Budgeting for service charges can be difficult, especially in the current economic climate. So if you own, or are looking to buy a leasehold property, the key question you should ask is are the charges reasonable, warns Adams & Remers.
Alix Lee, solicitor at Adams & Remers comments: “Service charges must be demanded correctly and in accordance with the lease. Usually the lease provides for the landlord to recover his outlay for maintenance, repair and upkeep of the building. The Lease may also allow the Landlord’s management fees to be recovered. The Landlord should not be making a profit from service charges.”
“Service charges must be reasonable, and demands must be accompanied by a summary of the tenant’s rights in a statutorily prescribed form. A tenant is entitled to inspect accounts and all receipts and invoices held by a landlord upon request. If any works shall cost more than £250.00 per leaseholder then the landlord is obliged to comply with the statutory consultation process”.
“Landlords and leaseholders have a right to apply to the Leasehold Valuation Tribunal (LVT) for a determination of whether a charge or a proposed charge is reasonable. An application can be made whether or not the charge has been paid. If however the charges have been agreed by the parties or determined by a court or tribunal – no LVT determination can be made.”
“In reaching their determination, the LVT are likely to have to consideration to the following points:
Was it or would it be in the circumstances, reasonable for costs to be incurred and if so;
were or will the works be provided to a reasonable standard?
What are the Landlord’s procedures for assessing and controlling the costs?
The LVT may determine – whether a service charge is payable under a lease; by whom and to whom the service charge is payable; the manner of payment.”
Alix Lee concludes: “Whilst the LVT is considered to be a more informal forum, none the less clear evidence from an applicant in support of their case shall be expected. It is not sufficient for a leaseholder simply to say that they believe the service charges to be unreasonable or alternatively for a landlord to suggest that his proposed charge will be reasonable without supporting evidence.”