service charges that are lawfully demanded. There is no obligation, moral or otherwise, to pay service charges that are not lawfully demanded.
The very least that leaseholders should expect from the freeholder and their managing agent is that service charge demands meet the lawful requirements of the leases and the law. If the freeholder is unable to produce a legal demand, then it is up to them to pay for the services.
There are many problems with the latest demands
The service charge demands served on leaseholders by KMP Solutions last month are not valid lawful demands. There is no obligation, legal or otherwise, for leaseholders to pay them.
Among the many key issues are:
Almost total non-compliance with the requirements of clause 4 of our leases which sets out how a valid demand must be made.
Expenditure has been included which is not recoverable under our leases.
The demands rely on a “draft” Income & Expenditure account which is not signed off by independent accountants.
There is no balance sheet (as required by the RICS Service Charge Code).
The figures include some of Mr Maunder Taylor’s legal costs which are not recoverable as service charge.
These demands do not give rise to a debt which is “due and payable”.
Sorting out the mess of the accounts
To create a legally binding service charge demand you need accounts that include a balance sheet as well as an income and expenditure account. When correctly assembled they must then be signed off by independent accountants.
The recent demand sent to leaseholders was only page 4 (the I&E account but no balance sheet) of a longer document, so just one part of the accounts. Stamped as a “draft”, it was not signed off by independent accountants.
One of the missing pages likely shows a debt of around £4 million, designated as “money due”.
But this money isn’t due from any leaseholder. It is a bad debt which can’t be billed to leaseholders — as found by the London County Court in May 2019.
Where we are now
Since taking over from Mr Maunder Taylor in December 2019, KMP Solutions have had over 18 months to reconcile Northwood Hall’s service charge accounts, but they still seem a long way from producing something that can be signed off by independent accountants.
Therefore, until they are able to make a legally enforceable service charge demand, no money is payable, and no legal action can be taken against any leaseholder who fails to pay.
Northwood Hall Residents’ Association