Warning To Landlords After Service Charge Appeals11th Dec 2013
Two recent tribunal decisions involving service charge disputes are a timely reminder to landlords to comply with lease conditions when collecting payments, warn Dorset solicitors Coles Miller.
Both cases involved payments of service charges in relation to long leases. They reinforce the importance of landlords carefully following their lease when seeking to recover service charge costs from tenants.
The two cases were both appeals to the Upper Tribunal.
- Graham Peter Wrigley v Landchance Property Management Ltd  UKUT 0376 (LC)
- London Borough of Southwark v Dirk Andrea Woelke  UKUT 0349 (LC)
Coles Miller landlord and tenant solicitor Nick Leedham said: “Landlords must be sure that they are following the service charge mechanism contained within their lease.
“They must not request service charges in any other way,” he added.
In both of these cases, the leases provided for an on-account service charge payment.
They stipulated that the landlord must provide the tenants with audited accounts as soon as is practicable at the end of each service charge year.
After these accounts are provided, the landlord must refund any overpayments or collect any further monies due promptly.
Failure to do so could put them in breach of their lease. They risk failing to recover the money already spent as a result.
Although the landlord in one of these cases was not entirely unsuccessful, that landlord could not recover all of the costs incurred.
Mr Leedham said: “The mechanism within both leases in these cases is reliant on the landlord demanding a sum on account of estimated charges, followed by audited accounts ‘as soon as practicable’ after the end of each service charge year.
“The message flowing from both of these cases was that this simple mechanism was not followed and the landlords could not recover all of the sums they had incurred as a result.”
These cases involved the lease mechanism. Service charge disputes handled by Coles Miller also involve two further categories:
- Reasonableness: Whether the works are reasonably necessary and whether the sum being levied is reasonable. A landlord cannot get a property completely reroofed and pass the substantial costs on to the tenants when potentially a simple repair would have sufficed. In addition, a landlord must not simply pick an expensive contractor, knowing that ultimately it will be the tenants paying the bill.
- Statutory Checklist: Whether the landlord has consulted the tenants correctly on ‘major works’ and whether the landlord has demanded the charges correctly within the correct time frame.
Dorset-based Coles Miller has two specialist teams to deal with different types of leasehold property disputes.
Disagreements involving tenants on short leases are handled by the firm’s litigation solicitors in Bournemouth and Poole.
Disputes which centre on tenants on long leases are matters for the dedicated Residential Leasehold Property department which is based in Bournemouth.
Coles Miller also assists tenants with the right of first refusal - under the law they are given first option to buy the freehold of their property if the landlord decides to sell.
Solicitors at Coles Miller also help tenants exercising the right to manage their own property.
Tenants have the right to manage their own property if they are dissatisfied with the services provided by the landlords or their agents.
Coles Miller has five offices in Bournemouth, Poole, Broadstone, Charminster and Wimborne.
Its solicitors work predominantly in the Dorset area but also take on residential leasehold property, clinical negligence, personal injury and interest rate swap cases from all over England and Wales.
For further information about resolving disputes over services charges, please contact Associate Solicitor Nick Leedham, for more information, 01202 355697.