Service charges: 10 questions from our leaseholder webinar

Our recent webinar on service charges was delivered by Richard Hand and Ben Anoff, Senior Legal Managers at LEASE.

Leaseholders submitted a wide range of questions about rising costs, missing accounts, major works and what to do when a landlord or managing agent does not respond.

Below, Richard and Ben answer 10 of the most common questions.

The exact position will often depend on the wording of your lease, so it is important to check it carefully and get legal advice where necessary.

You have a legal right to ask your landlord for a summary of the service charge account under Section 21 of the Landlord and Tenant Act 1985.

The request must be made in writing. You can send it to either your landlord or their managing agent.

You can ask for a summary covering the last accounting year, or the previous 12 months if the landlord does not use accounting years.

The landlord must normally provide it within one month of receiving your request, or within 6 months of the end of the accounting period if that is later.

If the landlord does not respond in time and does not have a reasonable excuse, they may be breaking the law. You can contact your local housing authority, usually through its Tenancy Relations Officer, to ask whether it will take action.

A local authority landlord is exempt from prosecution under these rules. Housing associations are not exempt.

Yes. After receiving a summary of the service charge account, you have the right to inspect the supporting documents. These can include accounts, receipts, invoices and other relevant records.

You must make your request within 6 months of receiving the summary.

The landlord must allow you to inspect the documents within one month of your request. They must then keep them available for inspection for 2 months and allow you to make copies.

LEASE has template letters that you can use to request both a summary of the costs and access to the supporting documents.

There is no set limit on how much a variable service charge can increase.

However, the charges must still be reasonable, must be allowed under your lease and, where they relate to work or services, the work must have been completed to a reasonable standard.

An increase is not automatically unreasonable simply because it is large. You will need to understand what has caused it.

You can ask for a summary of the service charge account and inspect the supporting invoices and receipts. This may help you identify whether particular costs have increased and whether the landlord took reasonable steps to control them.

If you decide to challenge the charge, useful evidence might include alternative quotations, photographs, records of unanswered complaints or, in some cases, an expert report.

Service charges can include the cost of cleaning communal areas and maintaining shared gardens if these services are covered by your lease.

However, the cost must be reasonable and the work must be completed to a reasonable standard.

If you believe the work is not being carried out, or is of a poor standard, set out your concerns to the landlord or managing agent in writing. Include any evidence you have, such as photographs and records of unanswered complaints.

Explain what you believe has gone wrong and what you would like the landlord to do. Give them a reasonable period to respond and use their formal complaints process where one is available.

If the issue cannot be resolved, you may be able to challenge the charge at a tribunal.

There is no automatic right to withhold service charges merely because you disagree with them. If the demand has been made in the correct manner it will be legally payable on the due date.

Even where you believe a charge is unreasonable, refusing to pay is likely to be treated as a breach of your lease. Your landlord may take court action, add administration or legal costs where the lease allows this, or take other enforcement action.

It is usually safer to pay the charge under protest and then challenge it.

Paying under protest means making it clear in writing that you disagree with the charge and are not accepting responsibility for it.

This is important because a tribunal cannot consider a challenge if it decides that you have already agreed or admitted that you are responsible for paying the charge.

LEASE has a template letter that you can use when making a payment under protest.

A landlord must normally issue a service charge demand within 18 months of when they incurred the cost. A cost is incurred when the landlord pays it or becomes legally liable to pay it, such as when they receive an invoice.

There is an exception if the landlord sends you a notice within the 18-month period. The notice must say that the cost has been incurred and that you will later be asked to contribute through the service charge.

The notice should give the actual cost, although it does not have to confirm exactly how much your individual share will be.

If the landlord issues the demand after 18 months and did not send the required notice in time, they cannot recover that cost through the service charge.

A landlord must normally consult leaseholders if planned major works will cost any one leaseholder more than £250.

This is known as the Section 20 consultation process.

If the landlord does not follow the correct consultation process, they cannot normally recover more than £250 from each leaseholder. However, the landlord can apply to a tribunal for permission to recover more.

A tribunal will generally only give permission where the landlord’s failure to consult did not cause leaseholders to lose money or lose important rights.

Even where the consultation process was followed correctly, the cost of the work must still be reasonable and the work must be completed to a reasonable standard.

If you decide to challenge the charge, you will need evidence to support your case.

Your lease sets out which services you must contribute towards and how your share is calculated.

You do not have to pay for services that are not covered by your lease.

Some leases contain broad wording allowing the landlord to recover other reasonable costs connected with managing or maintaining the building. This is sometimes called a “sweeping-up clause”.

However, some costs need more specific wording. For example, management costs, legal costs and the cost of improvement works may only be recoverable if the lease allows them.

How the service charge is divided between the flats should also be set out in the lease. It might be based on floor area, the number of rooms, an equal split or the extent to which different properties benefit from a service. A percentage share is one of the most common ways service charges are divided.

Leases can be difficult to interpret. Get advice from a solicitor specialising in leasehold law if the wording is unclear.

Many leases require leaseholders to make payments in advance based on an estimate of the year’s costs.

At the end of the year, the landlord should compare the estimated payments with the actual expenditure.

If the amount collected is higher than the actual costs, what happens to the surplus will depend on the lease. It may be:

• used to reduce the following year’s service charge
• refunded to leaseholders
• transferred to a reserve or sinking fund

Service charge money must be held on trust by the landlord for the leaseholders. This means it must be used for the purposes set out in the lease.

You can ask for a summary of the service charge account to see how the money has been recorded and used.

If you agree that the charge is payable but are struggling financially, it is important to seek free, independent debt advice.

There is no automatic right to pay service charges by instalments unless your lease allows for this. If you are struggling to pay, contact your landlord as soon as possible and explain your financial circumstances.

You can ask whether they are willing to agree to instalments or another payment arrangement. However, landlords are not generally required to offer a payment plan. It is also important to be aware that agreeing to pay by instalments may limit your ability to challenge the reasonableness of the charge later.

If you believe the amount is unreasonable, or that you are not responsible for it under your lease, you may be able to challenge it. It is usually safer to pay under protest rather than simply withholding payment.

The First-tier Tribunal in England, or the Leasehold Valuation Tribunal in Wales, can decide whether a service charge is payable and reasonable. It can also decide the date and method of payment.

Applying to a tribunal can be difficult, so consider getting advice from a solicitor or surveyor before taking this step.