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Service Charges and other Breaches

The First Tier Tribunal (Property Chamber) has jurisdiction to deal with service charge and administration charge disputes as well as determinations about whether a leaseholder has breached another covenant in their lease.

The issue of service charges and administration charges is often ripe for dispute, generally because the landlord is spending the leaseholders money.

A landlord can apply to the tribunal for a determination as to whether a service charge or administration charge is payable by a leaseholder, usually as a prerequisite to forfeiture of the lease, which is now required following the introduction of the section 168 of the Commonhold and Leasehold Reform Act 2002. A landlord can also apply to the tribunal, in limited circumstances, to dispense with the consultation requirements set out in section 20 of the Landlord and Tenant Act 1985 (amended by the Commonhold and Leasehold Reform Act 2002) in relation to major works. Most of these applications can also be made by a management company (including a right to manage company).

A leaseholder can also apply to the tribunal to challenge service charges and/or administration charges incurred or demanded by the landlord or management company. This applies to demands for money on account, charges appearing on the service charge accounts, any year end excesses demanded and any reserve or sinking fund contributions.

The lease will set out how the landlord or management company should demand and deal with service charges and it will also set out what the leaseholders are obliged to pay for. Generally, if the lease does not include an obligation to pay for something then they do not have to pay. However, alongside the provisions of the lease, are many statutory requirements which govern how service charges should be dealt with. These include what information must be included on and with a demand for payment and consultation requirements relating to major work or qualifying long term agreements.

The tribunal can determine whether or not a service charge or administration charge should be paid, but also whether the actual cost of an item of expenditure is reasonable in amount.

The tribunal can also determine, upon an application by the landlord, whether or not a leaseholder is in breach of any covenants contained in the lease. These applications are usually appropriate for a landlord as a prerequisite for forfeiture or an injunction.

There are usually costs consequences of an application to the tribunal. The tribunal has very limited powers to award costs against any party but landlords might have the power to claim costs against a leaseholder directly or through the service charge under the terms of the lease. The tribunal has the power to prevent landlords from claiming costs by the service charge by way of a determination under section 20c of the Landlord and Tenant Act 1985. It is important to take advice from a professional before embarking on an application to the tribunal, whether you are a landlord, management company or leaseholder, on both the costs risks of the same and on the likely chances of success.

Our award winning Leasehold Enfranchisement team have the specialist knowledge, expertise and experience to advise you in respect of applications to the tribunal relating to service charges, administration charges and other breaches of covenant. They can assist you in determining whether there are grounds for an application, guide you through the procedure and likely costs involved in more detail and of course act for you in connection with the claim itself. They can also provide advice to those who are facing claim by their landlord or leaseholders.

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