If you are a flat owner, your landlord will require you to pay service charges. These cover expenses such as building insurance, utilities for communal areas and repairs and maintenance. The fees you are charged should be for costs that were reasonably incurred and for work that is of a reasonable standard.
It is sometimes the case that disagreements arise between landlords and tenants over the amount charged or the quality of work that has been carried out. Our service charge dispute guide looks at what service charges are and how to resolve service charge disputes before they escalate.
What are Service Charges?
When you buy a leasehold flat, the landlord or their managing agent will deal with issues relating to the upkeep of the building. The lease will allow them to recover the cost of this from the tenants by way of service charges.
The landlord or their managing agent will notify you of the amount they require you to pay each month. They can also require a payment towards a ‘sinking fund’, which is a sum of money held in an account that accrues over time so that large items of expenditure can be paid for when needed, such as a new roof or structural works.
If the sum held in a sinking fund is not sufficient to cover work, then tenants will be required to pay the balance.
What Can a Landlord Charge a Tenant For?
A landlord can only charge a tenant for items that are included in the lease. The lease will usually be comprehensive, allowing the landlord to recover all possible expenses, but it is worth checking to make sure. For example, residential leases for property owned by private landlords do not usually require a tenant to pay for the costs of work done to improve a property.
Charges made by professionals, including managing agents and solicitors, can only be recovered if the lease provides for this.
The lease will also usually say how and when you can be charged for it, for example, whether the landlord can require payment in advance of works being carried out and how often service charges can be levied.
Items that may be included in your lease include:
- Buildings insurance
- Repairs and maintenance
- The cost of utilities to communal areas
- Gardening for shared outside areas
- The cost of a porter or maintaining CCTV and lifts, if the property has these
- Fees charged by managing agents if the landlord uses them
What is a Reasonable Service Charge?
Service charges must be reasonable, and if there are increases, tenants have the right to challenge them. A landlord should be able to justify a service charge by providing evidence of the costs they are paying to third parties, such as insurers, builders or managing agents. In addition, these expenses should be on par with charges made by other providers of a similar service.
A service charge demand should include the landlord’s name and address and a summary of the leaseholders’ rights and obligations.
What Can Cause a Service Charge Dispute?
Service charge disputes are relatively common. Causes include:
- Unreasonable or excessive charges
- A sudden unexplained increase
- Failure to provide a breakdown of the costs
- Poor quality work or services or work that has been delayed or not carried out
- Not correctly apportioning service charges between flats if some leaseholders are liable for a larger share, for example, because they have a bigger flat
- Charges that the landlord is not entitled to make under the terms of the lease
- Excessive administration charges
How Do You Challenge Service Charges?
If you are a leaseholder, it is crucial to follow the correct process in challenging service charges. If you simply stop paying, you will be in breach of the terms of your lease, which could result in you facing legal action from your landlord. In the worst-case scenario, they could seek forfeiture of the lease and possession of your property.
However, when you do pay, you need to notify the landlord that you are paying ‘under protest’ so that the landlord is put on notice that you are objecting.
The Landlord and Tenant Act 1985 states that a tenant (i.e. a leaseholder) cannot challenge service charges in court if they have admitted that they are payable. By consistently paying service charges without objection, you are likely to be deemed to have admitted that they are payable.
By notifying the landlord that you are paying under protest, the landlord will not be able to claim that you have admitted that the charges are payable.
You should set out clearly in a letter addressed to the landlord that:
- You disagree with the service charges
- Your payment is made under protest
- The payment should not be considered as your agreement to the charges
- You are reserving the right to dispute the service charges at court
The next step is generally to try and negotiate a resolution with the landlord. You may want to seek legal representation from expert service charge disputes solicitors at this point. This can persuade the landlord that you are taking the matter seriously and prompt them to explore ways of resolving matters.
If an agreement cannot be reached, you can consider alternative dispute resolution, such as mediation. Where it is not possible to find a way forward, you can take your case to the First-Tier Tribunal (Property Chamber). This is a court that specialises in property cases, including service charge disputes.
Avoiding Service Charge Disputes
Wherever possible, it is recommended to try and keep the lines of communication open with your landlord and attempt to talk through issues as they arise. It is not in the landlord’s interests to be in disagreement with leaseholders, and they may be prepared to listen to your requests.
Taking legal advice early on will ensure that you have a strong case, and if a solicitor intervenes on your behalf, they may be able to resolve matters before a dispute escalates.
Longer-term options for dealing with service charge issues include working with your fellow flat owners to take over the right to manage the property from the landlord or to buy the freehold with them.
This will give you and your fellow flat owners the responsibility of dealing with all of the service matters. You need to ensure that you can work together to look after the property and that you are not simply transferring a difficult situation to a different group of people.
Our landlord and tenant experts can advise you of your options and discuss the best way forward to resolve any difficulties you may be experiencing.
Contact Us Today
If you are involved in a service charge dispute, call us today, and we will be happy to help.
Feeling confused about a service charge? Our landlord and tenant dispute solicitors can help. Contact us today and let’s discuss your options. Call us at 0330 173 3980, or send us an email at info@witansolicitors.co.uk.
