We have dealt with several instructions to assess the reasonableness of service charges presented by local authority landlords to private lessees – the service charge demand can be very high indeed and it was interesting to see that this was picked up by Radio 4 recently. Listen Here
Since August 2014 social landlords are limited in the amounts that they can claim – these limits are £15,000 within London and £10,000 outside London. Social landlords also have the power to vary, waive or reduce service charges subject to varying criteria. There’s a good piece here that covers this in detail. Nonetheless if the charges are still excessive then they can often be challenged.
Here’s a quick and very general guide – we could write reams about this…. Challenging service charges can be difficult and expensive, but if they are-wrong or disproportionate then this can be reconsidered by the property tribunal.
Very often the first call is to a chartered surveyor. When we are asked to consider the service charge they very first thing we do is to check that all of the required section 20 consultation notices have been issued. To be honest this formal process is very rarely flawed in local authority property but we do find that costs and work descriptions can change between notices. Any error in this process can limit a freeholders ability to claim service charges. You should check these.
Ideally, we will have been invited to inspect a property by a lessee before the works start – this enable us to confirm the condition of a property and to determine whether the repair is necessary or otherwise.
We acted as expert witness in one case where the whole cost of reroofing was rejected [it was a lot of money] because our early inspection and report proved that the roof was is sound condition and the work was unnecessary. These inspection can be costly but if your split the cost with other lessees in the block the fee per flat can be reasonable.
We will then review the lease documents in detail – this is important because it sets out what the freeholder can claim as a service charge item and a lessees liability to pay it. Sometimes we find that the lease precludes “improvements” being a service charge recoverable item and if these have been included then they need to be removed form the final bill.
Only then will we carry out a site inspection. Occasionally we will find that the works have all been completed and carried out to a good standard – in those cases we will advise that he charges are “reasonable” if all other criteria have been met. More often than not though we find problems – here’s a selection:
- Gutter replacement being partially completed – rather than full replacement claimed and only a down pipe replaced
- Works simply not done but costs claimed – most recently brick bin stores just left dilapidated
- Poor quality workmanship – especially decoration
- Poor finishing and making good
- Non compliance with building regulations and planning regulations
- Specified materials not used and cheaper material substituted
- Works of improvement claimed as repair – this could include things like communal satellite TV installation and security installations
Part of the problem is that very often costs are assessed on an estate wide basis and then simply divided without regard for the actual work done on individual blocks – some will need more and some will need less. We nearly always find that the administration costs are excessive – our experience says that a full design and constitutions team should cost around than 18% of a project value but we regularly see 25% or more. We occasionally see accounts where the contingency has not been omitted.
So what then – in most cases you will need legal advice [always use a specialist housing / leasehold lawyer] and you may take the case to the property tribunal for review. They will hear evidence from both sides and make a decision that may uphold, vary or reduce service charges. This can be expensive and costs are not always recoverable. Here’s a typical decision form a case we were involved in
Since August 2014 social landlords are limited in the amounts that they can claim – these limits are £15,000 within London and £10,000 outside London. Social landlords also have the power to vary, waive or reduce service charges subject to varying criteria. There’s a good piece here that covers this
Need service charge advice – call us 020 8295 1200 [London] 01303 239000 [Kent]
Other Links – Painsmith Solicitor – Service Charges – What You Need to Know