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Service Charge and
Ground Rent Procedures
Liz Gibbons
Leaseholder Network Meeting
19th May 2014
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Key Statutes
• Landlord and Tenant Act 1985
• Landlord and Tenant Act 1987
• Housing Act 1996
• Commonhold and Leasehold Reform Act 2002
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What is a service charge?
• An amount payable by a tenant 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 relevant
costs
• Section 18(1) LTA 1985
• Arnold v Britton & Ors [2013] EWCA Civ 902
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Service charges – what’s in the
lease?
• Advance payments?
• And when due?
• Certification?
• And by whom ?
• Audited accounts required ?
• When do final accounts have to be sent out?
• Leonora Investment Co.Ltd.v.Mott Macdonald Ltd.[2008]
EWCA Civ 857
• “The leases prescribe the contractual route down which the
landlord must travel to be entitled to payment.”
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Provision of information
• A leaseholder should be provided with an address for
service of notices including notices in proceedings
• Section 48 LTA 1987
• Any demand for service charges should contain the
landlord’s name and address
• Section 47 LTA 1987
• Beitov Properties Limited v.Elliston Bentley Martin[2012]
UKUT 133 (LC)
• Address of agent not sufficient
• Payment not due until compliance with Sections 47 and
48
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Obtaining information
• Request for summary of costs incurred
• During last twelve months/last financial year
• Summary must be provided within one month of the end
of the accounting year
• Summary must be certified by a qualified accountant if
service charges payable by more than four dwellings
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What must a summary include
• Costs in respect of which no demand for payment was
received within the accounting period
• Costs in respect of which a demand for payment was
received and payment was made by the landlord within
that period
• Amounts received credited to leaseholders
• Any relevant grant received
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Inspecting documents
• Within six months of receiving Section 21 summary
• Written requests for facilities to inspect accounts, receipts
and other documents supporting the summary
• Facilities provided free of charge
• Reasonable copying costs payable
• Available for two month period starting no later than one
month after request
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Non compliance with Sections 21 &
22 LTA 1985
• Prosecution in Magistrates Court
• Defence of reasonable excuse
• Submit papers within six months of commission of offence
• Maximum level 4 fine £2500
• Local housing authority can prosecute
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Service charge demands
• Sections 47 and 48 LTA 1987
• Section 21B LTA 1985 introduced by the 2002 Act
• Landlord must provide with each service charge demand
a summary of rights and obligations
• Prescribed content
• Printed or typewritten in a font no smaller than 10 point
• Non-compliance means right to withhold payment and the
terms in the lease for enforcement such as interest do not
apply until summary served
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Summary of rights and obligations
• Summary of Rights and Obligations,and Transitional
Provisions (Wales) Regulations 2007/3160
• Amourgam v.Valepark Properties Ltd [2011] UKUT
261(LC)
• Section 21B applies where costs incurred on or after 1st October
2007
• Tingdene Holiday Parks Ltd v Cox and others[2011]
UKUT 310(LC)
• Section 21B information must accompany the demands and not be
a copy of the relevant statutory instrument
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Consultation for major works
• Section 20 LTA 1985
• As amended by Section 151 of the 2002 Act
• Provision of information and costs to leaseholders
• Requirement to seek views and nomination of contractors
before proceeding
• Potentially no right of recovery beyond costs limit if work
started before completion of process
• Daejan Investment Limited v Benson & Others [2013] UKSC 14
• Phillips v Francis [2012] EWHC 3650 (Ch D)
• Court of Appeal hearing now adjourned to 13-15 October 2014
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Dispensation
• Section 20ZA(i) LTA 1985
• Jurisdiction of the Leasehold Valuation Tribunal (“LVT”)
• Urgent works
• Advance applications
• Impracticality of obtaining more than one estimate, etc
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Demands must be within time
Section 20B LTA 1985
• Costs cannot be recovered if incurred 18 months before
demand for payment
• Unless notice served within 18 months then costs
incurred and will be payable
• London Borough of Brent v.Shulem B Association Limited
[2011] EWHC 1663 (Ch)
• Demand for payment must be in accordance with the terms of the
lease
• OM Property Management Limited v.Burr [2012] UKUT
2(LC)
• When are costs incurred?
• Date of bill or date of payment?
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Limitation Act 1980
• Is the demand being enforced within the period allowed
under the Limitation Act 1980?
• 12 years for service charges?
• 6 years for rents?
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Service charges – they must be
reasonable
• Section 19 LTA 1985
• Relevant costs shall be taken into account in determining
the amount of a service charge payable for a period
• Only to the extent that they are reasonably incurred, and
• Where they are incurred on the provision of services or the carrying
out of works, only if the services or works are of a reasonable
standard
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Recovering service charges
• Check compliance with Sections 47 and 48 LTA 1987
• Check summary of rights and obligations accompanies
the service charge demand
• In time?
• Section 20B of the LTA 1985
• Proper consultation under Section 20 of the LTA 1985
• Limitation Act 1980
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Recovering service charges-county
court
• Service of Form N1
• www.hmcourts-service.gov.uk
• Prepare for allocation
• Questionnaire
• Directions
• Hearing
• Case defended
• Anticipate transfer to the LVT under 2002 Act Schedule 12
para.3(1)(a)
• Ancillary matters retained by county court
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Recovering service charges – LVT
• Section 27A of the LTA 1985
• Leasehold Valuation Tribunals (Procedure)(Wales)Regulations
2004
• Freeholder or lessee can seek ruling on payability or
reasonableness of service charges both past and
prospective
• Download application form
• wales.gov.uk/docs/rpt/publications/130718lvt6en.pdf
• Appeal lies to Upper Tribunal (Lands Chamber) with leave
of the LVT and/or the Upper Tribunal
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Forfeiture of lease-service charges
• Section 81 of the Housing Act 1996
• Cannot forfeit unless
• Admission that service charges are payable
• Final determination of payability by LVT, court or arbitral tribunal
• Section 146 notice served where not reserved as rent
• Service not less than 14 days after final determination under
• Is a default judgment in county court such a final
determination?
• Yes - Church Commissioners for England v.Koyale Enterprises
Limited and another 2011 in the Central London County Court
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Ground rent – Some housekeeping
• Section 48 of LTA 1987
• Section 166 of the 2002 Act
• Ground rent not payable under long lease unless leaseholder given
a notice in the prescribed form
• Landlord and Tenant (Notice of Rent)(Wales)Regulations
2005/1355
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What’s in the prescribed notice of
ground rent?
• Amount of ground rent due
• Date it should be paid
• Not less than 30 days or more than 60 days after day on which
notice given
• Name of leaseholder
• Period covered by demand
• Details of to whom money should be paid
• Summary information relating to Section 167 of 2002 Act
• Landlord barred from forfeiting for ground rent unless sums owed
exceed £350 or have been outstanding for more than three years
• Note different summary information in England and Wales
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Recovering ground rent
• County Court
• Small claim if under £5000
• Check what the lease says
• Check compliance with Section 48 LTA 1987 and Section
166 of the 2002 Act
• Chasewood Park Residents Ltd.v.Kim [2010] EWHC 579
(Ch)
• Landlord must plead and prove compliance with Section 166.
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Administration charges
• Para.1(1) of Schedule 11 of the Commonhold and
Leasehold Reform Act 2002
• “…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 or in connection with the grant of approvals under his 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 person who is a party to his lease otherwise
than as landlord or tenant
In respect of a failure by the tenant to make a payment by the due date to
the landlord or tenant, or a person who is a party to his lease otherwise
than as landlord or tenant, or
In connection with a breach (alleged breach) of a covenant or condition in
his lease”
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Administration charges
• May be fixed or variable
• Open to challenge at the Leasehold Valuation Tribunal
• Demand must be accompanied by a summary of rights
and obligations
• Levied directly from a leaseholder
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Southall Court ( Residents) Limited v
Tiwari & Others [2011] UKUT 218 (LC)
“It is strongly to be hoped that any future disagreements
about service charges payable will be resolved by
negotiation rather than litigation, if necessary with the
assistance of mediation. For all landlords and tenants,
recourse to courts or tribunals should be a last resort and
certainly not an inevitability.”
• Alternative Dispute Resolution including mediation
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Final thoughts
• Points to check:
• Enforcement within limitation period
• Ground rent and service charge demands
• Section 20 consultation notices
• Section 20B notification
• Section146 notices
• Administration Charge?
Questions?
The Leasehold Advisory Service
020 7383 9800/02920 782222
info@lease-advice.org
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Maple House, 149 Tottenham Court Road
London W1T 7BN/c/o Care & Repair Cymru, 2 Ocean Way, Cardiff, CF24 5TG