NEED TO KNOW
Continuing the series in which our Clinic experts provide a guide to those difficult problems that can trip up the unwary.
This week, David Fleming on service charges: Most of the flat owners in my building are in dispute with the freeholder over the service charges he is demanding. What rights do we have? By statute, service charges are only payable insofar as they are reasonably incurred and for a reasonable amount. Furthermore, where building works are involved, no individual lessee has to pay more than £250 towards them unless the freeholder has gone through a complex consultation procedure involving the obtaining of at least two estimates. The same now applies for what are known as “qualifying long-term agreements”. These are agreements (such as contracts with managing agents) that can last longer than a year. What happens if we refuse to pay? The landlord may either sue in the County Court or bring proceedings before the Leasehold Valuation Tribunal to determine the reasonableness of the service charges. The costs of this sort of litigation are high and I advise flat-owners that it is only worth arguing about service charges if a sufficient number become involved. Anything else we have to watch for? Sometimes, the landlord will simply wait, safe in the knowledge that one day the lessee will wish to sell his flat and that it would be very difficult to do this if service charges are unpaid. Accordingly, in a serious case it is probably worthwhile for the lessees themselves taking the initiative by applying to the Tribunal for a declaration that the service charges are not payable. This sounds quite serious. Could we not try another approach? Most of us have better things to do than engage in disputes that theoretically could lead to a court or tribunal case every time a service charge demand is sent out. The alternative is for the lessees collectively either to exercise their rights to buy the freehold or their right to take over the management of the building. It is, however, important to realise that this is not a panacea for all ills.
Block management is a complex business and people have different opnions of what constitutes a reasonable service charge. Accordingly, instead of getting involved in disputes with a third party, it is quite common where the lessees have collectively bought the freehold for individual flat owners to end up arguing with their neighbours. David Fleming is head of property litigation at William Heath & Co.