Service charges, administration charges, ground rent, recognised tenants associations and forfeiture.
For a brief summary see the Service charges fact sheet.
There are additional advice guides on Section 20 Consultation for Private Landlords, Resident Management Companies and their Agents and Section 20 Consultation for Council and other public sector landlords.
This advice guide is not meant to describe or give a full interpretation of the law, as only the courts can do that. And it does not cover every case. If you are in any doubt about your rights and responsibilities, you can contact us or a specialist solicitor for further advice. Depending on your circumstances, it may be possible to get more detailed advice and representation through Advocate – a charity which finds people free legal help from barristers.
This booklet covers the following.
- Service charges
- Administration charges
- Ground rent
- Estate management scheme charges
- Recognised tenants’ associations
- Forfeiture and possession
Unless we tell you otherwise, it is mainly written for leaseholders, including tenants, who may pay variable service charges and administration charges.
The advice provided applies to you if your lease means you must pay a service charge which changes in accordance with the costs of works undertaken and services provided, or if the landlord asks you to pay administration charges. It also applies if you have to pay charges to an estate management scheme.
References to ‘the tribunal’ in this guide mean:
- the First-tier Tribunal (Property Chamber), in England; or
- the Leasehold Valuation Tribunal, in Wales.
Service charges are one of the main areas for dispute between leaseholders and landlords. This booklet sets out what the law says about various matters, including:
- setting and recovering service charges;
- your and your landlord’s right to challenge or support the charges before the tribunal;
- your landlord’s obligation to consult you before carrying out qualifying work or entering into qualifying long-term agreements;
- how demands on leaseholders are controlled by law; and
- alternative dispute-resolution methods, such as mediation.
What are service charges?
Landlords charge service charges to recover their costs in providing services to a building. The way in which your service charge is organised (for example, what it covers and how it is worked out) is set out in your lease or tenancy agreement. The charge normally covers the cost of services such as general maintenance and repairs, buildings insurance and, if these are provided, central heating, lifts, porters, and lighting and cleaning shared areas and so on. The charges may also include the costs of management services provided by the landlord or by a professional managing agent, and contributions to a reserve fund.
The lease will set out details of what the landlord can and cannot charge for and the proportion of the charge that you will have to pay. The landlord, or sometimes a management company named in the lease, provides the services and you and any other leaseholders pay for them. The landlord will generally make no financial contribution to the services, but sometimes they have to pay for the services before recovering their costs from leaseholders.
Some landlords charge for giving you permission to make alterations or for sub-letting.. These are administration charges and are dealt with separately.
Fixed or variable service charges?
Originally, the costs of services were included in rent payments, but as costs and inflation increased, landlords wanted to make sure they recovered all their costs every year. Some old leases still allow a fixed charge to be charged, regardless of the actual costs to the landlord. However, most service charges are based on the actual or estimated cost of the services, and so may well change from year to year. These are known as variable service charges.
Service charge structure
Generally, the landlord must provide certain services under the lease, and can charge a service charge for doing so.
The lease will usually give the dates of the service charge period and how often the payments are due. The service charge period is often a year, but payments may be due every six months or every three months, or in some cases may be charged after the costs have been run up. Your lease will usually set out the percentage or proportion of the service charge that you must pay. For example, you may have to pay a share of the charge based on the square footage of the flat as a proportion of the whole building. Or, your share of the charge may be based on a simple percentage of the total service charge or, in older leases, it may be based on the rateable value of the flat as a proportion of the rateable value of the whole building. Sometimes the lease just states that each leaseholder must pay a ‘fair’ or ‘just’ proportion of the service charge. If different groups of tenants benefit from different services, there may be different service charges for the different groups.
Your lease will say whether you must make advance payments and, if so, whether these are based on the previous year’s cost or an estimate of the cost in the year to come. There will often be a final charge due at the end of the year when the actual costs are known, if these are not covered by the payments you (and any other leaseholders) have made. In this situation, the landlord will send you a bill asking for your share of the shortfall. If the total payments leaseholders have already made are more than the actual costs, depending on what it says in the lease the extra money may be:
- used to reduce next year’s charge;
- refunded; or
- paid into a reserve fund.
If the leases in a block do not provide for advance payments, that can present a real difficulty for everyone involved. In theory, the landlord has to buy all the services before they can recover their costs from the leaseholders. It is better for the landlord if they can ask for service charges before they have to pay for work and services. The amount leaseholders pay would then be based on an estimate of the costs. At the end of the financial year, when the landlord knows the actual costs, they would either ask leaseholders to pay any shortfall (if the actual costs are more than the service charges paid) or refund the difference to leaseholders (if the actual costs are less than the service charges paid). If the lease does not allow the landlord to ask for service charges in advance to pay for major work, they may have to borrow enough money to pay for the work, and the lease may allow them to recover the costs involved (for example any interest charged) through the service charges.
Limits on service charges
Service charges can go up or down without any limit, but the landlord can only recover costs which are reasonable. You have the right to apply to the tribunal to challenge any service charges that you feel are unreasonable.
When considering buying a leasehold flat, it is important to find out what the current and future service charges are likely to be. Your solicitor will normally ask the seller for this information.
What are reserve or ‘sinking’ funds?
Many leases allow the landlord to collect money in advance to create one or more reserve or ‘sinking’ funds. The purpose of these funds is to build up a sum of money to cover the cost of irregular and expensive work such as decorating the outside of properties, carrying out structural repairs or replacing the lift.
There are usually two reasons for maintaining a reserve fund. The first is to make sure that all tenants contribute to the cost of major work, not just those who are living in the building at the time it is carried out. The second is to even out the yearly charges, avoiding large one-off bills, and to help leaseholders budget for these costs. However, even if there is a reserve fund in place, this will not always be enough to cover the full cost of major work. If this is the case, leaseholders are likely to have to make up the balance through the service charge.
Leases sometimes say how much must be contributed to the reserve fund each year, but usually they do not and it is left to the landlord to decide the amount of the contributions. However, contributions must be reasonable and, because they are just like any other service charges, you have the same right to challenge them at the tribunal if you believe they are unreasonable.
Reserve funds should earn interest because they are generally held for a longer period than day-to-day service charges, and this goes some way to meet increasing budget costs. There is more information on holding service charges and reserve funds in the paragraph ‘Holding service charges – trust accounts’.
If you sell your flat, you will not usually be able to claim back any contributions you have paid to the reserve fund, but some leases may allow this.
The power to recover service charges
It is important to understand that your landlord’s power to charge a service charge and your obligation to pay it are governed by the conditions in the lease. The lease is a contract between you and your landlord, and you do not have to pay anything that is not included in your lease.
Your lease may contain specific terms which say your landlord must carry out certain work or provide certain services. You only have to pay a service charge for the work or services if the lease contains a clause giving your landlord the power to recover the cost of the work or services from you. If the costs can be recovered through a service charge, the lease should say whether you should pay this before or after the work is carried out or the services are provided, and whether you should pay it as regular payments, perhaps once a year or on a set day every three months, or whether it should be charged once the costs have been run up. Your lease may be very specific in its wording, setting out quite precisely which work or services your landlord can charge for. Or, the clauses may be very general and simply refer to the costs of repairing and maintaining the structure of the building.
You can generally assume that a service charge will apply and that it will cover the costs of repairing and maintaining the fabric of the building, the lift, the boilers and so on, as well as cleaning, lighting and maintaining shared areas. What else the service charge covers will depend on the type of services provided. In some cases, the service charge is worked out simply by referring to the landlord’s costs in meeting their obligations, as set out in one of the schedules to the lease.
There are a number of issues to consider if your lease allows your landlord to apply a service charge to recover their costs.
- Improvement work: As a general rule, leases in the private sector do not state that leaseholders must contribute to costs of work to improve the building. However, leases from local authorities and housing associations often do contain such clauses.
- Management costs: The fact that the landlord, or a managing agent acting on their behalf, manages the building does not automatically mean that they can recover management charges. They can only do this if the lease says they can. Your lease may state that the landlord can recover a percentage of their costs, or may just refer to a ‘reasonable’ amount.
- Legal costs: As with management costs, these must be included in the lease. If your lease allows your landlord to recover legal costs through a service charge, they may well include the cost of recovering arrears.
- Caretaker and porter: If your lease allows your landlord to recover the costs of employing a caretaker or porter, it should be clear what is included in the service charge. For example, it should state whether or not the caretaker or porter will live on the premises, and if they will, whether their accommodation must be provided rent-free. The cost of a live-in caretaker or porter will normally be higher than if they don’t live on the premises.
- Heating, cleaning, garden maintenance and alarm systems: Again, if your landlord must provide these services, and you must pay for them, this should be included in your lease (and usually will be). In some cases, this may be done simply by referring to the landlord’s obligations, as set out in one of the schedules to the lease.
The general principle of a lease is that the landlord does not have to provide any service which is not covered by the lease, and the leaseholder does not have to pay for anything that is not specifically set out in the lease.
If you are in any doubt about whether you need to pay a charge, check the wording of your lease and get advice, if necessary, from a solicitor who specialises in this area of the law.
The need to be reasonable
Usually a lease simply allows the landlord to recover their costs for maintaining and repairing the building (including any management costs), and for general upkeep, from the leaseholders. They can claim back any money they have spent, but cannot normally make a profit from managing the building.
The law also expects the landlord to behave in a ‘reasonable’ manner regarding spending on the building. The landlord has a long-term interest in maintaining the condition and value of their investment. You may have a much shorter-term view if you only intend to live in the property for a few years. These different viewpoints often lead to dispute.
A landlord does not usually have to keep the costs to a minimum. However, the law states that service charges must be ‘reasonable’ and, where costs relate to work or services, the work or services must be of a reasonable standard.
Applying to the tribunal
Both you and your landlord have a right to ask the tribunal whether a charge, or a proposed charge, is reasonable. However, the law does not define what is ‘reasonable’. The tribunal will consider the evidence presented and then make a decision on the matter.
You and your landlord can apply to the tribunal for a decision on whether a service charge is reasonable, regardless of whether or not you have already paid the charge. Your application can relate to costs your landlord has already paid for work, services or other charges, or can relate to an estimate or budget. However, if you have agreed or admitted responsibility for paying the charges, or the charges have been finally decided by a court or tribunal, or by arbitration following a dispute, you and your landlord cannot apply to a tribunal.
The tribunal is likely to ask the following questions.
- Considering the circumstances, was it, or would it be, reasonable for the landlord to have to pay the costs?
- If so:
- was the standard of the work carried out or services provided of a reasonable standard (or will it be)?
- what are the landlord’s procedures for assessing and controlling the costs, including supervising the project?
You and your landlord can present evidence on any of these matters and question the evidence given by the other person.
The tribunal may also decide:
- whether the service charge must be paid under the lease;
- who must pay the service charge and who they must pay it to;
- the date on which the service charge must be paid; and
- how the service charge can be paid (for example, by direct debit or standing order).
Full details of the procedures and requirements for applying to the tribunal are set out in our advice guide Application to the First-tier Tribunal (Property Chamber).
The Landlord and Tenant Act 1985 sets out the basic rules for service charges. It defines what is considered a service charge, and sets out requirements for making sure costs are reasonable and for landlords to consult leaseholders before entering into any agreement for work or services which would lead to a service charge.
Section 18 (1) of the act defines a service charge as ‘an amount payable by a tenant of a dwelling as part of or in addition to the rent
- which is payable, directly or indirectly, for services, repairs, maintenance, improvements or insurance or the landlord’s costs of management; and
- the whole or part of which varies or may vary according to the relevant costs.’
The costs of the services, repairs, maintenance, improvements, insurance and management must be reasonable, and the tribunal may decide whether they are.
Please note: the definition in section 18 (1) does not overrule the lease. The item or service must still be included in the lease for your landlord to be able to charge for it.
Demands for service charges
Demands for service charges which you must pay to your landlord must be in writing and must contain your landlord’s name and address. If your landlord’s name and address are not on the demand, you do not have to pay the service charge until you are given this information. (The name and address of the managing agent will not count unless they are also the landlord.) If your landlord’s address is outside England or Wales, the demand must contain an address in England or Wales which you can use to send notices to your landlord.
This does not apply if you must pay the service charge to a management company named in the lease, rather than directly to your landlord. The demands must still be in writing, but they do not need to contain your landlord’s name and address.
Normally the lease will allow landlords to ask for the service charge before work is carried out or services are provided, but there will be times when the demands are issued afterwards. In these cases, your landlord must issue the demand within
18 months of when they become liable to pay for the works undertaken or the services provided, which may be either by the presentation of an undisputed invoice from the contractor or supplier or actual payment of the invoice. If they issue the demand later than this, they cannot recover the costs unless they serve a notice on you within 18 months of the landlord becoming liable to pay for the works undertaken or the services provided , stating that they have run up the costs for the work or services and that you will have to contribute to those costs by paying a service charge (section 20B of the Landlord and Tenant Act 1985).
With any service charge demand, landlords must provide a formal summary of rights and obligations (the content and form is set by Parliament).
Holding service charges – trust accounts (section 42 of the Landlord and Tenant Act 1987)
When collecting service charges or holding sinking or reserve funds, the landlord is holding leaseholders’ money until they need to spend it in the future for the benefit of the leaseholders – in other words, they are acting as trustee for the money. By law, if several leaseholders must contribute to the same costs under the terms of their leases, the money they pay must be held in trust and ideally in one or more accounts.
Summary of service charges accounts (section 21 of the Landlord and Tenant Act 1985)
Leaseholders, or the secretary of a recognised tenants’ association, have a legal right to ask the landlord for a summary of the service charge account. The request must be in writing and can be sent directly to the landlord or to the managing agent. It can ask for a summary of the relevant costs relating to the service charges for the last accounting year or, if accounts are not kept by accounting years, the past 12 months.
If a landlord receives a request for a summary of the service charge account, they must provide it within one month (or within six months of the end of the 12-month accounting period, whichever is later).
The summary should show:
- how the costs relate to the service charge demand, or that they will be included in a later demand (if this applies);
- any items which the landlord did not receive a bill for during the accounting period;
- any items which the landlord received a bill for but which they didn’t pay during the accounting period;
- any items which the landlord received a bill for and which they paid during the accounting period; and
- whether any of the costs relate to work for which an improvement grant has been or will be paid.
If the service charge must be paid by the leaseholders of more than four homes, the summary must be certified by a qualified accountant as a fair summary and the landlord must give the accountant adequate accounts, receipts and other documents to support this. If the landlord is a local authority one of their officers who is a qualified accountant may certify the summary, but in all other cases, the accountant must be independent of the landlord.
Rights to further information (inspecting accounts and receipts) (section 22 of the Landlord and Tenant Act 1985)
Leaseholders also have the right to inspect documents relating to the service charge to provide more detail on the summary. Within six months of receiving the summary, leaseholders (or the secretary of a recognised tenants’ association) can write to the landlord to ask if they can access and inspect the accounts, receipts and any other documents that are relevant to the service charge information in the summary and to ask them to provide facilities to copy these.
The above right applies even if the summary was provided as end-of-year statement of account, rather than in response to a formal request for a summary under section 21 of the Landlord and Tenant Act 1985.
Landlords must provide facilities for inspecting the documents within one month of the leaseholder’s or secretary’s request, and these facilities must be available for two months.
Leaseholders have other rights to investigate the service charges and the way the building is managed – the Leasehold Reform Act 1993 gives them the right to ask for a management audit, and under the Housing Act 1996 they have the right to appoint a surveyor. Full details of those rights are set out in our advice guide Appointment of a Surveyor, Management Audits.
What happens if my landlord fails to provide a summary or allow access to further information?
If your landlord fails to provide a summary or access to inspect and copy supporting documents following a request from you or the secretary of a recognised tenants’ association, and they do not have a reasonable excuse for this, they are committing a summary offence and are liable for a fine of up to £2,500 (level 4 on the standard scale of fines for summary offences) if they are convicted. The local housing authority has the power to start legal proceedings against the landlord, or you can start them. Local authorities are exempt from prosecution, but registered providers (housing associations) are not.
By law, landlords must consult leaseholders before carrying out work above a certain value or entering into a long-term agreement for providing services.
This is a complex procedure which is discussed in detail in the following guides.
Service charges: summary and conclusions
The general principle is that the landlord decides how to spend the service charges, which is the leaseholders’ money. This applies in all situations where flats are managed centrally and still applies if the leaseholders themselves manage their building (for example, where there is a residents’ management company). However, the law protects people who pay service charges and sets the following responsibilities which the landlord must meet.
- Charges must be reasonable. (You can challenge them at the tribunal if you don’t believe they are.)
- The landlord must consult you before starting any work which will cost you more than £250 (qualifying work), or entering into a long-term contract which will cost you more than £100 for any leaseholder in any accounting year (a ‘qualifying long-term agreement’).
- Demands for payment must include the landlord’s name and address and be accompanied by a summary of your rights and obligations.
- Service charge funds must be held in trust.
- Landlords must account for all spending during the year by providing a summary of relevant costs if you or the secretary of the recognised tenants’ association asks for this in writing. After the landlord has provided the summary, you or the secretary can inspect the relevant documents.
The Commonhold and Leasehold Reform Act 2002 introduced rights relating to administration charges. These are defined in the 2002 act as ‘an amount payable by a tenant as part of or in addition to rent, which is payable directly or indirectly for:
- the grant of approvals under the lease or applications for such approvals;
- for or in connection with the provision of information or documents by or on behalf of the landlord or a party to the lease other than the landlord or tenant;
- costs arising from non-payment of a sum due to the landlord;
- costs arising in connection with a breach (or alleged breach) of the lease.’
Any administration charge the landlord asks for must be reasonable and the landlord must provide a summary of your rights and responsibilities relating to administration charges with the demand. If the summary is not included, you do not have to pay the charge until the landlord issues the demand with the summary.
In some cases, your lease may also allow your landlord to recover from you legal costs arising as a result of court action or a tribunal decision. These costs may arise as a result of you:
- failing to pay an amount that was due to the landlord; or
- breaking (or allegedly breaking) the terms of the lease.
If the costs result from one of the situations listed above, they will be classed as an administration charge. Administration charges should be reasonable, and you can challenge them by applying to the tribunal for a decision if you do not believe they are fair. However, as with service charges, you cannot challenge an administration charge which:
- you have already agreed or admitted responsibility for paying;
- has been (or will be) referred to arbitration following a dispute; or
- has already been decided by a court or tribunal.
Information about your landlord
You are entitled to know the identity of your landlord. You can ask for your landlord’s details by writing to the person who demands the rent, the person who last received the rent or the person who acts as the landlord’s agent. The person you ask must give you a written statement of the landlord’s name and address within 21 days of receiving your request.
If your landlord is a company, you can write to your landlord, your landlord’s agent, or the person who demands the rent, asking for the name and address of every director and the company secretary. The person you ask must give you a written statement of this information within 21 days of receiving your request.
What happens if my landlord fails to provide details of their identity or the identity of the directors and company secretary (if the landlord is a company)?
If your landlord fails to provide the relevant information following your request for details of their identity or the directors’ and company secretary’s names and addresses (if the landlord is a company), and they do not have a reasonable excuse for this, they are committing a summary offence and are liable for a fine of up to £2,500 (level 4 on the standard scale of fines for summary offences) if they are convicted. The local housing authority has the power to start legal proceedings, or you can start them. Local authorities are exempt from prosecution, but registered providers (housing associations) are not.
Insurance by the landlord
Usually, your lease will allow your landlord to arrange the insurance of the building (not the contents) and charge you the cost of this as a service charge. This is the normal arrangement for buildings that are divided into flats because it is important that there is one policy which covers all risks to the whole building. The cost of the insurance is normally included as part of the service charges, so it can be challenged at, or confirmed by, the tribunal in the usual way.
If a service charge consists of or includes an amount for insurance, you (or the secretary of a recognised tenants’ association, if this applies) can ask your landlord for a written summary of the policy or an opportunity to inspect and take copies of the policy.
The request must be made in writing and the landlord must provide the summary and allow you or the secretary to inspect and take copies of the policy within 21 days of receiving the request.
- If the request is for a written summary, the summary must show:
- the amount the property is insured for;
- the name of the insurer; and
- the risks covered by the policy.
You, or the secretary, can only ask the landlord to provide the summary once in each insurance period (usually a year).
- If you (or the secretary of a recognised tenants’ association) ask to see the policy, the landlord must provide reasonable access for you to inspect the policy and any other relevant documents which provide evidence of insurance premiums paid (including receipts) and facilities for copying these. Or, you can ask the landlord to take copies of the policy or documents (or extracts from these) and send them to you or the recognised tenants’ association or arrange for them to be collected.
Any costs related to providing facilities to inspect and copy insurance documents may be treated as a management cost and so can be recovered through service charges.
What happens if my landlord fails to provide insurance information or reasonable access to insurance documents?
If your landlord fails to provide copies of insurance documents or facilities for you or the secretary to inspect or copy insurance documents (depending on the request), and they do not have a reasonable excuse for this, they are committing a summary offence and are liable for a fine of up to £2,500 (level 4 on the standard scale) if they are convicted. You should get advice from a solicitor who specialises in this area of the law if you are considering action against your landlord in relation to this.
Insurance through the landlord’s nominated or approved insurer – houses
(Commonhold and Leasehold Reform Act 2002, section 164)
Some leases, usually those relating to houses, state that the leaseholder has to insure the property with an insurer nominated or approved by the landlord. However, under the above act the leaseholder of a house is entitled to arrange the insurance with their own choice of insurer, as long as they give the landlord notice and meet certain requirements relating to the cover arranged. Please note this only applies to leasehold houses, not flats.
If this applies, the insurance you arrange must:
- be with an ‘authorised insurer’, which means an insurer operating within the requirements of the Financial Services and Markets Act 2000;
- cover the interests of both you and the landlord;
- provide cover of at least the amount shown in the lease; and
- cover all the risks the lease says must be covered.
As long as you meet these conditions, you do not have to arrange insurance through an insurer the landlord has nominated.
You can arrange your own insurance, but must serve a notice of cover on your landlord no later than 14 days after arranging the insurance a). The notice must be in the prescribed form (see below) and must state:
- the name of the insurer;
- the risks covered by the policy;
- the amount and period of the cover;
- the address of the house insured;
- the registered office of the authorised insurer;
- the reference number of the insurance policy;
- how often premiums are due;
- the amount of any excess on the policy (the first part of any claim that the policyholder has to pay) and what the excess applies to;
- whether the policy has been renewed (and the renewal date if so);
- a statement that you are satisfied that the policy covers your interests; and
- a statement that you have no reason to believe that the policy does not cover your landlord’s interests.
Telling the insurance company about a possible claim
You can tell the insurance company about a possible claim. You should do this in writing, and should provide a brief description of the damage. (There is a link to a template for giving this notice below.) You need to do this within six months, or any longer period if the policy allows this. This right is meant to help you if your landlord is not making a claim, or is delaying putting in a claim, and you are concerned that the time limit for making the claim may run out. This right does not give you the right to make a claim under the policy or to force your landlord to do so.
Ground rent is a payment you make to your landlord as a condition of the lease. As with any rent, if you must pay ground rent this will be stated in your lease and you should pay it by the due date. Although it is your responsibility to pay the ground rent, the landlord must give you notice of it beforehand using a form prescribed by the Landlord and Tenant (Notice of Rent)(England) Regulations 2004 and the Landlord and Tenant (Notice of Rent)(Wales) Regulations 2005 (see the link below). Landlords cannot legally recover ground rent unless they have asked for it first.
Notice of ground rent
You are not liable to pay the ground rent unless your landlord has asked for it using the prescribed notice of demand form.
The notice must state:
- the amount of the ground rent due; and
- the date on which you must pay the ground rent or, if the demand is sent after the due date, the date when it would have been due under the terms of the lease.
The date the payment is due must not be either less than 30 days or more than 60 days after the date the notice is served, or before it is meant to be paid in line with the lease. The landlord can send the notice by post to the address of the house or flat it relates to, unless you have already given the landlord a different address.
The notice of demand must also include:
- your name;
- the period covered by the demand;
- the name and address of the person or company the payment should be made to;
- the name and address of the landlord (or agent if this applies) who is giving the notice; and
- certain supporting information (included as notes to the notice).
Your landlord cannot begin any legal steps for recovering the rent, including action for forfeiture (the landlord’s right to end the lease and re-enter their property if you break the terms of the lease) and possession, unless they have already served the notice of demand (in the correct format) and given you the correct period of notice, and you have failed to respond.
Estate management scheme charges
An estate management scheme allows landlords to keep some management control over properties, facilities and shared areas if the freehold has been sold to the leaseholders. These schemes are quite rare. Since 1976, it is no longer possible to create new ones for houses, and since 1999 they can only be created for flats in very limited circumstances.
In many cases, the aim of a scheme will be to make sure that the appearance and quality of the area as a whole is kept to the same standard. However, a scheme can also include conditions relating to the upkeep of shared gardens or other shared facilities or areas. If this is the case it may allow the landlord to recover certain charges.
You can challenge charges made under a scheme in a similar way to service charges. You can apply to the tribunal to vary the scheme itself on the grounds that a charge made under the scheme is unreasonable or that any formula used to calculate the charge is unreasonable. You and the landlord can also apply to the tribunal for a decision as to whether or not a charge should be paid and, if so, how much the charge should be, who should pay it and who they should pay it to, and how it can be paid.
As usual, you and the landlord cannot apply to the tribunal to challenge an estate management charge which:
- you have already agreed or admitted responsibility for paying;
- has been (or will be) referred to arbitration under an arbitration agreement following a dispute; or
- has already been decided by a tribunal.
Recognised tenants’ associations
What is a tenants’ association?
A tenants’ association is a group of tenants (normally leaseholders) who hold houses or flats on leases/tenancies from the same landlord on similar terms, which contain provisions for the payment of service charges etc.
What is a Recognised Tenants’ Association?
A Recognised Tenants’ Association is one where the members have come together to represent their common interests so that the association can act on the tenants’ behalf, and which has been formally recognised. An association is recognised either by notice in writing from the landlord to the secretary of the association, or by application to the Tribunal.
Where estates are concerned, it may be possible for more than one association to be recognised, for example, for separate blocks of flats within the estate, providing there is no duplication and the interests of the leaseholders/tenants can be seen to differ.
What powers does a Recognised Tenants’ Association have?
The secretary of a Recognised Tenants’ Association can, with the members’ consent, act on behalf of its members in respect of a number of issues, some of which are in addition to that of an individual member. These are:
- to ask for a summary of service charge costs incurred by their landlord for which the members have to pay a service charge (section 21 of Landlord and Tenant Act 1985);
- to inspect the relevant accounts and receipts (section 22 of Landlord and Tenant Act 1985);
- to be sent copies of estimates obtained by the landlord for either long-term agreements to be entered into or intended qualifying work on their properties (section 20 of Landlord and Tenant Act 1985);
- to propose names of contractors to be included in any tender list when the landlord wishes to enter a long-term agreement or carry out qualifying works (section 20 of Landlord and Tenant Act 1985);
- to ask for a written summary of the insurance cover and inspect the policy (Schedule to the Landlord and Tenant Act 1985);
- Download a template for the leaseholder’s notice for a written summary of insurance cover under section 30 and paragraph 2 of the Schedule to the Landlord and Tenant Act 1985
- to be consulted about the appointment or re-appointment of a managing agent (Section 30B of Landlord and Tenant Act 1985).
What happens when the landlord changes?
Where a Recognised Tenants’ Association exists and the landlord changes, a notice should be served on the new landlord indicating the existence of the Certificate of Recognition if the association still wishes to be consulted about issues.
How does a tenants’ association seek contact information about other tenants in the building? (Please note this item applies in ENGLAND ONLY)
The secretary of a tenants’ association has a right to obtain from the landlord contact information for other leaseholders in a shared block provided that leaseholders have individually consented to their information being made available in this way.
The secretary can serve a request notice on the landlord asking them to provide the following information about relevant qualifying tenants who are not already members of the association.
- Their name;
- The address of the dwelling for which they pay a service charge;
- Any address to which service charge demands for them are sent;
- Their email address
How must the landlord respond to a request notice? (Please note this item applies in ENGLAND ONLY)
The landlord has a number of duties following receipt of the request notice-
Duty 1: Acknowledgment of request notice
When served by a secretary of a tenants’ association with a request notice for information about relevant qualifying tenants who are not members of the association, a landlord must within seven days (beginning with the date on which the request notice was received):
- acknowledge receipt of the request notice in writing; and
- Inform the secretary of the tenants’ association that the landlord will provide a substantive response to the notice.
If the landlord does not consider the request notice to be valid they must, within seven days beginning with the date on which the notice was received-
- Inform the secretary of the tenants’ association in writing that the landlord will not provide a substantive response because the landlord does not consider the notice received to be a valid request notice: and
- Give reasons as to why the landlord does not consider the notice to be a valid one.
Duty 2: Contacting relevant qualifying tenants
Once served with a request notice, a landlord must, as soon as practicable, send an information form to each relevant qualifying tenant about whom information has been requested.
The “information form” is a written document which:
- informs the leaseholder that a tenants’ association has requested that the landlord provide information relating to the qualifying tenant;
- sets out what information has been requested in relation to the qualifying tenant;
- identifies the tenants’ association that has made the request;
- includes the postal address of the tenants’ association and its e-mail address (if it has one);
- asks the qualifying tenant for written consent to disclose the information to the tenants’ association,
- Informs the qualifying tenant that the information will not be disclosed without that consent;
- informs the qualifying tenant that the tenants’ association has stated in its request that the information will only be used to ask the qualifying tenant if they want to become a member of that association;
- informs the qualifying tenant that any queries relating to the tenants’ association should be directed to that tenants’ association;
- asks the qualifying tenant to reply within 28 days (beginning with the date of receipt of the information form):
- confirming that they consent to all of the information being disclosed;
- confirming that they consent to some of the information being disclosed (and what that is);
- confirming that they do not consent to any of the information being disclosed;
- gives a postal address and e-mail address (if the landlord has one) which can be used to reply to the landlord; and
- is signed and dated by the landlord.
Duty 3: Substantive response to request notice
A landlord has four months (beginning with the date on which the request notice was received) to provide a substantive response to the tenants’ association.
This substantive response must be in writing.
The substantive response must either state:
- all information which the landlord has consent to disclose; or
- that there is no such information.
The substantive response must:
- state the number of qualifying tenants to whom the landlord sent an information form; and
- state the number of such qualifying tenants who did not give written consent for information to be disclosed
- Be signed and dated.
- Be accompanied by a statement signed and dated by the landlord that the information contained in the substantive response is true to the best of the landlord’s knowledge and belief.
Duty 4: Further disclosure
Where a landlord receives consent from a qualifying tenant to disclose known information after the four-month period, the landlord must disclose that known information as soon as reasonably practicable after consent has been received. Such further disclosure must be in writing and accompanied by a statement that the information comprising the further disclosure is true to the landlord’s knowledge and belief. This statement must be signed and dated by the landlord.
What can be done if the landlord fails to comply with any of the duties? (Please note this item applies in ENGLAND ONLY)
The Tribunal can deal with landlords who fail to comply with their duties.
The secretary of a tenants’ association can apply to the Tribunal for an order requiring a landlord to:
- acknowledge their request notice;
- contact relevant qualifying tenants ;
- provide a substantive response to the request notice.
Application form TA2 can be completed and submitted to the relevant Tribunal office accompanied by a crossed cheque or a postal order for the required fee (currently £100).
The application can be dealt with on paper, but if it proceeds to a formal hearing a further fee of £200 will be payable.
How does a tenants’ association become recognised?
To gain recognition from the landlord the secretary of the association should first ask the landlord in writing for a written notice of recognition. Once given, the landlord must give six months’ notice should they wish to withdraw recognition.
If the landlord refuses to give written notice of recognition or if the association desires a certificate of recognition in any event from the Tribunal a formal application to the Tribunal for a certificate of recognition can be made.
What information and documents should be provided with an application to the Tribunal? (Please note this item applies in ENGLAND ONLY)
- The name and address of the association;
- The name, address and other contact details of the secretary or their representative
- The name, address and other contact details of the landlord or their representative;
- Either the date of the landlord’s notice recognising the association and reasons why the association also wishes to obtain a certificate of recognition from the Tribunal Or if the landlord has refused an application to grant written recognition or has given notice withdrawing recognition, the reasons given and/or attach relevant documents
- Details of any previous certificate of recognition by the Tribunal or its predecessor a rent assessment panel
- Details of the property concerned including, if the application covers more than one block, the number of blocks involved and the names or identity of the blocks and whether a separate service charge is payable in respect of some or all of the services.
- The number of flats in the block(s)
- The number of flats for which variable service charges are payable
- Number of flats whose tenants/leaseholders or joint tenants/leaseholders are members of the association
- A copy of the rules and the constitution of the association including details of tenants’ association’s rules regarding membership, decision making and voting. Model rules to help draw up the constitution can be obtained from the local Tribunal.
- Details of the composition of the membership of the tenants’ association;
- Details of the extent to which any fees or charges payable in connection with membership of the tenants’ association and any exemptions from the payment of fees;
- The names, addresses and contact details of the chairperson, secretary or treasurer;
- The accounts for the tenant’s association for the last financial year and, if available, for all previous financial years;
- Copies of the minutes of all of the tenant’s association meetings for the current financial year and, if available, for all previous financial years;
- A list of members, indicating flat numbers, which is signed and dated by all the members;
- Confirmation from the Secretary that all the listed members have paid their subscriptions to date;
Application form TA1 can be completed and submitted to the relevant Tribunal office accompanied by a crossed cheque or a postal order for the required fee (currently £100).
Before consideration is given to the granting of a certificate, the landlord will be asked whether they wish to make any observations regarding the application.
The application can be dealt with on paper, but if it proceeds to a formal hearing a further fee of £200 will be payable.
How should the Tribunal deal with the granting of a certificate? (Please note this item applies in ENGLAND ONLY)
The Tribunal has discretion as to whether recognition will be granted and it will not, therefore, be given automatically.
The matters to which the tribunal must, in particular, have regard in granting a certificate are the following-
- the composition of the membership of the tenants’ association;
- the tenants’ association’s rules regarding membership, including whether tenants who are not qualifying tenants are entitled to become members;
- the tenants’ association’s rules regarding decision making;
- the tenants’ association’s rules regarding voting;
- the extent to which any fees or charges payable in connection with membership of the tenants’ association apply equally to all members;
- the extent to which the constitution of the tenants’ association takes account of the interests of all members;
- the extent to which the tenants’ association is independent of the landlord of the dwellings to which the association relates;
- whether the tenants’ association has a chairperson, secretary and treasurer;
- whether the constitution of the tenants’ association may be amended by resolution of the members and the rules regarding amendment;
- whether the tenants’ association’s constitution, accounts and list of members are kept up to date and available for public inspection
If recognition is given the Tribunal/ Committee has discretion over how long this should be for, but it would usually be for four years. A renewal can be sought at the end of this period, though the Tribunal/Committee may cancel a Certificate of Recognition if it is considered that for some reason the association no longer merits it.
When should the Tribunal refuse to grant a certificate? (Please note this item applies in ENGLAND ONLY)
The Tribunal must not give a certificate to a tenants’ association:
- in relation to a premises where it represents fewer than 50% of the qualifying tenants of dwellings in the premises. (But where the tenants’ association represents qualifying tenants in dwellings situated in related premises; and those qualifying tenants contribute to the same costs by the payment of a service charge then the Tribunal must not give a certificate to the tenants’ association in relation to the related premises if the tenants’ association represents an aggregate of fewer than 50% of the qualifying tenants of dwellings situated in the related premises.)
- in relation to any premises if a certificate has previously been given to a tenants’ association in relation to the premises and the certificate is in force.
- if the Tribunal is not satisfied that the constitution and rules of the association are fair and democratic.
Finally, the Tribunal has the discretion to refuse to grant a certificate in all the circumstances.
How can the certificate of recognition be cancelled by the Tribunal? (Please note this item applies in ENGLAND ONLY)
Application form TA3 can be completed and submitted to the relevant Tribunal office accompanied by a crossed cheque or a postal order for the required fee (currently £100).
The application can be dealt with on paper, but if it proceeds to a formal hearing a further fee of £200 will be payable.
The matters to which the tribunal must, in particular, have regard in cancelling a certificate are the following-
- whether the certificate was obtained by deception or fraud;
- whether the tenants’ association to which the certificate relates represents fewer than 50% of the qualifying tenants of dwellings situated in the premises to which the association relates;
- where the tenants’ association relates to related premises and the qualifying tenants in dwellings situated in the related premises contribute to the same costs by the payment of a service charge, the tenants’ association to which the certificate relates represents an aggregate of fewer than 50% of the qualifying tenants of dwellings situated in the related premises;
- whether the office of chairperson, treasurer or secretary of the tenants’ association are vacant and, if so, the length of time for which the position has remained vacant.
- whether any provision of the constitution of the tenants’ association has been breached and, if so, the extent and nature of the breach;
- whether an amendment to the constitution, as passed by a resolution of its members, has not been implemented and, if so, the nature of the amendment and the length of time for which it has not been implemented;
- any irregularities in the tenants’ association’s voting process, decision making implementing of decisions; or recording of decisions, and the nature of the irregularities and their effect.
Forfeiture and possession
If you fail to pay service charges, ground rent or administration charges which are due, you could face action from your landlord. This could include your landlord applying for a county court judgment, asking your mortgage company to pay the arrears and add these to the amount outstanding on your mortgage and, finally, taking action to end the lease and repossess the house or flat. By law, your landlord has the right to take this action, but they cannot take back possession of your home without a court order. They must generally start the process of action to take back possession of your home by serving a valid notice of seeking possession under section 146 of the Law of Property Act 1925 (a section 146 notice).
In practice, few landlords enforce the action to the point where they gain possession of the house or flat, but serve a section 146 notice as a way of encouraging a leaseholder to pay charges which they owe, or to correct a situation where the leaseholder has broken the terms of the lease. The misuse of the process in some instances has led to significant changes to the procedures. Landlords now have to prove that a leaseholder has broken a condition in the lease before they can serve a valid section 146 notice. There are also controls preventing landlords from using this procedure to recover very small amounts.
Your landlord cannot serve a valid section 146 notice unless you have agreed that you owe the money or have broken the lease, or the tribunal, a court or an arbitrator has made a final decision that you have broken the lease. A decision becomes final at the end of any period allowed for appeal, and your landlord cannot serve a section 146 notice until 14 days after that date.
If there is a dispute about charges that you have not paid (arrears), your landlord must also apply to the tribunal to confirm that you owe the amount and that it is reasonable.
So, before your landlord can serve a section 146 notice:
- you must have agreed that you have broken the lease and that you owe any arrears; or
- the tribunal must confirm that you have broken the lease.
The following conditions also apply.
- If you owe any charges, the landlord must be allowed to charge these and the amount must be reasonable.
- After the decision of the tribunal, court or arbitrator becomes final, you must be allowed a further 14 days in which to take action to make sure you are no longer breaking the lease or to settle the arrears.
- If, after 14 days, you have not paid the arrears or are still breaking the lease, your landlord can service the section 146 notice.
Failure to pay a small amount of charges for a short period
Your landlord cannot serve a valid section 146 notice unless the amount of service charges, administration charges or ground rent you owe (or a combination of all of these) is more than £350, or is made up of, or includes, an amount that has been outstanding for more than three years.
If your landlord is not eligible to issue a section 146 notice, they can take other action to recover their money, such as through the small claims court, so you should not use the rules as a way of withholding money that is legally and reasonably charged under the terms of the lease.
Alternative dispute resolution
Not all disputes about service charges end up at the tribunal or the county court.
The courts and tribunal should be a last resort and leaseholders and landlords should to try to settle their issues by agreement and discussion, if possible.
Formal mediation between you and your landlord can be a good option if you are both prepared to take part in the process. The mediation process will allow both sides to put forward their views and issues in a less formal setting. A trained mediator (or mediators) will encourage you and your landlord to reach your own agreed solution to the dispute.
There are many mediation services available. For a sample of these, you can search the Ministry of Justice’s civil mediation directory. For more detailed information about alternative dispute-resolution services, see our advice guide, Alternative Dispute Resolution.