Service Charge Rights for Leaseholders: An Overview

Leaseholders have specific rights regarding service charges, which are fees charged by the landlord or management company to cover the cost of maintaining and repairing the building and any communal areas. These rights are designed to ensure that leaseholders are charged fairly and that the charges are reasonable.

Leaseholder Key Rights to Service Charges:

Right to be consulted: The landlord or management company must consult with leaseholders before carrying out any major works or making any changes to the services provided. This includes providing a summary of the costs and allowing leaseholders to comment.
Right to challenge: Leaseholders can challenge service charges they believe are unreasonable. This can be done through the First-tier Tribunal (Property Chamber), which has the power to determine whether the costs are reasonable and, if not, to vary them.
Right to information: Leaseholders can request information about the service charges they are asked to pay. This includes the right to see receipts, invoices, and other documents relating to the costs.
Right to a summary: The landlord or management company must provide leaseholders with the costs they are being asked to pay, including how the charges are calculated and what they are for.
Right to pay in instalments: Leaseholders have the right to pay service charges in instalments rather than in a lump sum.

Leaseholder Protections

Leaseholder protections are an essential element of the leasehold system and help to ensure that leaseholders are treated fairly by landlords and residential management companies.

Right to Challenge Service Charges

Leaseholders can challenge service charges if they think they are excessive or unreasonable. The process for applying to the First-tier Tribunal (Property Chamber) is set out in the lease and must be followed for an application to be successful. A successful application will result in an order from the tribunal that sets out a reduced service charge amount.

Right to Information

Leaseholders have a right to request information about the service charges levied by their landlord or management company. This includes details of how the charges are calculated, as well as any deductions that have been made from them. The landlord or management company must provide this information within 21 days of receiving a request.

Right to be Consulted

Leaseholders have a right to be consulted before carrying out major works or making changes to services in their building. This includes providing a summary of costs and the opportunity to comment on them before any work is carried out. Leaseholders need to take advantage of this right to ensure they are not left with unexpected bills for work they disagree with.

Right to Manage

Leaseholders also have a right to take over the management of their building if they are unhappy with how it is currently being managed. This is known as the ‘Right To Manage‘ and can be exercised if certain conditions are met. These include at least half of all leaseholders within the building agreeing to participate in the process, and all parties involved being given sufficient notice.

Right to Extend Lease

Leaseholders need to understand their rights regarding enfranchisement to ensure that they get a fair deal from their landlords. Leaseholders also have a right to extend their lease or purchase the freehold of their building if certain conditions are met. This is known as ‘Leasehold Enfranchisement’ and is a complex process that should only be attempted with professional advice.

New Protections

In recent years, many new protections have been introduced for leaseholders. These include a ban on the sale of new leasehold houses, restrictions on ground rents, and a new Building Safety Fund, which provides funding for properties with unsafe cladding and other fire safety defects. These new protections will help ensure leaseholders are better protected when dealing with landlords and managing agents.

Challenge Unfair Service Charge

If leaseholders feel that their service charge is unfair, they have several options to challenge it. It’s important to note that leaseholders have a limited time to challenge service charges, so acting quickly is essential if they believe the charge is unfair.

Review the Lease Agreement

The first step is to review the lease agreement and check whether the service charge is reasonable according to the lease terms. Legal advice may be required to determine whether the service charge is reasonable if the lease is unclear or ambiguous. It is also important to check any local laws or regulations that may apply to the service charge.

Request Information

Leaseholders have the right to request information about the service charge, including invoices, receipts, and other documents related to the costs. This information can help leaseholders understand how the service charge has been calculated and whether it is reasonable. The landlord or management company will need to provide this information when asked.

Raise the Issue with the Landlord or Management Company

If leaseholders believe that the service charge is unfair, they should raise the issue with the landlord or management company in writing. They should set out their concerns and request that the amount is reduced or provide more information. In some cases, the landlord or management company may be willing to resolve the issue without resorting to legal action.

Mediation or Alternative Dispute Resolution (ADR)

If the landlord or management company is unwilling to address the issue, mediation or Alternative Dispute Resolution (ADR) can be used to resolve the dispute. This involves an independent third party who will try to help the parties resolve. ADR can be quicker and cheaper than court proceedings, but it is essential to remember that it may not always be successful.

First-tier Tribunal (Property Chamber)

If mediation or ADR is unsuccessful, leaseholders can apply to the First-tier Tribunal (Property Chamber) to challenge the service charge. The tribunal can determine whether the costs are reasonable and, if not, vary them. This process can be lengthy and expensive, but it can effectively resolve a dispute with a landlord or management company.

Seek Legal Advice

If leaseholders need clarification on their rights or assistance with any of the above steps, they should seek legal advice from a solicitor with experience in leasehold law. A solicitor can guide what steps should be taken and represent them in court if necessary.

Checks on Service Charges

Leaseholders need to ensure that they are being charged fairly for services by their landlords. Landlords are legally obligated to ensure that the service charges they levy are reasonable and in line with the lease agreement.

The Landlord and Tenant Act 1985 sets out several rights and obligations for landlords and tenants, including the payment of service charges. Service charges can include management fees, maintenance costs and insurance premiums.

Leaseholders should follow these steps to ensure that they are not being unfairly charged:

Request a summary of the service charge from the landlord/freeholder. This should include a breakdown of the costs that make up the service charge, such as management fees, maintenance costs and insurance premiums.
Review the lease agreement to check that the service charge is in line with what was agreed in the contract.
Request a breakdown of costs to ensure that the service charge comprises reasonable expenses.
Seek professional advice from a solicitor or surveyor if necessary.
Challenge the service charge if it is deemed unfair or unbalanced.

Major Works on Property

Leaseholders have the right to be consulted on major works on the property and have a say in the decision-making process. The consultation process is designed to ensure that leaseholders are aware of the work and the cost involved and to allow them to comment on the proposal.

The specific requirements for consultation will vary depending on the nature and extent of the work, but the general principles are set out in the Landlord and Tenant Act 1985. The Act requires the landlord or management company to follow a consultation process.

Providing written notice of the proposed works

The landlord or management company must provide written notice of the proposed works to all affected leaseholders. This notice should provide details of the works, the estimated cost, and the proposed timetable.

Providing a summary of the proposed works

The landlord or management company must provide a summary of the proposed works in writing, including the reasons for the works, the options considered, and the expected benefits and drawbacks.

Providing a consultation period

The leaseholders must be given a reasonable time to consider the proposal and provide comments. The minimum consultation period is usually 30 days, but longer periods may be required for more complex works.

Considering the comments

The landlord or management company must consider any comments received from the leaseholders and consider them when deciding whether to proceed with the works.

Applying to the First-tier Tribunal

Suppose the landlord or management company fails to comply with the consultation requirements. In that case, the leaseholders may be able to apply to the First-tier Tribunal (Property Chamber) to challenge the works or the cost involved.

Service Charge Rights FAQs

Q: What is a service charge?
A service charge is a fee charged by the landlord or management company to cover the cost of maintaining and repairing the building and any communal areas.

Q: What are the service charge rights for leaseholders?
Leaseholders in the UK have several rights regarding service charges, including the right to challenge the charges, the right to information, the right to be consulted, the right to manage, and the right to extend the lease.

Q: How can leaseholders challenge a service charge?
Leaseholders can challenge a service charge by reviewing the lease agreement, requesting information, raising the issue with the landlord or management company, using mediation or ADR, or applying to the First-tier Tribunal (Property Chamber).

Q: What is the First-tier Tribunal (Property Chamber)?
The First-tier Tribunal (Property Chamber) is an independent tribunal with the power to determine whether service charges are reasonable and to vary them if necessary.

Q: What is Leasehold Enfranchisement?
Leasehold Enfranchisement is the process of extending the lease or purchasing the freehold of a property. This can give leaseholders greater control and ownership of their property.

Q: What is the Right to Manage?
The Right to Manage is the right of leaseholders to take over the management of their building from the landlord or management company.

Q: What is mediation?
Mediation is a process in which an independent third party helps the parties to a dispute to resolve.

Q: What is Alternative Dispute Resolution (ADR)?
Alternative Dispute Resolution (ADR) is a process that allows parties to a dispute to resolve their differences without going to court.

Q: What should leaseholders do if they have concerns about their service charge?
Leaseholders should review the lease agreement, request information, raise the issue with the landlord or management company, seek professional advice, and challenge the service charge if necessary.

Q: Can the landlord or management company charge whatever they want for the service charge?
No, the service charge must be reasonable and calculated per the terms of the lease. The landlord or management company must also follow a consultation process before doing major work or changing the services provided.

Q: Can service charges be increased?
Yes, service charges can be increased if there is an actual increase in the cost of providing the services or if significant work is required. However, the increase must be reasonable and calculated per the terms of the lease.

Q: How often must the service charge be paid?
A: The service charge is usually paid regularly, such as annually or quarterly. The specific payment schedule will be set out in the lease agreement.

Q: Can the landlord or management company charge for services that are not provided?
No, the landlord or management company cannot charge for services not provided. Leaseholders have the right to challenge any charges they believe are unreasonable.

Q: Can leaseholders be charged for improvements to the property?
Leaseholders can be charged for improvements to the property, but only if the improvements benefit the leaseholders and the charge is reasonable. The specific requirements for charging for improvements will be set out in the lease agreement.

Q: Can leaseholders be charged for the landlord or management company’s legal costs?
Leaseholders can be charged for the landlord or management company’s legal costs if they are incurred in relation to the provision of services or the management of the property. However, the costs must be reasonable and calculated according to the terms of the lease.

Lastly

Leaseholders in the UK have the necessary rights regarding service charges. These rights are designed to ensure that leaseholders are charged fairly for the cost of maintaining and repairing the building and any communal areas and that they are consulted on any major works or changes to the services provided. Leaseholders have the right to challenge service charges they believe are unreasonable, to request information about the charges, to manage the building themselves, and to extend their lease or purchase the freehold.

By understanding their service charge rights and taking appropriate action when necessary, leaseholders can ensure they are not unfairly burdened with excessive or unreasonable charges. Leaseholders need to review their lease agreement, seek legal advice if necessary, and use the available channels for dispute resolution to protect their interests and ensure they are treated fairly by the landlord or management company.