Service charges are amounts paid by leaseholders to their landlord or management company toward the cost of maintaining, repairing, and managing a building. They are one of the most common sources of dispute in leasehold property and leaseholders have significant legal protections that many do not know about.
Under the Landlord and Tenant Act 1985, service charges are only recoverable if the costs to which they relate have been reasonably incurred and the services or works are of a reasonable standard. A leaseholder can apply to the First-tier Tribunal (Property Chamber) to determine whether a service charge is payable and, if so, in what amount. This is an accessible and relatively low-cost route that does not require legal representation, though having a specialist helps in complex cases.
Common grounds on which service charges are challenged include the costs being unreasonably high, the works being unnecessary or of poor quality, the landlord failing to obtain competitive quotes before appointing contractors, the charge including items not covered by the lease, and the landlord failing to consult leaseholders before carrying out major works as required by Section 20 of the Landlord and Tenant Act 1985.
Before carrying out qualifying works costing more than 250 per leaseholder, or entering into a long-term agreement for services costing more than 100 per leaseholder per year, the landlord must follow a prescribed consultation procedure. Failure to do so limits the amount recoverable from each leaseholder to 250 for qualifying works, regardless of the actual cost, unless the tribunal dispenses with the requirement.
An application to the First-tier Tribunal is made on the relevant form and supported by evidence of the charges disputed. The tribunal lists a hearing at which both sides present their case. The tribunal is made up of a legally qualified member and a surveyor, and its decisions are legally binding. There is generally no order for costs in service charge proceedings, which means each side bears their own legal costs regardless of outcome.
This is risky. If the service charge is not paid and the lease contains a forfeiture clause, the landlord may be able to forfeit the lease for non-payment, although the courts are generally reluctant to allow forfeiture of residential leases. Making a formal application to the tribunal is a much safer way to dispute a charge than simply withholding payment.
Service charges can be challenged at the First-tier Tribunal if they are unreasonably incurred or of an unreasonable standard. Major works require Section 20 consultation. Withholding charges without applying to the tribunal carries risk. A specialist property barrister can advise on whether a challenge is viable and represent you at the tribunal hearing.
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