Changing the lease to omit the requirement to audit service charge accounts

Garden Mews Berkshire SL1

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The Challenge

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Clause l3 of Lease required the freeholder to audit the service charge accounts. With the cost of an audit being £2,500 upwards and the cost of the typical requirement for this size of block being a 'service charge verification', both carried out by a Chartered Accountant the clause was considered overly onerous for this size of block.

The cost of a service charge audit was not only the most expensive item in the service charge budget, but cost about £1,000 more than the management fee, £1,500 more expensive than the buildings insurance and believed to offer less real value to the leaseholders.

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The Solution

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An application to the Tribunal under Section 37 of the 1987 Act which is the procedure to vary a lease where not 100% agree.

for 9+ flats - you need 75% to consent and not more than 10% opposing,
for up to 8 flats you need all but 1 party to consent.

The result - a more 'reasonable' service charge.

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Customer Response

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Common sense prevailed. The requirement to audit a service charge when there are perhaps only 20 invoices a year is simply bad drafting by the original Solicitor.

If any leaseholder feels that they later want a service charge audit or even a management audit, they are still protected as the 2002 Act gives them this right anyway.