Service Charges – What You Need to Know
By Nige
on March 6, 2023
at 6:45 am
Type: Post
Category: Service Charges
Tags: Announcements | FirstPort
Since 2021, the residents of The Dovecote have been receiving notifications of annual service charges and an associated account statement. We thought it would be helpful to explain what these service charges relate to and whether you need to pay them.
We have summarised the Key Points for those who just want the headlines. For those that would like to read a little more, head to our In-Depth Analysis.
Key Points
- All homeowners have signed up to paying service charges by signing a TP1 or TR1 when they completed on their house purchase.
- FirstPort send homeowners a summary of charges every year, normally in February, which comprises an invoice (or credit note) together with an account summary.
- FirstPort should make it clear on your account summary whether you are in credit or in a debit position.
- If you are in a debit position, follow the instructions for paying FirstPort on time.
- You can look into claiming these charges back from Bloor Homes separately.
In-Depth Analysis
Background
When homeowners completed on their homes, they signed a form called a TR1 or TP1. This is also known as a Transfer Deed.
What is a Transfer Deed?
The Transfer Deed is the formal Deed that is lodged at HM Land Registry, in order to effect the change in ownership of the property, or land, in question. So, in our case, it covered the formal transfer of our properties from Bloor Homes to the new homeowner for a purchase price.
We have included an example of a TP1 Transfer Deed in this post. What’s the difference between a TR1 and a TP1?
- TR1 – transfer of the WHOLE of a registered title.
- TP1 – transfer of a PART of a registered title.
On the basis that Bloor owned the entire development when individual plots were sold to homeowners, probably explains why all of the original purchasers had to sign a TP1. We assume that establishes a new registered title specifically for the plot purchased by the homeowner. Any subsequent sales/purchases are likely to require homeowners to sign a TR1.
This scenario is primarily focused on those residents that purchased their homes directly from Bloor Homes between 2018 and 2021. For those residents that moved in as the second owner, we assume a similar process is followed, although the details on the Transfer Deed will be slightly different.
However, the important clauses in the Transfer Deed will be the same, whether residents purchased directly from Bloor Homes or they purchased from an original homeowner. These are the important clauses in the Transfer Deed that impact homeowners:
| Clause | Meaning |
|---|---|
| 1 | Definition |
| 1.25 | “Rentcharge Provision” means the Manager’s (or its agent’s) computation made prior to the commencement of each Rentcharge Year of the estimated expenditure reasonably likely to be incurred in the next Rentcharge Year relating to the matters mentioned in clause 12. |
| 11 | Computation of the Variable Rentcharge |
| 11.2 | The Manager (or its agent) shall provide a copy of the Rentcharge Provision to the Transferee before the commencement of the Rentcharge Year to which it relates and the Transferee will pay to the Manager the Rentcharge Interim Payment in advance by direct debit or standing order to an account nominated by the Manager on a monthly basis or such other period as may be nominated by the Manager and is to provide the Manager with an up to date direct debit or standing order mandate at all times PROVIDED THAT in respect of the Rentcharge Year current on the date hereof the Rentcharge Interim Payment shall be that amount payable for the unexpired term of the said current Rentcharge Year. |
| 12 | Part A – Estate Costs |
| 12.10 | Generally managing and administering the Communal Areas and Facilities and protecting the amenities of the Communal Areas and Facilities and for that purpose if necessary employing a firm of managing agents (Provided Always that the payment of such managing agents shall be met exclusively from the fees more particularly mentioned in clause 12.5) or consultants or similar and the payment of all costs and expenses incurred by the Manager thereby… |
| 12.18 | All other reasonable and proper expenses (if any) incurred by the Manager: |
| 12.18.3 | as to any legal or other costs reasonably and properly incurred by the Manager and otherwise not recovered in taking or defending proceedings (including any arbitration) arising out of any transfer or lease of any of the Dwellings or any claim by or against any transferee or lessee or any tenant agent or visitor thereof or by any third party against the Manager as owner lessee or occupier of any part of the Estate. |
The key point of the above is that the Manager (or its agent) has the right to charge homeowners a variable rentcharge. The term rentcharge, is more relevant to leaseholders, since the leaseholder pays ground rent to the freeholder. In our case, the homeowner is the freeholder, so no ground rent is payable.
So What Does this Really Mean for Residents of The Dovecote?
There will be a variable service charge payable for the upkeep of the Public Open Space (POS). That will be calculated on an annual basis and every homeowner is obligated to pay the service charge that the Manager (or its agent) decides is due.
From a service charge perspective, the maintenance year officially starts on 1st Feb and concludes on 31st Jan. So, if a homeowner completed early on in that maintenance year (say 1st March), they would have paid 11/12ths of the total service charge for that year. I.e. 11 months out of the 12 months in that maintenance year. If a homeowner completed late on in that maintenance year (say 1st December), they would have paid only 2/12ths of the total service charge for that year.
When homeowners completed on their homes, they also paid an amount of money towards this service charge. This was calculated prorated based on the estimated annual service charge at the time.
Who is Our Manager/Managing Agent?
Until the POS is fully handed over to the Management Company (MC), Bloor Homes is responsible for the upkeep of the POS. However, rather than take on the day to day work involved in managing the POS and keeping the residents under some sort of control, they outsourced that work to a third party.
Initially, that was Chamonix. Chamonix took on the role of Bloor’s agent. Chamonix Estates was an estate manager, which was taken over by FirstPort in 2021. FirstPort is the company that currently acts as Bloor’s agent.
What Does FirstPort Do?
FirstPort is the UK’s leading property manager, looking after 330,000 properties. When handover to the MC concludes, FirstPort will (by default) become the estate manager for The Dovecote, (unless the residents decide to move in a different direction). That means FirstPort will be responsible for the following:
- Prepare an estimate of the work involved in maintaining the POS for the whole year. That covers things like grass cutting, maintenance of hedges, fencing, provision of utilities in support of communal lighting etc. All of this needs to be inline with the Management Plan agreed with Vale of White Horse District Council (VWHDC) as part of the planning application.
- Prepare an estimate of the cost to deliver that work, then add on top a cost to cover their overheads and profit. Typically these extra costs add 50% on top of the raw cost of maintaining the POS.
- Issue communications to all residents, advising of the the estimated service costs for the year and how much each resident will need to pay.
- Liaise with residents in collecting the service costs. If residents fail to pay on time, FirstPort will have the right to engage the services of a debt collection agency. Ultimately, they can go a step further than that, but we will leave that for a separate discussion.
- Ensure that all trades people are engaged in a timely manner and deliver the services required to maintain the POS in line with the Management Plan throughout the year.
- Provide services to residents in support of fault reporting/fixing.
- Provide property-related services to outgoing residents and incoming residents. For example, they will liaise with solicitors during the home selling and buying process.
Why are We Being Charged Now?
Good question! There’s no legal justification for an estate manager to start charging residents before handover has completed. After all, Bloor Homes is still fully responsible for the POS prior to handover.
We will publish a separate post about what residents can do about reclaiming any charges that are imposed on them by First Post.
Do Residents Need to Pay FirstPort?
The answer to this question depends on whether your account remains in credit or not.
If you are in credit, FirstPort will simply reduce your account balance by the service charge they have imposed. Consequently there is nothing for you to pay.
If you are not in credit, (i.e. you are in a debit position), then you need to pay FirstPort the amount that they show you owing. That is NOT necessarily the amount of the service charge for the year. You may have been in credit the previous year, so you simply need to pay the balance that FirstPort shows on your statement.
The key point here is that FirstPort holds all the cards in this relationship. They have a legal position that supports them in applying onerous restrictions on residents’ homes if they don’t pay up on time. There is no point in getting into an argument with FirstPort as to whether to pay or not.
It’s much safer to pay and then have the argument afterwards.
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