Introduction
Service charges are a frequent source of contention between leaseholders and freeholders (or their appointed management companies) in leasehold properties. These charges are intended to cover the costs of maintaining and managing the building and any communal areas. However, disagreements often arise concerning the amount, calculation, and administration of these charges.
Typical Areas of Dispute
1. Reasonableness of Charges
Under the Landlord and Tenant Act 1985, all service charges must be reasonable. Leaseholders frequently challenge charges they believe to be excessive or not reflective of the actual services provided. Common issues include:
- Overcharging for routine maintenance or repairs
- Charging for services not actually rendered
- Inflated management fees
2. Calculation and Apportionment
Disputes often arise over how service charges are calculated and apportioned among leaseholders. Problems may include:
- Incorrect allocation of costs between leaseholders
- Disagreement over the method of calculation as set out in the lease
- Inclusion of costs that should not be recoverable under the lease terms
3. Transparency and Consultation
Leaseholders are entitled to transparency regarding how service charges are spent. The Landlord and Tenant Act 1985 requires landlords to provide detailed accounts and, in certain cases, to consult leaseholders before carrying out major works (Section 20 consultation). Disputes may occur when:
- Landlords fail to provide adequate accounts or receipts
- Proper consultation procedures are not followed before major works
- Leaseholders are not given the opportunity to comment on proposed works or costs
Legal Framework
The Landlord and Tenant Act 1985 provides the statutory framework governing service charges. Key provisions include:
- Section 19: Service charges must be reasonable, and works or services must be carried out to a reasonable standard.
- Section 20: Landlords must consult leaseholders before undertaking qualifying works or entering into long-term agreements above a certain cost threshold.
Resolution of Disputes
When disputes cannot be resolved informally, leaseholders or landlords may refer the matter to the First-tier Tribunal (Property Chamber). The Tribunal has the authority to determine:
- Whether a service charge is payable
- The reasonableness of the amount charged
- Whether proper consultation has taken place
Conclusion
Service charge disputes are common in leasehold properties, often centring on reasonableness, calculation, and transparency. Both leaseholders and landlords should be aware of their rights and obligations under the Landlord and Tenant Act 1985. Where disagreements persist, the First-tier Tribunal provides an accessible forum for resolution.
For further information on disputes regarding service charges, please contact: james@naylorllp.co.uk or find out more about our landlord and tenant services today.
The information provided in these articles is for general guidance and informational purposes only. It does not constitute legal advice and should not be relied upon as such. While every effort has been made to ensure the accuracy of the content at the time of publication, laws and regulations may change. For advice specific to your circumstances, please consult a qualified legal professional. No liability is accepted for any loss or damage arising from reliance on the information contained herein.