Are you unhappy with your service charge bills?

One of the most contentious areas for leaseholders and landlords is service charges. Leaseholders are all too often unaware of their legal rights. This can result in some leaseholders being pressured into paying service charges for which they are not liable, or making ill-advised applications to the First-tier Tribunal.

So what can you do as a leaseholder if you are unhappy with your service charges?  The following checklist is not definitive, but does set out the key questions leaseholders need to ask before deciding whether they can challenge their service charge bills.

1. Check the Lease

Your lease is the contract between you and your landlord which governs the relationship between the parties, including the issue service charges. Your lease should cover how and when service charges are demanded, what expenditure they can include, and what proportion each leaseholder is liable for. This is particularly relevant where one-off service charge demands are made in respect of major works. You should check whether your lease allows the landlord to make such one-off demands, or whether they are restricted to annual demands only. The contractual obligation to pay service charges is not triggered unless the landlord has properly demanded the relevant sums in strict accordance with your lease.

2. Check compliance with Sections 47 and 48 of the Landlord and Tenant Act 1987

All demands for service charges must include the landlord’s name and address and, if that address is not in England and Wales, an address within England and Wales must be given, so that notices can be served. It is insufficient for demands to only include the details of the landlord’s agent. Failure to comply with these requirements has the same effect as if the demands not been served at all, and so no payment is due until they are corrected.

3. Has a Summary of Rights and Obligations been served?

The law also requires that all demands for service charges must be accompanied by a summary of tenants’ rights and obligations in the prescribed form.  There is no obligation on leaseholders to pay service charges if this summary has not been served with the service charge demand.

4. Has the demand been made within 18 months of the costs being incurred by the landlord?

The law also prevents landlords from making retrospective service charge demands that date back further than 18 months.  This has the effect of barring landlords from recovering historic costs from tenants. However, this is not the case if the costs are over 18 months’ old but the landlord notified its tenants, before the expiry of the 18 month period,  that those costs had been incurred and that they would later be required to contribute.

If a landlord fails to adhere to their legal obligations, then a leaseholder has the right to challenge their service charges by making an application to the First-tier Tribunal.

But what can you do if your landlord has demanded service charges correctly, but you think the amounts being demanded are excessive? Firstly, check whether the demands include costs that are not actually recoverable under your lease.  Then, it will be a matter of considering whether or not the amounts demanded are reasonable.  If the service charges seem high for inconsequential works, or you are unhappy with the quality of the works carried out, then you can apply to the Tribunal to make a determination. This is not simply a case of showing that the work could have been done for a lesser amount – it will require the landlord to show that, amongst other things, they carried out a proper tendering process. If the landlord cannot demonstrate this, there may be scope for the  service charge liability to be reduced accordingly.

For further information on service charge issues, please contact Leah Veasey on 0207 288 4708 or leahveasey@boltburdon.co.uk.