As a leaseholder, you have the right to get information about how your service charge money was spent in two ways: under the terms of your lease or through your legal rights to see the accounts.
Your lease
Most modern leases require landlords to provide accounts at the end of the year.
If your lease has such a clause, you can ask your landlord to comply by providing that information. Failure to do so could be a breach of the lease.
Your rights in the law
The law gives leaseholders a right to request a summary of the service charge costs. Having received the summary, you can then ask to inspect receipts and accounts from the last accounting year, or where accounts are not kept by accounting years, the past 12 months before your request.
You must make a request for a summary in writing. The landlord must provide it either within one month of your request or within 6 months of the end of the accounting period if that is later. The summary must be certified by a qualified accountant if there are more than four flats in the building.
Making a further request for receipts
You can ask to inspect accounts, receipts and any other relevant documents that shed more light on the summary. You must do this within 6 months of receiving the summary, whether it came to you because you asked requested it or as part of an end-of-year statement of account.
Landlords must also provide facilities for inspecting the documents within one month of your request and make them available for 2 months.
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There are only limited circumstances in which you can withhold payment of your service charges without breaching the terms of your lease.
These are to do with the way the landlord has issued your service charge demand. You can withhold your service charge payment if:
However, if the landlord makes the necessary corrections you are likely to need to pay and your right to withhold the charges is likely to be lost.
Withholding payment for other reasons could put you at risk of facing a court claim, legal fees and even the forfeiture of your lease.
Disputes
If you are unhappy about your service charge or think that your landlord or managing agent may be breaching the terms of your lease – for example, by not following their obligations to carry out repairs – you should try to resolve the dispute with them first before taking legal action.
Set out your concerns to them in writing. Keep a record of all your communications as they may be useful later if you need to apply to a court or tribunal. If you cannot reach a solution, mediation is also an option before legal action.
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The law says that your landlord is only allowed to demand a reasonable service charge for works of a reasonable standard.
Even though it is your legal right not to pay more than is reasonable, it is risky to withhold payment, which is likely to be a breach of your lease terms.
If you breach your lease, it could put you at risk of facing a court claim from your landlord, legal fees and even the forfeiture of your lease.
But if you pay your service charge as normal, a Tribunal could take the view that by doing so you have agreed to the charge increase, which would undermine your claim that it is unreasonable.
One way forward is to make it clear you are paying your charge under protest. This shows the landlord, and a Tribunal if it comes to it, that you are still fulfilling the terms of your lease, but do not agree with the new service charge.
Contact your landlord first
If you are unhappy about your service charge, you should try to resolve the issue with your landlord first.
Set out your concerns to them in writing. Keep a record of all your communications as they may be useful later if you need to apply to a court or tribunal.
You can also use your legal rights to ask for information from the landlord, such as a summary of the service charge accounts, as well as receipts and other relevant documents.
If you cannot reach a solution, mediation is also an option before legal action.
Applying to Tribunal
If all of the above fails and you have evidence to challenge the charges, you can make an application to the First-tier Tribunal (Property Chamber), or the Leasehold Valuation Tribunal if the property is in Wales.
We recommend that you seek advice of a solicitor or a surveyor if you decide to challenge the charges.
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Your service charge is a share of the costs that the landlord pays to maintain and manage your building, according to the terms of your lease.
Service charges are usually split between leaseholders in a property. How your share is calculated should be set out in your lease.
There are many ways this could be done. For example, your share may be in proportion to:
It could also be just a fixed percentage of the total costs.
The terms of your lease
Your lease will not only tell you how the landlord’s costs are divided between leaseholders. It will also tell you what services are covered – that is, what services the landlord can charge you for.
This is important, because you do not have to pay for services that are not included in your lease.
Often, the terms of the lease could be general, such as ‘repairing and maintaining the structure of the building’. But some items such as legal costs, management costs, heating, cleaning, garden maintenance and alarm systems should be specified.
If you are not sure if you should be paying for something, check your lease or get legal advice.
The lease also tells you:
Reasonable charges
The lease usually allows the landlord to get back the costs of maintaining and managing the building. But the law expects these costs to be reasonable, and that the works are done to a reasonable standard.
If you think any service charges are not reasonable, you have the right to make an application to the Tribunal to challenge them.
Ultimately, it is up to a Tribunal to decide what is and is not reasonable, depending on the circumstances of each case.
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Your lease will tell you whether or not the landlord can increase your service charges.
It will specify whether the amount you pay is fixed or variable.
Some older leases allow a fixed service charge – a specific amount or a formula – regardless of the actual costs to the landlord.
However, most service charges are based on the actual or estimated cost of the services, and so may change from year to year. These are known as variable service charges. Your landlord can increase a variable service charge.
Any increases must be reasonable. You have the legal right to challenge an increase that is not reasonable at a tribunal.
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You have a legal right to ask for a summary of service charge costs for the last accounting year, or last 12 months if they are not kept in accounting years.
What the summary should show
The summary should show any items that were:
It should also say:
Time limits
The landlord should give you the summary within one month, or within 6 months of the end of the accounting period if that is later.
It is an offence punishable by a fine for a landlord to fail to provide this information within the time limits without a reasonable excuse.
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Usually, every leaseholder has to contribute towards repairs to the roof, as it is deemed to be a ‘common part’ of the building.
However, you are only required to pay for the costs of roof repairs if your lease has a term that expresses that.
If your lease does require you are to contribute towards the repair of the roof, but if you think that the costs are unreasonable, you can challenge them at the First-tier Tribunal.
Furthermore, major works like roof repairs are likely to require the landlord to consult leaseholders under Section 20 of the Landlord and Tenant Act 1985. This gives you the right, among others, to give your comments about the works and to propose a contractor.
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The law requires that upon request, the landlord must supply a summary of the service charge costs incurred during the last “accounting period” ( usually the last service charge year under the lease) and allow for inspection of documents within certain time limits.
Where a landlord fails without reasonable excuse to comply with either a request for a summary or to inspect supporting documents they commit a summary offence on conviction and are liable for a fine of up to 2,500 (level 4 on the standard scale).
The local housing authority, usually through the Tenancy Relations Officer, has the power to bring proceedings at the magistrates’ court, or they can be brought by the leaseholder privately. Any prosecution must be presented to a magistrate within 6 months of the date of the offence.
Please note that local housing authorities are exempt from prosecution.
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