The phrase “service charge retention “may be familiar to those of you who have bought or sold a leasehold property. It is worth considering whether this retention is sitting dormant in a law firm’s account. I suspect that tens of millions of pounds, owed to members of the public, are being held country-wide by conveyancing solicitors.
Following reconciliation of accounts at the end of the financial year, leasehold properties are subject to service charges. At this time, the property leaseholder is liable for any over or under payment as the debt or credit relates to the property rather than the owner. This still stands even if s/he may not have been the owner over the entire period. When dealing with a residential leasehold property subject to service charges, many property lawyer s act prudently by incorporating a ”retention” within any sale contract. Thus a fixed amount is agreed and retained by both buyers’ and sellers’ lawyers until accounts are finalised.
Conveyancing lawyers often hold these monies in escrow for unnecessarily prolonged time periods following sale completion. Considering the current economic climate, I do believe that the Law Society should ensure that all conveyancing solicitors deal proactively with service charge retentions. For the majority of individuals, recovery of large sums of money is a matter of urgency. Therefore solicitors should return these sums to those legally entitled to them, rather than sitting quietly on money.
The above comments suggest complacency rather than any dishonesty from lawyers. Often buyers and sellers, relieved at having sold a property, simply forget about the retention. Once a transaction is completed and the property law firm has been fully paid for their conveyancing services, the file remains dormant. As there is no financial motivation to chase the landlord or managing agents to determine whether the accounts are finalised, the money remains in the firm’s escrow account.
It is worth emphasising that you are unlikely to incur any costs in trying to recover what you are owed. In 99% of cases, the property lawyer is not entitled to levy a charge to release the retention as this was already covered as part of your conveyancing process.