The Mayor of London, Sadiq Khan, recently created headlines when he voiced his belief that the law should be changed so that leaseholders should reserve the right to refuse to pay service charges if they believe that they are too high. Many leaseholders have seen their service charges increase substantially in recent times, with the average service charge on a flat in England and Wales now standing at £2,247 per year, a staggering 31% higher than in the first quarter of 2019.
Khan stated, “While many landlords act responsibly, we need stronger rights for leaseholders to act against those who don’t, with new powers of redress and the ability to withhold service charges that simply aren’t justified.” Part of his proposals include the ability for leaseholders to withhold the payment of service charges for payments that have not been provided for in writing, such as in a statement of accounts.
While refusing to pay your service charge is a bad idea, as it could lead to eviction or repossession, leaseholders do have certain rights when it comes to their service charge. One of these rights is the ability to challenge a service charge. But, as a leaseholder, when is it possible to challenge an unfair service charge and how can you do it?
Keep reading to find out.
What is a service charge?
If someone owns a flat then they will share their building with other people. Leaseholders own the flat itself, but they do not own the land it sits on. As a result, the landlord, or freeholder will charge the leaseholder a service charge in return for providing services to a building.
This can cover a wide variety of services such as general maintenance and repairs, buildings insurance, central heating, lifts, lighting, cleaning etc. The payment period for a service charge is generally one year, but payments may have to be made on a more frequent basis.
So, how can you challenge a service charge you believe is unfair? Keep reading to find out.
When can you challenge a service charge?
While there is no limit when it comes to service charges, they must be deemed reasonable. If they are not, then it is possible to challenge them. However, the law does not define ‘reasonable’ in this context.
It is important to note that you do not have to pay for any service charges which are not included in your lease. It is worth double checking your lease to ensure that you are not being charged for anything which is not included in your lease.
The expense also must have been reasonably incurred. If the windows required a repair rather than a complete new replacement, this may not be an example of a reasonable service charge.
The job or service must also have been carried out at a reasonably standard. If some communal tiling starts to come loose after only a few months then this is clearly not an example of a job which was carried out at a reasonable standard.
Finally, if the amount charged for a job or service was not reasonable then this may also be a matter which can be challenged.
How do you challenge a service charge?
As a leaseholder, you have the right to apply to a tribunal to challenge any service charge, or proposed service charge, which you feel is unreasonable. Your landlord can also ask the tribunal if a service charge is reasonable. The cost for applying to the First-tier Tribunal (Property Chamber) is fixed at £100 for all applications “to commence proceedings for a determination of liability to pay and reasonableness of service charges” ((Section 27A of the Landlord and Tenant Act 1985). The hearing fee is fixed at £200.
If you have already agreed or admitted responsibility for paying the charges then you cannot apply to a tribunal. This also applies in cases where the charges have been decided by a court or tribunal, or by arbitration following a dispute.
If your service charge is due, then in most cases it is advisable to continue to pay it. However, at the same time you can advise your landlord then you will be challenging the charge at a tribunal. If you are successful at a tribunal then the landlord will be forced to repay the amount that you overpaid for.
Our thoughts
Ultimately, if you are unhappy with the way your building is managed then it may not make sense to continue applying to the First-tier Tribunal. An alternative to this is to make a Right to Manage application or to buy the freehold. However, neither of these solutions may be possible if not enough of the flats in the building are let to “qualifying tenants”. When it comes to either buying the freehold or making a Right to Manage application, two thirds of the flats in the block must be let to a ‘qualifying tenant’, also known as a leaseholder.
We previously assisted a group of leaseholders on a dispute regarding the service charge passed on by the landlord for repairs to building parts that were considered structural and should not be included in the service charge. To address such an issue, a detailed investigation into the lease agreement content is necessary. Additionally, obtaining a professional surveyor report on the structural issues that need to be remedied would be beneficial in resolving the dispute effectively.
We also advised on a case where the issue stems from the contractor or subcontractor and the building was constructed with defects. This would indeed be unreasonable and unfair to pass the cost of repairs onto the leaseholder. In such a scenario, leaseholders should not be burdened with costs that are a result of construction defects or contractor negligence.
If your lease contains a forfeiture clause for breach of non-payment of service charge, even though you consider the charge is not reasonable, we will advise against not paying it and risking your lease being forfeited.
Have any further questions? Get in touch with us today.
Have questions? Get in touch today!
Call us on 020 7928 0276, phone calls are operating as usual and we will be taking calls from 9:30am to 6:00pm.
Email us on info@lisaslaw.co.uk.
Use the Ask Lisa function on our website. Simply enter your details and leave a message, we will get right back to you: https://lisaslaw.co.uk/ask-question/
For more updates, follow us on our social media platforms! You can find them all on our Linktree right here.
