Introduction

Some of the most frequent causes for concern by leasehold occupiers of flats or houses are the costs of services and the standards of management and maintenance provided by the landlord. It is not unreasonable for leasehold tenants to want to know more about how their charges are made up and about the landlord’s arrangements for managing and repairing their properties.

Information, other than that required by legislation, is often difficult to obtain just for a general assessment of management arrangements and highly problematical where tenants wish to actively challenge those arrangements.

A tenant with a leaking roof will find it difficult to dispute their landlord’s costs or methods of repair, without a detailed inspection and a knowledge of building practice; similarly it is practically impossible to properly assess and evaluate contractual and financial arrangements. Although legislation provides rights to question the reasonableness of service charges, this may not be possible in the absence of full information.

In our guide Applying to the First-tier Tribunal (Property Chamber) we emphasise the need for expert, objective, evidence in support of such applications. In many cases the matters in dispute will be beyond the abilities of the tenants to contest without both detailed information, presently only known to the landlord, and detailed advice relating to the structure and physical state of repair of the property. Whilst tenants have rights of access to certain information under Landlord and Tenant Acts this will not be sufficient, in many cases, to contest major issues of dispute on service charges.

However, leasehold tenants (and other renting tenants who pay variable service charges) have a legal right to appoint a surveyor to examine the management practices of their landlord. Where tenants are unhappy about any aspect of the management of their property, its state of repair or general maintenance, levels of service charges or the landlord’s provision of accounting information, the law provides two rights:

• to appoint a surveyor to advise on service charges (S84 and Schedule 4, Housing Act 1996) – this right is not available to individual tenants but to a recognised tenants’ association (RTA)
• to carry out a management audit (S76, Leasehold Reform, Housing and Urban Development Act 1993) – this right is available to individual leasehold tenants where theirs is the only dwelling, or one of two, in a building but otherwise qualification is by not less than two-thirds of the tenants acting together

The rights do not provide any specific remedy to problems in themselves but are to provide tenants with information:

• as a general check on present management standards and procedures
• as a check or audit of the service charge accounts
• to enforce covenants of the lease covering management, repair and services
• to ensure further compliance with approved codes of management practice
• to provide evidence for challenge of service charges at a First-tier Tribunal (Property Chamber)
• to support an application for the appointment of a manager

The appointed surveyor or auditor has legal powers of access to the building/estate and the landlord’s accounts and other documents:

• this provides a means of tenants investigating what they normally cannot see
• the appointed surveyor has more rights of access than the tenants

Both the rights provide direct means for tenants paying variable service charges to fully investigate how the landlord is spending their service charge contributions, how he is maintaining the property or estate and the efficiency of his management arrangements. In the provision of the rights the legislation is redressing the difficulty tenants can have in obtaining necessary information from their landlord, particularly so when they require the information for the purpose of evaluating the landlord’s management or challenging charges.

Both rights provide legal rights of reasonable access for the appointed surveyor to otherwise confidential information. The exercise of these rights is dependent upon tenants meeting certain qualification conditions and providing proper notice to the landlord.

Whilst tenants paying service charges should be fully entitled to know how their money is being spent, they should also accept that these rights provide enforceable access to what the landlord will, not unreasonably, regard as confidential business arrangements and they should not be used lightly.

In all cases tenants are recommended to negotiate matters with the landlord, including use of any existing grievance procedures, prior to formal appointment of auditor or surveyor.

Management audit

The purpose of the audit is set out in S78 of the 1993 Leasehold Reform, Housing and Urban Development Act as:

"an audit carried out for the purposes of ascertaining:

a) the extent to which the obligations of the landlord which

i) are owed to the qualifying tenants, and

ii) involve the discharge of management functions in relation to the relevant premises or any appurtenant property,

are being discharged in an efficient and effective manner; and

b) the extent to which sums payable by those tenants by way of service charges are being applied in an efficient and effective manner"

The purpose of this right is clearly to carry out an objective assessment of the landlord’s management functions and procedures and to evaluate those; it is not simply to provide rights of access to premises and information as a “fishing expedition”.

The appointment of a surveyor

The rationale for the appointment of a surveyor is set out in S84 of the 1996 Housing Act and is much less specific:

• to appoint a surveyor “to advise on any matters relating to, or which may give rise to, service charges payable to a landlord”

This is clearly a wider remit for both the tenants and the appointed surveyor and, whilst the information gathered may be similar to that required for the management audit, its use is not limited other than that it should provide the basis of advice on service charges.

The auditor or the appointed surveyor may refer to approved codes of management practice in evaluating the landlord’s management or service charge arrangements. These codes are approved by the Secretary of State for Housing and are not legally enforceable but may be used to evaluate a landlord’s management for purposes of a management audit, or to support tenants’ applications in any court or tribunal proceedings.

The Secretary of State has, to date, approved two codes of practice, one produced by the Association of Retirement Housing Managers relating to retirement housing and one by the Royal Institution of Chartered Surveyors relevant to all tenants paying variable service charges. Either code may be used. They are obtainable direct from the ARHM and the RICS.