Service charges - a chilling reminder for landlords

Service charges are one of the principal areas of dispute between leaseholders and their landlords. A recent case has again highlighted the importance of landlords being aware of the key regulation in this area and what they need to do to comply with the Landlord and Tenant Act 1985.

In this case, the leaseholder had a long lease of a flat in a block of similar flats. The freehold was owned by a Management Company. The leaseholder was one of the members and directors of the Management Company. The other members and directors all owned leases of the other flats in the block.

Under the terms of his lease, the leaseholder in question was required to pay 17% of the Main Building Expenditure and 19% of the Internal Building Expenditure. At a directors meeting, the need for certain works was discussed. Subsequently, the leaseholder was invoiced for his share of the works.

The leaseholder argued that not all of the invoiced works had been discussed and agreed at the directors meeting. Nor had he received written notice of the works. He therefore argued that his liability should be limited to £250 in accordance with s.20(3) of the Landlord and Tenant Act 1985 and Regulation 6 of the Service Charges (Consultation Requirements) (England) Regulations 2003 (“the 2003 Regulations”).

The Management Company decided to issue proceedings to recover the amount that it had invoiced.

In the County Court, the Judge ruled that there was no requirement for the written notice of the works to be in any particular form and came to the view that the minutes of the meeting had probably been sent to the leaseholder so he knew what to expect.

The leaseholder appealed this decision.

The focus of the appeal was whether the regulations and requirements for consultation had been complied with. It was held that, even if minutes had been sent out to the leaseholder, this notice would not comply with the consultation process detailed in the 2003 Regulations and that the County Court Judge had been incorrect to rule that there was no requirement for the written notice to be in any particular form.

The leaseholder was successful in his appeal and only found liable for £250.

This case reminds landlords to be careful to follow the correct procedures for service charges, including providing written notice and undertaking a proper consultation process. Otherwise, a landlord risks limiting a leaseholder’s liability to a paltry £250 and being left out of pocket.