Service charges for leased property in the UK
This article takes a closer look into these service charges from perspectives from both landlord and tenant, and what foremost must be considered.
There is an extensive list of rules and legal terms with regards to what a landlord must follow when it comes to the service charges for leased property, and despite the infliction of positive outcomes that this money can provide, this broad list of regulations can open up much room for error and disputes.
This article takes a closer look into these service charges from perspectives from both landlord and tenant, and what foremost must be considered.
What is service charge for leased property?
Landlords of leased property can apply a charge to their leaseholders/tenants to cover a variety of costs throughout the building.
The specifics of the charges applied should be clearly stated in the original lease/ tenancy agreement. This includes exactly what the cost is for, and how much/ often this will be.
What are service charge funds used for?
Service charge funds will be used to cover costs such as (but are not limited to):
- General maintenance
- Repair costs
- Cleaning services for communal areas
- Upkeep of the building
- Building insurance costs
What causes service charge disputes?
From a landlord’s perspective, service charge can be disputed for some of the following reasons:
- Tenants have been absent from the property
- Tenants are unlawfully subletting the property
- Tenants are neglecting/ refusing to pay the agreed service charge
From a leaseholder/ tenant’s perspective, service charge can be disputed for some of the following reasons:
- Being charged for services that were not originally specified in the lease
- Any services or repairs that have not been completed to an acceptable standard
- Being charged an excessive or unreasonable amount
As a tenant, there are many actions that you can take to correctly handle an issue with your service charge.
If you do not agree with a service charge levied to you, you may write directly to your landlord in order to outline the specific dispute and its reasoning.
All correspondence between yourself and the landlord should be copied and kept, in case in need of evidence in the future should legal action be taken.
If this is to fail in the case that you do not receive a satisfactory response from our landlord, you may then want to file a formal complaint against them. There may be a formal complaints procedure that you may need to follow to do this.
If a solution has not been met after completing the formal complaints procedure with your landlord directly, you may then apply your case to the Leasehold Valuation Tribunal (LVT). These applications will cost you a fee and can range from between £65 and £440 (the cost of your fee will range depending on the cost amount that is being disputed between you and your landlord.
What else is important to consider when disputing a service charge as a tenant?
One of the most important things to remember when you are a tenant disputing a service charge, is that you may not be the only person effected. Neighbours that live in the same building/ have the same landlord could potentially be experiencing similar issues.
Any formal action that is brought to the LVT is much more likely to be addressed not only faster, but much more seriously when multiple leaseholders are unhappy with the same dispute. This can also mean the cost of the legal action you are taking can be divided between yourself and others.
In addition to this, the key will be to be prepared and organised. Making your case for the dispute will stand much stronger when you have everything you may need. Having paper copies of any/ all correspondence between yourself and the landlord is very important.
If the dispute is over charges for repair work, you may also wish to ensure you can provide alternative quotes from outside sources to build your case, in order to demonstrate the excessive cost in question.
The most crucial factor when disputing with your landlord is knowing what rules and legal issues you may run into. Seeking legal advice from a UK solicitor can help you correctly assess your position. And in case of the dispute proceeding to the Leasehold Valuation Tribunal, making sure you have strong legal representation with experienced solicitors can mean the difference between a win and a loss.
What is important to consider when disputing a service charge issue as a landlord?
As a landlord, it is important to ensure you are aware of all the regulations that must be followed to avoid any opportunity for your tenants to dispute any service charges that you apply.
There are certain thresholds and rules that can sometimes confuse an agreement, which can inevitably lead to an unnecessary dispute.
Some of these may include:
- Landlords must make all service charge demands in writing, accompanied with a clear summary of the leaseholder/ tenants’ obligations. (If this is not done, the service charge may not have to be payable)
- Landlords must consult the leaseholder if they are carrying out work that the leaseholder would be charged more than £250 through service charge. (If they are not consulted, the charge may not have to be payable and may only be limited to a maximum charge of £250)
- Any long-term agreement to conduct work agreed to by the landlord that may result in costing the leaseholder over £100 per year, must be made aware to the tenant, and consulted on
- Demands for service charge monies must be made within an 18-month period from when the particular work has been completed. (After this period, the tenant may not be liable to pay)
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Above are just some of the overall regulations that must be followed with regards to service charge on leased property in the UK.
For a more detailed understanding, it is always recommended to seek advice from an experienced professional to ensure you can correctly manage your levied service charge toward your tenants, while making certain to avoid any disputes and costly errors.
