service c harge and ground rent procedures

www.lease-advice.org

Service Charge and Ground Rent Procedures Liz GibbonsLeaseholder Network Meeting19th May 2014


Key Statutes• Landlord and Tenant Act 1985• Landlord and Tenant Act 1987• Housing Act 1996• Commonhold and Leasehold Reform Act 2002


What is a service charge? • An amount payable by a tenant as part of or in addition to

the rent which is• Payable directly or indirectly for services, repairs, maintenance,

improvements or insurance or the landlord’s costs of management, and

• The whole or part of which varies or may vary according to relevant costs• Section 18(1) LTA 1985

• Arnold v Britton & Ors [2013] EWCA Civ 902


Service charges – what’s in the lease?• Advance payments?

• And when due?• Certification?

• And by whom ?• Audited accounts required ?• When do final accounts have to be sent out?• Leonora Investment Co.Ltd.v.Mott Macdonald Ltd.[2008]

EWCA Civ 857• “The leases prescribe the contractual route down which the

landlord must travel to be entitled to payment.”


Provision of information• A leaseholder should be provided with an address for

service of notices including notices in proceedings • Section 48 LTA 1987

• Any demand for service charges should contain the landlord’s name and address • Section 47 LTA 1987

• Beitov Properties Limited v.Elliston Bentley Martin[2012] UKUT 133 (LC)• Address of agent not sufficient

• Payment not due until compliance with Sections 47 and 48

Obtaining information • Request for summary of costs incurred• During last twelve months/last financial year• Summary must be provided within one month of the end

of the accounting year• Summary must be certified by a qualified accountant if

service charges payable by more than four dwellings

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What must a summary include• Costs in respect of which no demand for payment was

received within the accounting period• Costs in respect of which a demand for payment was

received and payment was made by the landlord within that period

• Amounts received credited to leaseholders• Any relevant grant received


Inspecting documents • Within six months of receiving Section 21 summary • Written requests for facilities to inspect accounts, receipts

and other documents supporting the summary • Facilities provided free of charge• Reasonable copying costs payable • Available for two month period starting no later than one

month after request


Non compliance with Sections 21 & 22 LTA 1985• Prosecution in Magistrates Court• Defence of reasonable excuse • Submit papers within six months of commission of offence • Maximum level 4 fine £2500• Local housing authority can prosecute



Service charge demands• Sections 47 and 48 LTA 1987• Section 21B LTA 1985 introduced by the 2002 Act• Landlord must provide with each service charge demand

a summary of rights and obligations• Prescribed content• Printed or typewritten in a font no smaller than 10 point • Non-compliance means right to withhold payment and the

terms in the lease for enforcement such as interest do not apply until summary served


Summary of rights and obligations

• Summary of Rights and Obligations,and Transitional Provisions (Wales) Regulations 2007/3160

• Amourgam v.Valepark Properties Ltd [2011] UKUT 261(LC)• Section 21B applies where costs incurred on or after 1st October

2007• Tingdene Holiday Parks Ltd v Cox and others[2011] UKUT

310(LC)• Section 21B information must accompany the demands and not be

a copy of the relevant statutory instrument


Consultation for major works• Section 20 LTA 1985

• As amended by Section 151 of the 2002 Act• Provision of information and costs to leaseholders• Requirement to seek views and nomination of contractors

before proceeding• Potentially no right of recovery beyond costs limit if work

started before completion of process• Daejan Investment Limited v Benson & Others [2013] UKSC 14• Phillips v Francis [2012] EWHC 3650 (Ch D)

• Court of Appeal hearing now adjourned to 13-15 October 2014


Dispensation• Section 20ZA(i) LTA 1985• Jurisdiction of the Leasehold Valuation Tribunal (“LVT”) • Urgent works • Advance applications • Impracticality of obtaining more than one estimate, etc


Demands must be within timeSection 20B LTA 1985• Costs cannot be recovered if incurred 18 months before

demand for payment• Unless notice served within 18 months then costs incurred

and will be payable• London Borough of Brent v.Shulem B Association Limited

[2011] EWHC 1663 (Ch)• Demand for payment must be in accordance with the terms of the

lease• OM Property Management Limited v.Burr [2012] UKUT

2(LC)• When are costs incurred?• Date of bill or date of payment?


Limitation Act 1980• Is the demand being enforced within the period allowed

under the Limitation Act 1980?• 12 years for service charges?• 6 years for rents?


Service charges – they must be reasonable

• Section 19 LTA 1985• Relevant costs shall be taken into account in determining

the amount of a service charge payable for a period • Only to the extent that they are reasonably incurred, and• Where they are incurred on the provision of services or the

carrying out of works, only if the services or works are of a reasonable standard


Recovering service charges• Check compliance with Sections 47 and 48 LTA 1987• Check summary of rights and obligations accompanies

the service charge demand• In time?

• Section 20B of the LTA 1985• Proper consultation under Section 20 of the LTA 1985• Limitation Act 1980


Recovering service charges-county court

• Service of Form N1 • www.hmcourts-service.gov.uk

• Prepare for allocation• Questionnaire• Directions• Hearing

• Case defended• Anticipate transfer to the LVT under 2002 Act Schedule 12

para.3(1)(a)• Ancillary matters retained by county court

http://www.hmcourts-service.gov.uk/


Recovering service charges – LVT

• Section 27A of the LTA 1985• Leasehold Valuation Tribunals (Procedure)(Wales)Regulations

2004• Freeholder or lessee can seek ruling on payability or

reasonableness of service charges both past and prospective

• Download application form • wales.gov.uk/docs/rpt/publications/130718lvt6en.pdf

• Appeal lies to Upper Tribunal (Lands Chamber) with leave of the LVT and/or the Upper Tribunal

http://www.justice.gov.uk/forms/hmcts/residential-property





Forfeiture of lease-service charges

• Section 81 of the Housing Act 1996 • Cannot forfeit unless

• Admission that service charges are payable• Final determination of payability by LVT, court or arbitral tribunal

• Section 146 notice served where not reserved as rent• Service not less than 14 days after final determination under

• Is a default judgment in county court such a final determination?• Yes - Church Commissioners for England v.Koyale Enterprises

Limited and another 2011 in the Central London County Court


Ground rent – Some housekeeping

• Section 48 of LTA 1987• Section 166 of the 2002 Act

• Ground rent not payable under long lease unless leaseholder given a notice in the prescribed form

• Landlord and Tenant (Notice of Rent)(Wales)Regulations2005/1355


What’s in the prescribed notice of ground rent?• Amount of ground rent due • Date it should be paid

• Not less than 30 days or more than 60 days after day on which notice given

• Name of leaseholder• Period covered by demand• Details of to whom money should be paid• Summary information relating to Section 167 of 2002 Act

• Landlord barred from forfeiting for ground rent unless sums owed exceed £350 or have been outstanding for more than three years

• Note different summary information in England and Wales


Recovering ground rent• County Court

• Small claim if under £5000• Check what the lease says• Check compliance with Section 48 LTA 1987 and Section

166 of the 2002 Act• Chasewood Park Residents Ltd.v.Kim [2010] EWHC 579

(Ch)• Landlord must plead and prove compliance with Section 166.


Administration charges• Para.1(1) of Schedule 11 of the Commonhold and

Leasehold Reform Act 2002• “…an amount payable by a tenant of a dwelling as part of or in addition to

the rent which is payable, directly or indirectly• For or in connection with the grant of approvals under his lease, or

applications for such approvals• For or in connection with the provision of information or documents by or

on behalf of the landlord or a person who is a party to his lease otherwise than as landlord or tenant

• In respect of a failure by the tenant to make a payment by the due date to the landlord or tenant, or a person who is a party to his lease otherwise than as landlord or tenant, or

• In connection with a breach (alleged breach) of a covenant or condition in his lease”


Administration charges• May be fixed or variable• Open to challenge at the Leasehold Valuation Tribunal • Demand must be accompanied by a summary of rights

and obligations • Levied directly from a leaseholder


Southall Court ( Residents) Limited v Tiwari & Others [2011] UKUT 218 (LC)“It is strongly to be hoped that any future disagreements about service charges payable will be resolved by negotiation rather than litigation, if necessary with the assistance of mediation. For all landlords and tenants, recourse to courts or tribunals should be a last resort and certainly not an inevitability.” • Alternative Dispute Resolution including mediation


Final thoughts• Points to check:

• Enforcement within limitation period• Ground rent and service charge demands• Section 20 consultation notices• Section 20B notification• Section146 notices• Administration Charge?

Questions?

The Leasehold Advisory Service020 7383 9800/02920 782222

[email protected]

Maple House, 149 Tottenham Court RoadLondon W1T 7BN/c/o Care & Repair Cymru, 2 Ocean Way, Cardiff, CF24 5TG

service c harge and ground rent procedures

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service of notices

service charges payable

arrears service charge

service charge demandssections

summary facilities

tenant act

summary includecosts

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