A checklist for service charge demands

Residential service charge demands must comply with the terms of the lease and with a number of statutory requirements. If a demand is non-compliant, the service charge may not be payable by the lessee until the landlord fulfils his contractual and statutory obligations. In some cases, it may not be payable at all.

This checklist does not pretend to cover all of the points which will affect the enforceability of a service charge demand, but it is a starting point for ensuring that the landlord is getting the basics right.

Where a requirement is enshrined in statute, I have given the number of the relevant section, the name of the Act and any Regulations which underpin it.  For reasonably current versions of legislation in the United Kingdom, try www.legislation.gov.uk.

  • Does the lease allow the landlord to make the demand?

For example, if it is an advance demand, is it being demanded at the time provided for?

If it is a one-off demand for major works, is the landlord entitled to raise it or is he/she restricted to making one advance and one balancing demand per year?

  • Does it give an address for the landlord in England or Wales where notices can be served?

Section 48, Landlord and Tenant Act 1987.

  • Does it give the landlord’s name and address, even if not in England or Wales?

Section 47, Landlord and Tenant Act 1987.

  • Is it accompanied by a summary of the tenant’s rights and obligations?

Section 21B, Landlord and Tenant Act 1985.

Service Charges (Summary of Rights and Obligations and Transitional Provision) (England) Regulations 2007/1257.

Service Charges (Summary of Rights and Obligations and Transitional Provisions) (Wales) Regulations 2007/3160.

  • Has it been served within eighteen months of the costs being incurred?

Section 20B(1), Landlord and Tenant Act 1985.

  • If not, has the landlord, within eighteen months of incurring the costs, notified the tenant that those costs have been incurred and that the tenant will subsequently be required under the terms of the lease to contribute to them by way of service charge?

Section 20B(2), Landlord and Tenant Act 1985.

15 Comments

  1. Joe Buchan says:

    Thanks Amanda. This is an invaluable checklist. I’m delighted to have discovered your blog which looks as if it will be invaluable. The time you take is appreciated. For a future block could you consider the role of the Residents Management Company, e.g. budget setting, audit, ensuring lease is followed by owners ? I hope this may be of interest.

    Thanks again,

    Joe

  2. Ernest Hartland says:

    The Development where I own my Home was managed by Retirement Care Group when I purchased into this maze of a Sheltered Housing, where I committed to pay a Service Charge by way of a Deed of Covenant. We were first informed by one Keith Edgar that Peverel had purchased Retirement Care and would not make any changes just yet! With all the issues with Peverel et al, one does not know where to turn for help. The Housing Ombudsman doesn’t want to know, the Housing Minister doesn’t want to know and LVT doesn’t want to know, so just who may we turn to for help? Our last endeavour was to contact the MP in the next constituency, and following protracted periods of writing emails and letters to this MP, his right hand woman has now written back and informed us that she hadn’t realised that we were not in her MP’s constituency, and so could not disclose the outcome of the Meeting of the MD of Peverel and the MP!

    As a Freehold Owner in a mixed development, is it not time that the Law was updated to allow us Freehold Home Owners the same rights as Leaseholders?

    If this can find its way into the Law Society, I would be greatly pleased.

  3. David Clark says:

    You would be amazed at how many agents are still failing to get these fundamentals right.

    Mr Hartland. The OFT are to investigate residential leasehold management this year and are currently seeking views on the scope of their investigation. I believe strongly that freehold rent charges should also be included in this investigation since they are on the increase and fall outside of service charge legislation. It is worth letting them know. See details here:
    http://oft.gov.uk/news-and-updates/press/2013/80-13#.Us1POrRpGnR

  4. Duncan Brown says:

    A helpful checklist/memory prompt for novices and (aged) solicitors! Thanks Amanda.

  5. Hi ,

    I have appreciated your blogs and say thank you very much.

    I am in a tripartite lease and the Freehold has been sold to Landmark Investments from Mercian Development Ltd and our Landlord is Meridian Retirement who is a Peverel Company using Peverel Retirement as Managing Agents.

    We are now paying Council Tax for an empty House Managers Flat waiting for it to be sold.

    Are we obliged to pay this Council Tax for an empty House Managers Flat?

  6. Norman Richardson says:

    The Leasehold Advisory service is a brilliant resource and their advice has helped me enormously in my current dispute with my landlord considering he has a barrister representing him. One query that no one seems sure about is the time limit for submitting retrospective Section 20 notices. My landlord carried out extensive and expensive repairs without consultation in 2012 yet the FTT/PC is allowing him to make a retrospective S20 notice in March 2015. More than 2 years after the work was completed. Is there such a time limit ?

  7. John Steele says:

    Hi Amanda

    Very informative, thank you. With reference to the Summary of Rights that must accompany the Service Charge. What should the heading of this summary include? Must it include the Title as well as the heading i.e. “Summary of Rights”?

  8. Rohan says:

    It is not mentioned above – the “landlord name” is also a requirement to be included on written demands. It is apalling that Managing Agents get it wrong or don’t bother to even include the landlord name on demands

    • This is a requirement for section 47 of the Landlord and Tenant Act 1987, I agree. I will amend the checklist accordingly. Thank you for pointing it out.
      In this context, it is also worth bearing in mind sections 1-3A of the Landlord and Tenant Act 1985, which impose disclosure obligations in relation to the landord’s name and address.

  9. CEP says:

    Do you know if there is a legal requirement on the managing agents to show the freeholders responses from leaseholders to Section 20 notices…. or come to that any correspondence from the leaseholders regarding charges etc?
    As the managing agents are not replying to letters querying charges, my assumption is that the freeholders do not know the extent of dissatisfaction amongst the leaseholders.

  10. RP says:

    As a member of a management company formed purely to manage the common parts/gardens of a cul-de-sac should I receive a formal demand for payment of service charge or does the deed of covenant/memorandum & articles serve as a sufficient demand?

  11. Sofia says:

    Hi there Amanda,

    Your blog is still a great source for me. I don’t know whether you remember but you offered me amazing support for my LVT against my freeholder and proved invaluable to my case. This is a great checklist. Wondered if you had any pointers to

    (a) whether a freeholder has the right to appoint a management agent as he wills or does he/she need the consent of the leaseholders

    (b) if management agents are being changed, who’s responsibility is it to do the proper monetary handovers

    (c) have the management agents got the freedom to put aside as much as they want in to a reserve fund in case of emergencies

    I wish I had never bought a freehold as management agents are a nightmare to work with 🙁

    • Amanda Gourlay says:

      Dear Sofia, I am sorry it has taken me so long to reply. Of course I remember you!
      (a) Yes, unless you have a Recognised Tenants’ Association and it has asked the landlord to consult it about the appointment of a new managing agent (see section 30B of the Landlord and Tenant Act 1985), the freeholder may appoint the managing agent of its choice;
      (b) A demon question. It should be built into the management agreements but ultimately the buck stops with the landlord as the party with whom you have a contract;
      (c) No. The lease will prescribe whether a reserve fund can be collected, and if so how.

  12. Robin Natley says:

    Hi Amanda , not sure if this is the right blog to post the question , but here goes hoping you can cast some light on this .

    I am a landlord and have a flat I rent which is managed by management agents which run the whole site of flats and houses. I have never missed a bill , but a bill due two months ago , which was for deficit in the accounts , slipped by me although they say they emailed and posted the demand. Now two months after the payment date the bill which was for only £50 odd pounds has been added to, £24 management fee , £80 Fee and if I had not paid by the end of the week another £500 off , comprising of an engagement fee for a debt collection office and the the fee of collection. , so almost £600 extra within two months : example from letter below

    “It is noted, with regret, that despite a reminder, the outstanding balance on your account remains unpaid. An arrears collection fee of £80.00 + VAT has therefore been added to your account.
    We would like to inform that in the light of your continued non-payment, failure to clear your account within the next 7 days from the date of this letter will result in further action; your account will be referred to a Debt Collection Agency, which will incur an Instruction Fee of £250.00 + VAT and Debt Collection Agency Fees of £200.00 + VAT. These will be added to the balance on your account. ”

    All this just does not seem reasonable and proportionate to the debt , in addition I don’t see how it matches the EU law on late payments ?

    They state that it is all in accordance with the law / act …. ” In compliance with Section 47/48 of the Landlord and Tenant Act 1987, these charges are being demanded on behalf of Whitstable Road Management Company Ltd ”

    Can this really be true , it seems to be unreasonable and very punishing , rather than collecting actual costs

    • Amanda Gourlay says:

      The first point is to check whether the landlord is entitled to claim those extra costs from you. You will probably find that your lease has a clause requiring you to pay all costs connected with a section 146 notice. A section 146 notice is a notice that a landlord must give to a tenant if he/she is intending to forfeit the tenant’s lease.

      I suspect that the landlord will say that he is claiming the costs under that provision. There are generally two forms of wording for what we describe as section 146 clauses: one refers to proceedings “in or in contemplation” of proceedings under section 146. The other refers to costs incurred “in the preparation and service” of a section 146 notice. My experience is that costs are recoverable under the first form of wording but not the second, although the point has not yet been decided in any court of record.

      Secondly, it is worth checking whether the landlord has done anything to waive its right to forfeit the lease. Put as simply as I can, a landlord waives the right to forfeit if s/he has done anything since the demand that affirms his/her intention that the lease should continue, and not be forfeited. It is quite a technical area of law and not easy to summarise. Accepting rent for a period post-dating the service charge demand would definitely waive the right. It may be that by relying on the section 146 clause the landlord is also waiving the right.

      The next point is, as you say, the amount and proportionality. The case of Christoforou, which you will find in the table of cases here, is quite helpful on that point.

      Have you now paid the demand? I think that it is fair to say that the general consensus on service charge demands is to pay them, and then take issue with any particular items afterwards, although each case does turn on its merits.

      When you pay the demand, make sure that you inform the managing agent that the payment is to be allocated to the service charge demand – citing the invoice number is normally the best way – rather than to the legal/debt collection costs.

      Please note that the above are my general thoughts on the question and should not be relied upon as legal advice for your particular set of facts.

      Best wishes

      Amanda

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