Service charges are a common feature with houses or flats which have been bought via a long lease. They are designed to cover the running costs your landlord will incur in keeping shared areas and other facilities in good order. For example, entrances, hallways and stairwells, lifts, gardens and carparks.
Your lease will contain details of the services you are required to pay for and how frequently you will be billed. You can only be forced to pay for services your landlord is contractually obliged to provide and you have the right to challenge charges that have not been demanded in accordance with prescribed statutory rules and the procedure set out in your lease, or which are assessed as being unreasonable.
Disputes arise frequently and have the potential to get out of hand quickly unless professional advice is taken at any early stage.
In this article, civil litigation lawyer and residential service charge expert, Lisa Waghorne, at Pengelly & Rylands in Tenterden, provides an overview of how service charges work, the rules that exist to protect you and your options for achieving a resolution where a dispute arises.
Causes of disputes
In most cases there will be no obligation on your landlord to limit what they spend on the services they have agreed to provide, but there is an obligation on them to ensure that any costs incurred are reasonable and services are carried out to a reasonable standard.
In view of this, most disputes arise because of concerns that:
- the service charge demand rules have not been followed;
- a demand has been made for services your landlord is not obliged to provide under the terms of your lease, such as works of improvement;
- the costs being claimed seem excessive; or
- the standard of services provided is not good enough.
How service charges work
When the lease for your property was prepared, your landlord will have agreed to perform certain services for your benefit, such as carrying out general repairs and maintenance, obtaining buildings insurance and ensuring communal areas are heated and well lit. By signing the lease you will have agreed to pay your share of these costs along with any other leasehold owners bound by the same service charge provisions.
Details of service charge costs will be included in regular demands issued by your landlord and you have the right to question and challenge these if you think they may be wrong.
The rules that need to be followed
For a service charge to be recoverable, your landlord must ensure that:
- demands are in writing and confirm the landlord’s name and address (unless a managing agent was joined into the lease to deal with payments);
- all demands and reminders are accompanied by a summary of your rights and obligations in the prescribed form; and
- you are supplied with a summary of service charge costs and allowed to inspect supporting receipts or documents upon request.
There is no obligation on you to pay unless and until a properly formulated demand has been issued. Where the services in question have already been provided, there is no obligation to pay at all unless:
- a demand is issued within 18 months of the costs of those services having been incurred; or
- a notice is issued within the same 18 month period advising you that such costs have been incurred and that you will be required to contribute to them via a service charge.
Your landlord is also obliged to consult you before:
- committing to undertake maintenance or repair works for which you or any other leaseholder will be asked to contribute over £250; or
- entering a contract with an independent organisation lasting more than 12 months for which you or any other leaseholder will be asked to contribute over £100.
Your options when a dispute arises
When a dispute arises, your options for dealing with it will depend on what the dispute is about. A solicitor will consider your circumstances and advise on the best approach, which may include entering into correspondence with your landlord initially, moving on to mediation or some other type of non-court based dispute resolution procedure and then ultimately, if nothing else works, taking your case to a property tribunal.
An exchange of correspondence is likely to be effective in cases where your landlord is clearly in the wrong. For example, if they have failed to comply with the rules around the service of demands or have attempted to charge you for services you are not obliged to pay for, such as works of improvement not recoverable under the terms of your lease.
Mediation may be effective where there is ambiguity around the scope of service charge provisions and you and your landlord are prepared to work together, with the help of a mediator and the support of lawyers, to try to find a way forward to reach an acceptable compromise.
Taking matters to a tribunal will always be a measure of last resort, but it is likely to be appropriate in cases where positions have become entrenched or where the matter in issue is so complex or contentious that it requires a judge to determine who is in the right and who is in the wrong.
Whatever course of action is right for you, a solicitor will ensure your concerns are properly aired, your case is well presented and you achieve the best possible outcome.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.