Residential Leasehold Service Charges
1.What is a service charge?
In leases granted for 7 years or more the tenant may be asked to pay the landlord towards the costs of repairing, maintaining, insuring and managing a property
Leases may differ as to what exact costs are included. Interpretation of lease clauses can be confusing so if you need to take legal advice it is helpful to have a copy of the lease available. Typically service charges cover costs of structural repair; repair, maintenance and redecoration of common parts of the building or outside areas such as gardens or parking; the buildings insurance and the cost of management of the building. Either this is by the landlord directly or through managing agents. Most leases do not permit the landlord to charge for improvements but only for repairs.
2. How is the service charge calculated?
Your lease will normally show the proportion which you have to pay. Normally this is determined by the size of your flat relative to the others in the block ie a 2 bedroomed flat will usually pay a larger service charge than a 1 bedroomed flat. Many leases set down a minimum amount to be paid in advance and then the balance is demanded at the end of the service charge year when the actual expenses are known.
3. Does the landlord have to consult me in advance of incurring service charge costs?
Yes, for all costs exceeding £250 per flat. In cases of emergency repairs or where it is impractical to carry out a full consultation the Leasehold Valuation Tribunal may allow the landlord to go ahead without consultation if for example, that is necessary to make a building safe.
In all other cases the landlord or his agents have to serve a notice on all the tenants and any recognised tenants association at least 30 days before starting the work setting out:
i) what works are proposedii) why the landlord thinks they are necessaryiii) inviting tenant’s comments and nominations of contractors
Such a Notice also has to be served when the landlord intends to sign a long term agreement for over 12 months eg. with a lift maintenance company or entryphone or communal TV agreement.
The landlord must have regard to the comments submitted by the tenant. He must obtain alternative estimates for the works or long term contracts. At least one estimate must be from a contractor unconnected with the landlord ie not the landlord’s relatives or companies. The regulations encourage the landlord to seek estimates from contractors nominated by the tenants but this is not compulsory.
Once all the estimates have been obtained the landlord has to send a further notice to the tenants setting out the comparative quotes and inviting them to inspect the estimates without making a charge for such inspection. The detailed estimates may be bulky so that it would be impractical to copy them.
The landlord does not have to choose the lowest estimate as he is entitled to take account of the standard of workmanship needed to ensure the long term viability of the building maintenance. Unless he does choose the lowest estimate or the contractor is the one nominated by the tenants the landlord has to give notice to the tenants within 21 days of signing the contract with the contractor.
If the landlord does not carry out the consultation properly then the tenant’s contribution is capped at £250 per flat.
4. Demands for Payment
The landlord must make a formal demand for payment . This must:-
i) contain the name and address of the landlordii) be served on the tenant within 18 months of the cost being incurrediii) be accompanied by a statement in prescribed form of a summary of the tenant’s rights and obligations under the lease
5. Can I check whether the service charges have been calculated correctly?
The tenant is entitled to ask the Landlord to supply a summary of costs for the previous accounting period ( 12month periods.) If there are more than 4 flats the summary must be certified by a qualified accountant unconnected to the landlord. The landlord must supply the summary within 6 months of the end of the accounting period or within 1 month of the request for the summary, whichever is later. The summary must include the costs of works , how much has actually been paid and the total amount of credit still available to tenants ie surplus money not yet spent.
Once the summary has been provided the landlord must allow the tenant facilities to inspect supporting documents such as receipts and to take copies. Inspection must be free, copies may be charged for. A landlord is liable to prosecution and a fine if he does not provide a summary or access to supporting documents.
6. Can I challenge the service charges?
If the tenants cannot resolve their concerns with the landlord or his managing agents directly then any one or more of the tenants can make an application to the Leasehold Valuation Tribunal for a ruling. This step should not be taken lightly as the tenants may have to pay the landlord’s legal and other costs if the Tribunal rules in his favour.