Efficient collection of service charges is key for any managing agent or Residential Management Company (RMC) who wants to effectively manage their blocks. Without funds, contractors may go unpaid and refuse to work, resulting in further disrepair and a vicious cycle where tenants refuse to pay until something is done, but nothing can be done until arrears are paid.

Leaseholders are also becoming more aware of the rights afforded to them by legislation, meaning it is more important than ever for management agents and RMCs to be on the ball.

What can you do if there is a dispute over service charge?

There are times when a tenant may have a real reason to have withheld payment and we are experienced in dealing with service charge disputes.

Leaseholders have a right to ask a Tribunal to determine whether a Service Charge is payable, who it is payable by and to, how much is payable, when it is payable and how it is payable.

There are three main reasons that service charge can be challenged in this way; either because the demands are not contractually valid (not allowed for in the lease), they are not legally valid or because the service charge is not reasonable.

  • Contractual Validity

A lease is a contract and all parties to it are bound by its terms.

Therefore, if service charges are not demanded within the confines of the lease then there may be scope to challenge them.

  • Legal Validity

Under the provisions of Sections 47 and 48 of the Landlord and Tenant Act 1987, the Landlord must include his name and address on all Service Charge demands.  It is not enough for the landlord’s agent’s details to be provided.  Failure to comply with these provisions has the same effect as had the demands not be served; no payment is due until they are corrected.

Additionally, Section 21B of the Landlord and Tenant Act 1985 requires that all demands for Service Charge are accompanied by a Summary of Rights and obligations.  There is no obligation on a leaseholder to make payment if this has not been served with each demand.

There are also various other statutory controls such as the “18 month rule” for demanding service charges and the consultation requirements for major works, which can leave you in trouble if not complied with.

  • Reasonableness

This category of challenge captures those cases where the leaseholders deem the service charges to be excessive or where service charges are being demanded but there is no real evidence of the money being spent on what it has been demanded for.  So, if the service charges seem high for inconsequential works or there is dispute over the quality of the works carried out, the Tribunal can be asked to make a decision.

You will be required to demonstrate that a full decision making process, including tendering, was undertaken rather than opting for the first contractor that you happened to come across, in order to show that the service charge is in fact reasonable. The leaseholder will need to demonstrate the opposite.

How can we help?

Successful service charge disputes by Leaseholders can result in heavy discounts to the Service Charge that is recoverable.

We offer fixed fee arrangements for dealing with recovery or any aspect of a service charge dispute – from an initial review of the lease to advice on the service charge provisions, right through to preparing for any necessary Tribunal hearing. We can also deal with supplementary service charge issues such as applications for dispensation from consultation requirements and general advice. We will aim to seek recovery of our costs or advise you well in advance if we expect there may be problems in doing so.

Should you need any assistance in this respect please do not hesitate to contact us today.

Leases are complicated legal contracts and usually include various restrictions, or covenants, on how the property can be used. The most common examples of these are alterations to the property, keeping pets, assignment, and sub-letting.

If you are approached by a leaseholder who wants to undertake one of these acts and they require your consent to do so, it is important that you consider what they are asking for carefully. Take appropriate advice and ensure that your interest is sufficiently protected.

Certain covenants will require you to give consent unless it is reasonable to withhold it, and even if the covenant itself does not require you to be reasonable, certain statutes and case law will require it.

If you discover that a leaseholder should have asked for your consent and didn’t, please visit our breach and forfeiture for assistance.

Our services for notices and licences are conducted on a fixed fee basis and we would usually (subject to your approval) seek payment of our fees from the leaseholder to ensure that there is no cost to you.

  • Licence to alter
  • Licence to sublet
  • Licence to assign
  • Deeds of covenant
  • Certificates of compliance.

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Even if you have the right paperwork in place, sometimes leaseholders are not advised of the terms of their lease or otherwise simply ignore them. This can and does leave landlords in situations where leaseholders are breaching their lease to your detriment, and you are forced to take action.

As a landlord, you have a number of options available to you and our expert solicitors can help provide you with advice as to the best course of action, as well as provide all the paperwork and legal advice if the case goes to a Court or Tribunal hearing:

  • Ask for a forfeiture of the lease so the property is ‘taken back’ from the leaseholder
  • Apply for an injunction to order the leaseholder to do, or stop doing, something
  • Grant or retrospective licence to an ‘acceptable breach’

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When a property is owned on a leasehold basis, there will be a lease, which forms the basis of the contract between the Landlord and the Tenant. But these leases can be complicated for even a seasoned professional to understand.  Sometimes they are still written in very old fashioned and archaic language, others are just written by draftsmen that have not considered the clarity of their phrasing and are so badly written that they fail to cover off the essentials.

Whatever the cause, the result is often a lease that requires formal interpretation, and a trained eye to advise on what the lease terms actually are.

Our team of expert solicitors can assist in reviewing your lease, either in full, or in respect of a particular query, and if the review identifies the need for additional services such as Licence to Alter or Breach of Lease we can help with these too.

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Many leasehold properties are now being used as rental accommodation. However, what leaseholders are not realising is that the terms of their lease may prevent them from doing so altogether or may require them to obtain their landlord’s consent beforehand.

Some leases may not only require the landlord’s consent, but they may also require the subtenant to enter into a Deed of Covenant with the landlord directly to comply with the leaseholder’s covenants under the lease. If a leaseholder is subletting their property without consent, as their landlord you may be able to take action against them and, if the lease allows for it, forfeit their lease.

Here at Bolt Burdon our expert lawyers can help you determine if a breach has occurred, and then advise you as to the best terms of actions for your particular case.

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Selling a freehold is not a simple process, and there is a strict framework for landlords to follow, such as first offering the freehold to qualifying tenants. If the landlord sells the freehold without following the legal framework, tenants can take action to force the new owner to sell the interest to them at the price the new owner paid for it.

Where there are two or more flats in a building and the landlord wishes to sell the freehold, a statutory process must be followed known as the ‘Right of First Refusal’, which involves the landlord serving the qualifying tenants with an offer notice.

If the tenants fail to serve an acceptance notice on time the landlord is entitled to sell the freehold to a third party. However, if the tenants do serve an acceptance notice, a statutory process begins, governed by strict deadlines (which, if not complied with, can leave you open to claims). You will also be unable to dispose of the property other than to the tenants.

At Bolt Burdon we are experts in this area of law, and regularly advise our clients on the disposal and the retention of their assets in accordance with the statutory framework.

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The Leasehold Reform Housing and Urban Development Act 1993 contains formal statutory processes for tenants to either:

  • Individually extend their lease; or
  • Collectively purchase the freehold of their block of flats.

If you receive a notice pursuant to this Act, it is important that you do not delay in dealing with it as failing to can have severe consequences.

Although there is a legal procedure your tenants can follow to force you to grant a lease extension it might be worth considering whether you wish to proceed on an informal basis which might bring you more favourable terms and greater flexibility (such as retaining a ground rent).  Our team of expert solicitors can provide you with all the necessary advice for pursuing the best right for your commercial needs, as well as ensuring compliance with all the statutory regulations that come with such a complicated process.

When are leaseholders entitled to extend the lease?

Once your tenant has owned their leasehold property for at least two years they acquire the right to extend the lease for an additional term of 90 years and have the rent reduced to a peppercorn (meaning you no longer receive any ground rent). You will be entitled to receive a premium in return.

The premium to be paid is calculated according to a strict formula which includes:

  • the value of the property;
  • length of the current lease;
  • the current ground rent;
  • and will often be negotiated between the parties’ surveyors.

Although there is a legal procedure your tenants can follow to force you to grant a lease extension it might be worth considering whether you wish to proceed on an informal basis which might bring you more favourable terms and greater flexibility (such as retaining a ground rent). Remember though, if your tenant has not owned the property for two years this would be the only option available to them.

If you do receive a formal Notice of Claim (known as a Section 42 Notice) from your tenant, it is important that you engage solicitors as soon as possible. You must reply within two months with a formal “Counter Notice”. Failure to do so could result in your tenant being granted a new lease for a lower premium and on less favourable terms than you would otherwise expect to achieve.

Once you’ve served your Counter Notice, terms can either will be negotiated and agreed, or if no agreement is reached , the First-tier Tribunal (Property Chamber) will be asked to decide on the terms under which the lease extension can be granted.

An important note is that you will be entitled to recover your reasonable legal and surveyor’s costs in investigation of title, valuation and the conveyancing for which your tenant will be responsible under the Act so do not hesitate to seek our assistance to increase your chances of being properly reimbursed.

Collective Purchase and Enfranchisement

Your tenants may be entitled to purchase the freehold title to your building (and potentially surrounding land or buildings) provided that:

  • there are at least two flats in the building, and
  • at least two of the flats are let to ‘qualifying leaseholders’; and
  • not more than 25% of the building is non-residential.

The number of leaseholders who join in on the purchase must represent at least 50% of the total number of flats in the building. They will usually begin the process by serving formal notice (known as a “Section 13 Notice”).

  • identifying the premises which they wish to purchase,
  • giving you details of the participants,
  • nominating a purchaser for you to transfer the property to along with setting out their proposed purchase price.

As with a lease extension, you will have two months to respond with your Counter Notice and negotiations as to price and terms will then take place between the respective surveyors and solicitors. In the absence of agreement, the matter will be referred to a tribunal to determine the terms.

Again, you are able to recover your costs in respect of investigating their title, valuation and conveyancing so the use of specialist advisers is recommended.

If you would like to discuss any aspects of lease extensions please contact us.

Sometimes leaseholders may want to make alterations to their leasehold properties, but what most leaseholders don’t realise is that any work they may want to undertake to their property may actually require their landlord’s consent. Whether consent is required or not will depend on the terms of their lease. Such consent is usually given by way of a Licence of Alterations that will set out what the tenant is allowed to do and what happens if any damage occurs.

If a leaseholder fails to obtain your consent where it is required, they could be in beach of the terms of their lease, and you may then have an opportunity to take action against the leaseholder in respect of those works.

This is where Bolt Burdon can help. Our team of expert lawyers can advise you on the best course of action, whether that be applying for an order requiring the leaseholder to put the property back into its original state at their own expense; or, even an application to forfeit the lease. You may even wish to grant a retrospective Licence.

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