What Should My Landlord Be Telling Me?

Jonathan Upton explains that lessee's rights to service charge information are clear in law but enforcement is limited.

Long leaseholders have a legitimate interest in finding out when and how much of their money has been spent by their freeholder. As Robert Walker LJ observed in the 1999 case of Martin & Seale v Maryland Estates Ltd , “Parliament has recognised that it is of great concern to lessees, and a potential cause of great friction between landlord and lessees, that lessees may not know what is going on, what is being done, ultimately at their expense.” That comment was made about major works but the statement could equally apply to all service charges.

What information can I request?

Parliament has given residential lessees various rights to demand information from their landlords and these are principally set out in sections 21 and 22 of the Landlord and Tenant Act 1985.

Under s.21, a lessee may require a landlord to supply him with a written summary of any costs incurred:

a) if the relevant accounts are made up for periods of 12 months, in the last such period ending not later than the date of the request;

or

b) if the accounts are not made up for periods of 12 months, in the period of 12 months ending with the date of the request.

The landlord is obliged to comply with the request within one month or within six months of the end of the relevant period set out in s.21(1) (a) or (b), whichever is the later.

If the service charges are payable by lessees of more than four dwellings, the summary of relevant costs must be certified by a qualified accountant as, in his opinion, a fair summary complying with the requirements of s.21(5) supported by accounts, receipts and other documents which have been supplied to him. Where the lessee has obtained a summary of relevant costs, under s.22(1) within six months he or she has the right to make a request to the landlord in writing to (a) inspect the accounts, receipts and other documents supporting the summary; and (b) take copies or extracts from them.

What are my landlord's obligations?

Failure to meet the requirements of these sections of the 1985 Act on the part of the landlord is a criminal offence (under s.25 of the Act), which carries a maximum fine of £2500. If the landlord is a company, the directors or managers may also be liable to prosecution and punishment.

Section 21A of the 1985 Act (inserted by the Commonhold and Leasehold Reform Act 2002 and amended by the Housing and Regeneration Act 2008) will entitle a lessee to withhold service charges if the landlord fails to comply with his statutory duties under section 21 (itself substituted and amended by those Acts). However, the new provisions, although enacted, have not yet been brought into force and the Department for Communities and Local Government has recently confirmed that the Government has no current plans to implement these measures.

Unfortunately, the Court of Appeal has recently decided that there is no civil remedy available in respect of ensuring compliance with ss.21 and 22. In the recent case of Di Marco v Morshead Mansions Ltd [2014], the lessee's claim for a mandatory injunction compelling the landlord to supply him with a written statement of costs which form part of the service charge (s.21) and to provide him with reasonable facilities for inspecting the documents which support the summary (s.22) was dismissed. This case reverses the 2013 decision of the High Court where the judge held that the lessee was entitled to an injunction.

Check your lease

However, it's not all bad news for leaseholders. Many leases include a covenant which states that, within a reasonable period after the end of the accounting period, the landlord must provide a certified summary of expenses incurred. A lessee may be entitled to force the landlord to comply by making a claim for specific performance or injunctive relief. Compliance with such a clause on the part of the landlord also often has implications for the lessee's liability to pay the service charge.

Although landlords will no doubt be relieved by the Court of Appeal's decision in Di Marco, it is far better to avoid a dispute in the first place. This is likely to be achieved by communicating effectively with lessees and being transparent with service charge expenditure from the outset.

Jonathan Upton is a barrister at Tanfield Chambers specialising in property disputes and is co-author of the upcoming 3rd Edition of Service Charges and Management (Sweet and Maxwell). He is a member of the chancery Bar association and the property Bar Association.

To view this article in Issue 18 of Flat Living magazine, click here.