Service charge arrangements for your flat are determined by your lease
Service charge arrangements for your flat are determined by your lease, as Christopher Last explains
A service charge is an amount of money paid by leaseholders for services provided by their freeholder or management company. The obligation to pay service charges should be set out in the lease; if not there will be no requirement to pay.
The service charge covenants in a lease may provide for leaseholders to pay an equal share of the total cost of the services provided for the building or estate, or instead set out a formula for calculating the individual leaseholder’s liability such as floor space or rateable value. This means that some leaseholders may pay a higher service charge than others in the same building.
Service charges must be ‘reasonably incurred’ and be of a reasonable standard. There are ways to hold your freeholder or manager to account. You can request from the freeholder a written summary of costs incurred during the last accounting period. They must send it to the leaseholder within six months of the end of the last accounting period or within one month of the request – whichever is later. If you wish, you can then send a written request to their freeholder asking to inspect the accounts and receipts within 6 months of receiving the summary.
Failure to comply with either request is potentially a criminal offence and the freeholder risks being prosecuted and fined up to £2,500. Local authorities are exempt from these provisions but can bring a prosecution.
If you believe your service charges are not reasonable and you wish to challenge the amount you are being charged, the Leasehold Valuation Tribunal (LVT) can determine the amount of any service charge demand you are liable to pay. However, do regard applications to the LVT as a last resort and first consider negotiating with your freeholder or inviting them into mediation on a dispute.
Should you require any advice on service charges, the Leasehold Advisory Service (LEASE) is able to assist. A range of advice guides and FAQs are available to download from the website at www.lease-advice.org.
Service charges are defined by Section 18 of the Landlord and Tenant Act 1985 as:
“…an amount payable by a tenant of a dwelling as part of or in addition to the rent—
(a)which is payable, directly or indirectly, for services, repairs, maintenance, improvements or insurance or the freeholder’s costs of management, and
(b)the whole or part of which varies or may vary according to the relevant costs.”
Christopher Last is a legal adviser at LEASE