More people are making applications to the First-tier Tribunal

It is inevitable in a recession that people will consider it worthwhile trying to protect their hard-earned money by challenging the financial demands made on them.  Service charges levied on flat-owners are no exception.

A few years ago a flat-owner, let’s call him Bill, may have been sitting comfortably with the value of his property increasing year by year, his mortgage decreasing, a steady job with a healthy annual pay rise and perhaps a bonus.  If Bill received a service charge demand from his landlord he might be able to pay the sum outright or borrow from his mortgage lender and pay it off over the remaining term of the mortgage, barely noticing the difference in his monthly outgoings.  In that situation Bill would probably just have paid up and carried on with his life.

Now things have changed.  Even if Bill is still in his steady job he may be nervous about extending his borrowings in the present economic climate.  What’s more, his lender will almost certainly have tightened its borrowing criteria so that he may be unable to borrow any more against his flat.  All in all, borrowing is likely to be a less attractive proposition in 2011 than it was in 2007.  Added to this, the cost of living is rising all the time with fuel and food bills reaching an all time high.  Not a great time to be faced with a large service charge bill for building repairs.

Bill is aware of his right to challenge his service charges from the summary served with the demand – a legal requirement since 2007.  This informs him that he can make an application to the First-tier Tribunal (FTT).  He has heard from some of his friends that this is worthwhile, as tenants often achieve a major reduction in the amount they will have to pay.  The other four leaseholders in the building all have similar concerns about the proposed works and charges and they make a joint application to the FTT.

Bill’s scenario is one which will be repeated in thousands of similar situations around the country in the current difficult financial climate.  It is therefore not surprising that there has been a significant increase in service charge disputes over the last year or so. My guess is that this is set to continue over the next year or so.

Simon Painter is a Partner at Bircham Dyson Bell LLP specialising in property litigation.