Small flat, big bills

Makeover: A teacher is faced with soaring service charges

NAMES: Danny McEvoy and Pauline Evans

AGE: Both 34

OCCUPATIONS: Teacher and care worker

THE PROBLEM: Danny bought a leasehold studio flat in Brighton for pounds 35,000 in June 1991, with a 100 per mortgage from Royal Bank of Scotland. Shortly after moving in, he discovered that the agents of the converted building, which covers 24 leaseholders in all, would be billing him for service charges of pounds 95 every six months, which he accepted as reasonably fair.

A year later, the freehold to the building was bought by Anthony Scrivens, who operates through a web of companies, including Adelaide Homes (Sussex) and Adelaide Property Management.

Within months, service charges began to climb. By 1994, they reached pounds 275 each half-year. The bill levied that year by Mr Scrivens on members of the entire building included pounds 60 a month for cleaning, rent for the television aerial of pounds 641 a year and pounds 300 a month management fees. Mr Scrivens, by happy coincidence, not only owns but manages the building.

If there were any significant repairs to the building, such as almost pounds 5,000 for roof repairs in 1994, Mr Scrivens levied an additional 10 per cent works' management fee. Last year, the leaseholders were landed with a pounds 27,000 paint job to the outside of the property, a job which a independent surveyor hired by the leaseholders describes as poor.

At this point, Danny felt enough was enough. He and Pauline decided to organise the other tenants. But when they tried to get a Rent Assessment Panel (RAP), a statutory body, to recognise them as a residents' association Mr Scrivens blocked recognition by arguing the ownership of the building is separated into two parts. Then, the fact that Pauline is not formally a resident proved a further legal stumbling block.

The leaseholders want Mr Scrivens to sell the freehold to them at a fair rate, but cannot force him to because of legal problems. He offered it to them for pounds 48,000, much more than they felt is fair. He then reduced it to pounds 29,000.

Meanwhile, workmen have fitted a felt roof, similar to that used on garden sheds, because the block's original roof blew off last year.

Danny and Pauline want to know what to do.

THE ADVISER: Tim Curran, a chartered surveyor and director of Leasehold Enfranchisement Ltd, a firm which advises leaseholders (London area only) on extending leases and buying their own freeholds. Address: 33 St George's Drive, London SWIV 4DO (0171-821 8820)

THE ADVICE: "There appears to have been a history of service charge problems with this block of flats and it does seem to me, without knowing every detail, that some of the charges are excessive.

As for the problems with regard to the Rent Assessment Panel and getting themselves appointed as a residents' association, I am sure the RAP's interpretation of the law, disappointing as it may seem, is probably correct. I imagine what is happening is that the freeholder is employing a professional, such as a solicitor, and they are following the letter of the law quite closely.

There are a number of recourses which these leaseholders could take under law. One option is to apply to the Leasehold Valuation Tribunal for a determination as to whether service charges are reasonable and for an appointment of a manager, either themselves or a third party, to take over the running.

The freehold is still owned by the landlord but this would neutralise the aggravation factor.

Tenants have always had the right to seek a new manager for the freehold property, but the right has been extended quite radically and it is a much easier procedure to obtain now. The cost of an application to an LVT has not yet been set but is unlikely to be above pounds 500.

The relevant legislation allowing this, under the Housing Act 1996, has been passed by Parliament but it has not yet come into effect. The signs are that it will come into force in July.

Leasehold Valuation Tribunals (LVTs) are an arbitration body set up by government to adjudicate on disputes between landlords and tenants. They have a range of powers which include setting prices for lease extensions and determining on the appointment of new managers for the property.

It is important to note, however, that the freeholder does have the power to object to this process and the LVT must take its point of view into account. A potential problem is that once the order is made the freeholder can still ask for that order to be changed or varied after a certain period of time

Although the LVT has the power to appoint another manager, it may be easier for the leaseholders to exercise another legal right, that of purchasing the freehold - known as collective enfranchisement. At least that settles the problem once and for all.

This is also subject to negotiation over the exact price between both parties. If they fail to agree, a final judgment is made by the LVT. But here, the leaseholders must be prepared to pay for the freeholder's reasonable costs, which may include surveyors' reports and lawyers, in any appearance before the LVT.

However, there are also legal restrictions on the right to buy a freehold which unfortunately appear to affect this property. This is because one leaseholder, a business operating on the ground floor, takes up more than 10 per cent of the floor space. Therefore, the leaseholder must negotiate a reasonable price. My view is that in this case, such a move would be cost-effective in the long run and, given the freeholder appears willing to sell, negotiations should be initiated.

As for the likely price, there is already guidance from previous LVT decisions, although they are not legally binding in this case."

THE VERDICT: "The problem is that we don't trust Mr Scrivens. He could take us down the path of negotiation, incurring huge solicitor's charges and then pull out.

As far as the LVT is concerned, July is too late by far. Leaseholders should have the right to apply for a decision now. We would also like to see the right to manage, as spelt out in the Government's paper, `An End to Feudalism', applied immediately.

Meanwhile, we will carry on paying just the ground rent, wait until the LVT acquires its new powers and then lodge an application for a change in management."

Tim Curran and Danny McEvoy were talking to Nic Cicutti.