Paying service charges will be familiar to most people holding flats or houses under a long lease. A leasehold owner owes various obligations to the freeholder (or a management company, where present) including paying ground rent, contributing towards the building insurance and paying service charge, generally the largest component.
Service charge is intended to permit the landlord to act for the good of the whole building or development in providing services and maintenance. Hence, the amount of service charge may go up and down and may spike dramatically if major works are required. Most leases will allow the landlord to claim estimated costs of works ahead of time or an amount towards a sinking fund for anticipated works.
It is common for leaseholders to balk at service charge demands and it is certainly not unknown for landlords to over claim or even seek to profit. Service charges are required to be reasonable but landlords and leaseholders often have very different perspectives.
What can leaseholders do if they feel they are being overcharged? Below are a few possibilities:
1. Request a summary of the service charge from the landlord as per section 21 of the Landlord & Tenant Act 1985 - Leaseholders then have the right to request further information within six months of receiving the summary. It is worth bearing in mind that a large demand may be reasonable if the building needs work!
2. Take action at the management company level - it is very common for service charges to be controlled by a management company, the shareholders of which are the leaseholders themselves. This is often overlooked but if the leaseholders are dissatisfied then a sufficient number of them can call a meeting of the company, appoint new directors and then install new managing agents, or take over the management direct.
3. Seek the judgment of a tribunal - leaseholders can bring a dispute to the First Tier Tribunal which will rule on whether a demand is reasonable and make reductions if appropriate. However, the tribunal may take a broad approach to what is reasonable. In the recent case of De Havilland Studios v Peries for example, it ruled that even though replacing windows in a building would have been the better option, the landlord’s decision to simply repair them was not unreasonable, just not optimal, so the landlord was entitled to charge for the work.
4. Exercise enfranchisement rights - there is a raft of rights available to groups of leaseholders who want more control over their property, from taking over management of a building from the landlord to purchasing the entire building. This is a major step with complex legal requirements and protocols and it is worth seeking legal advice to make the most of these opportunities.
If you are involved in any type of property dispute then the Property Litigation Team at Blacks Solicitors can assist. Please contact Luke Patel on 0113 227 9316 or email him at “LPatel@LawBlacks.com”.