When it comes to service charge demands under the residential lease of a flat, it's important to get it right. A failure to do is more likely to result in service charges being paid late, more challenges generally and applications to the Court/Tribunal which will not only increase costs but take up time and resources to bring/defend. We have addressed one of the issues which regularly arises and explained how to get it right. Watch this space for more tips…
The most important issue to consider is that the service charge demand is a contractually valid service charge demand. This means that it must be demanded in accordance with the terms of the lease. If its not, the amount will not be due from the leaseholder. Whilst many modern blocks of flats will have leases with similar terms, there is no guarantee of this. Therefore, all leases should be checked in the first instance to establish what the service charge mechanisms are under those leases and then ensure that the service charge demands are prepared and sent out in accordance with those terms.
This issue is particularly important when you consider the strict 18 month deadline for demanding variable service charges. If the service charge demand was served within the 18 month deadline of the costs being incurred, but it later turns out that the demand was not prepared/served in accordance with the lease (i.e. it should have been accompanied by an estimate for charges), then the amount could be unrecoverable. A notice under Section 20B (2) of the Landlord and Tenant Act 1985 may assist here (if it's been served) but that’s not always guaranteed as it's important those are also prepared and served correctly too.
For the purposes of this blog, I will not digress into s20B (2) notices, but you will see it's clear that not following the service charge mechanisms in the lease could result in a harsh outcome for the landlord.
As far as checking the leases are concerned – it's not just the original lease you need to check either. You should check any deeds of variations or subsequent lease extensions. This most likely means that you will, at least initially, need to obtain copies of the titles to the flats from Land Registry to check what documents govern any specific leaseholder's obligations to pay a service charge. Excel or other case management systems may help with this exercise. Once the task has been undertaken, unless any further leases or deeds of variations are granted, or there is a successful application to the Tribunal to vary the lease, then the exercise does not need to be repeated.
If we can be of assistance regarding the matters discussed above, or any other property disputes, please do not hesitate to contact a member of the team.