Have service charges on your property surged? Here’s how to effectively challenge unreasonable increases
- Leasehold sector is largely unregulated and can see service charges double
- Service charges can include annual fees as well as extra costs for major works
- Legal expert explains how to effectively challenge unreasonable charges
I bought my flat in 2015. Since then, my service charges have more than doubled from £1,200 to £2,800.
Can I challenge them, and if so, what is the best of way of doing it? AD
Any charges must clearly be reasonable and if you suspect they are not – and have done your research – there are ways to effectively challenge any increases
Myra Butterworth, MailOnline property expert, explains: Increases in service charges are set to become more of an issue.
As the Government begins to clamp down on other freehold and developer revenue streams such as ground rents, service charges are a proven way for investors to make money.
The sector remains largely unregulated and is open to abuse. It is not uncommon for some property managers to invoice for service fees north of 10 per cent to oversee any major works – and that’s on top of residents’ annual service charge bills.
However, any charges must clearly be reasonable and if you suspect they are not – and have done your research – there are ways to effectively challenge any increases.
The key is to get as much support as possible from other residents and present your case in a reasonable and documented way.
Stephen Gold, a retired judge and author, explains: The service charge that your flat or house lease condemns you to pay is as popular as parking tickets and the Ultra Low Emission Zone. But more exposed to attack.
Whether you are being told by the landlord or their managing agents to fork out for cleaning the stairways, insuring the building or buying a new peaked cap for the porter, you can challenge what you have been asked to pay.
First, the lease wording must catch each item included in the service charge.
If the lease is silent on a particular expense then the landlord is up the creak.
Second, the expense must have been reasonably incurred.
Were brand new windows needed or could the old ones have been repaired at a quarter of the price?
Third, the job or service must have been carried out to a reasonable standard. Did the paint on the front door begin to peel off within six months of the decorator finishing his last sandwich and did the porter skive off early and sleep for most of the time he was present?
And finally, the amount charged must be reasonable. Was the going rate in the area for a gardener who can’t tell the difference between an orchid and a weed really £35 an hour?
Stephen Gold is a retired judge and author
Residents’ association
There is more power to your elbow if you hunt in packs and so try and get any residents’ association or as many of your co-tenants to support any challenge that is to be made.
The Government-funded Leasehold Advisory Service will give free telephone advice to tenants with a lease for over 21 years but only 15 minutes’ worth, so talk fast.
Where appropriate, seek some quotes for overcharged work from other contractors which can be relied on if lower than charged or to be charged.
And download the free service charge residential management code issued by the Royal Institution of Chartered Surveyors, which sets out best practice to be followed by landlords and their managing agents.
It’s akin to the highway code and breach of the code could well help your case.
A letter or email to the landlord or managing agents should be your starter.
Template email to managing agent
A letter to the landlord or managing agents should be your starter. It’s probably not worth investing a postage stamp on it so use e-mail if you can – something along these lines:
‘We refer to your service charge demand for 2020/1. It is our case that the items particularised in the schedule to this letter are not payable by us for the reasons explained in the same schedule.
We have calculated that our liability should be limited to the sum of £x instead of £y as claimed. We invite you to revise the demand to £x and to notify your decision on this within 28 days of the date of this letter.
If you are not prepared to accept £x, it is our intention to make an application to the First-Tier Property Chamber (Residential Property) (or, in Wales, the Leasehold Valuation Tribunal) to reduce the demand under the Landlord and Tenant Act 1985.
Should you make a claim to the county court before the application is issued, we will request the court to transfer the proceedings to the tribunal which we are advised it can be expected to do.
We will apply to the tribunal and/or county court under section 20C of the 1985 Act for an order that prohibits landlord costs and expenses of dealing with the dispute being added to a future service charge.’
The bit above in the template email about section 20C is important. The lease will probably permit the landlord to add their costs and expenses – and that includes lawyers’ bills – to a demand to come.
This could mean that you and your co-tenants end up paying for the privilege of making the challenge, even if you win.
The lease wording would prevail over the usual rule in a county court small claim or in the tribunal that you only get hammered for the winner’s costs if you acted unreasonably. Quite a trap.
The trap is eliminated by a section 20 C order which can be made where it is ‘just and equitable’ to do so. ‘That wording is a fat lot of good,’ you may say. I sympathise. Let me put it this way… you have a good chance of an order being made.
Do I have to pay the service charge if I disagree with it?
What do you do when you dispute the service charge and the deadline for paying it is imminent?
At the least, pay over the amount you say you should have been charged. Just in case the landlord is inclined to play it dirty and tries to induce your mortgage lender to pay on your behalf by threatening to take steps to forfeit your lease, tell the lender about the dispute and not to pay.
Should paying part only make you twitchy, pay the lot and at the same time state to the landlord that you dispute it is all due and are challenging the charge at a tribunal.
If the tribunal backs you, the landlord will have to repay what you have overpaid.
The pandemic can be expected to rear its ugly head in future disputes. Was it reasonable for the managing agents to charge their usual fee when they were not managing as expected because staff were off work or working reduced hours?
Has the benefit of furloughing been factored into their overheads? Should certain services not have been stopped or reduced?
The lease will probably permit the landlord to add their costs and expenses – and that includes lawyers’ bills
Just to give you some hope, here is my favourite successful challenge in a case which went to the Court of Appeal in 2017.
It concerned the replacement of windows and cladding to 10 blocks of flats in Isleworth.
The landlord was the local authority and some of the flats were occupied by former council tenants who had purchased them under the ‘right to buy’ scheme.
One lady received a demand for £55,000 towards this work and some other items.
However, the windows had not been in disrepair but suffered from an inherent design fault that related to a hinge failure.
The hinges could have been replaced for £140 a pair although the problem would have eventually recurred with new hinges.
The new windows that were fitted had a life span of twice that of the UPVC windows which might have been used at a lower cost.
The Court of Appeal ruled that this sort of work, which amounted to improvements, had to be approached differently to repairs.
With improvements, a landlord was to take account of the extent of the interests of the paying tenants, their views and the financial impact on them if proposed works went ahead.
Tenants in a luxury block in Knightsbridge might find it easier to cope with a bill for £50,000 than tenants of a former council flat in Isleworth.
It was not sufficient to simply rely on what the lease said as justification for embarking on a scheme of very expensive improvement work. The tenant who challenged would have to pay part only of the bill.
Happy service charge demands to you all.
- Stephen Gold is an ex-judge and author of ‘The Return of Breaking Law’ published by Bath Publishing. For more on service charge defences, go to www.breakinglaw.co.uk
What are your options if you’re not getting value for money from your property manager?
Disgruntled leaseholders have three main options to address poor property management
1. One solution is to buy the freehold, but the flat owners may not be able to do this for a variety of reasons, such as not having the required minimum number of leaseholders in the block to buy it.
2. A step down from buying the freehold is doing a Right To Manage application where you apply to the First Tier Tribunal (Property Chamber) to deal with disputes regarding property management.
The tribunal is part of the courts system and is a leaseholder friendly route for those who cannot afford to pay lawyers. It means you acquire the right to manage the block and need to set up your own company to oversee it.
In reality, you’ll employ another property management to do the work, which will give you more control over how the block is managed. You will need to seek advice and speak to solicitor.
3. Perhaps the simplest way to deal with poor property managers is ask the Tribunal to decide whether the service charges are reasonable and for this, you will not need a solicitor. If you apply via the Tribunal, it must investigate.
It can result in your monthly property management charges being significantly reduced and you can even end up with money being paid back. You can get free advice at www.lease-advice.org
Source: Read Full Article
