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Service Charges and Ground Rent

Service Charges and Ground Rent. Christopher Last and Nadeem Hussain Leasehold Advisory Service. Key statutes. Landlord and Tenant Act 1985, Landlord and Tenant Act 1987 Housing Act 1996 Commonhold and Leasehold Reform Act 2002. Provision of information.

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Service Charges and Ground Rent

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  1. Service Charges and Ground Rent Christopher Last and Nadeem Hussain Leasehold Advisory Service

  2. www.lease-advice.org Key statutes • Landlord and Tenant Act 1985, • Landlord and Tenant Act 1987 • Housing Act 1996 • Commonhold and Leasehold Reform Act 2002

  3. www.lease-advice.org Provision of information • The tenant 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

  4. www.lease-advice.org 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)(England) Regulations 2004/3096 • Landlord and Tenant (Notice of Rent)(Wales)Regulations • 2005/1355

  5. www.lease-advice.org 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

  6. www.lease-advice.org 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.”

  7. www.lease-advice.org 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

  8. www.lease-advice.org 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

  9. www.lease-advice.org Summary of rights and obligations • Summary of Rights and Obligations,and Transitional Provisions (England) Regulations 2007/1257 • 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

  10. www.lease-advice.org Consultation for major works • Section 20 LTA 1985 • As amended by Section 151 of the 2002 Act • Provision of information and costs to tenants • Requirement to seek views and nomination of contractors before proceeding • No right of recovery beyond costs limit if work started before completion of process

  11. www.lease-advice.org Consultation for major works • £250 limit • Three-stage process • 30 day periods for response • Seeking dispensation order from the leasehold valuation tribunal

  12. www.lease-advice.org Consents for dispensations • Section 20ZA(i) LTA 1985 • Jurisdiction of the Leasehold Valuation Tribunal (“LVT”) • Urgent works • Advance applications • Impracticality of obtaining more than one estimate, etc • Daejan v Benson • Court of Appeal decision of 28th January 2011 going to the Supreme Court in December 2012 • Guidelines

  13. www.lease-advice.org 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? NB Limitation Act 1980 - reserved as rent?

  14. www.lease-advice.org 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

  15. www.lease-advice.org Recovering ground rent • 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.

  16. www.lease-advice.org 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

  17. www.lease-advice.org Recovering service charges – LVT • Section 27A of the LTA 1985 • Leasehold Valuation Tribunals (Procedure) (England) Regulations 2003 • Leasehold Valuation Tribunals (Procedure)(Wales)Regulations • Freeholder or lessee can seek ruling on payability or reasonableness of service charges both past and prospective • Download application form • http://www.justice.gov.uk/forms/hmcts/residential-property • Appeal lies to Upper Tribunal (Lands Chamber) with leave of the LVT and/or the Upper Tribunal

  18. www.lease-advice.org 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

  19. www.lease-advice.org 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

  20. Questions? The Leasehold Advisory Service 020 7383 9800 info@lease-advice.org www.lease-advice.org Maple House, 149 Tottenham Court Road London W1T 7BN

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