When someone purchases a leasehold flat, they accept that service charges will be involved as stated within the terms of the lease. Nevertheless, service charges can be contentious and there are avenues through which leaseholders can challenge freeholders over service charges.
Legal action can be pursued against a freeholder if they are deemed to have acted in an unreasonable manner and the Landlord and Tenant Act states that action can also be taken if the service charge is considered disproportionate or unjustified. Leaseholders can also demand that the freeholder discloses certain information.
When a freeholder demands a service charge, it is only valid if they include details of leaseholder rights and how the leaseholder can challenge the fee. If this information is not provided, the leaseholder is not technically obliged to pay. A summary of the services which have been charged for should be provided to the leaseholder within 24 weeks in order to satisfy the leaseholder’s right to information. Again, if this information is not forthcoming, they are not obliged to pay the fee. Service charges which include 5 or more flats should have the summary approved as reasonable by an accountant. A leaseholder can then ask the freeholder to provide materials needed for inspecting the summary available and a £2,500 fine can be charged to freeholders if these facilities are not provided within 3 weeks.
The intervention of the Leasehold Valuation Tribunal (LVT) may be required if the leaseholder believes that the charge is unreasonable. The LVT will then decide (if a court has not already done so) whether or not the charge was fair. It is crucial that leaseholders who do not agree to the charge implicitly because that will preclude legal action.
When making a judgement the LVT will consider the dates and amounts involved in the case, whether the work referred to was of an acceptable standard, whether all costs involved were required under the terms of the lease and whether the leaseholder was given adequate notice. If the LVT judges the charge to be unfair, the freeholder will not be able to pursue the costs (under the Landlord and Tenant Act 1985).
Leaseholders who refuse to pay and have built up service charge arrears may find themselves facing forfeiture action at the LVT because freeholders retain the right to apply for termination of the lease and repossession of the property if lease terms are breached. Such action can only be taken if the leaseholder has agreed that the charge is due and if the charge is reasonable though. There must be a certain amount of money involved as well in order to seek forfeiture and the leaseholder must be served with a section 146 notice. Upon receipt of this notice, leaseholders should pay the charge because the penalties are enormous. Those who are unable to pay may find that their mortgage lender will help because no lender wants such a significant debt on their hands.
Contact us now – for expert advice on challenging service charge arrears
As well as lease enfranchisement and lease extension, our specialist lawyers can also help you with your service charge dispute – so whether you are a freeholder or leaseholder, for expert advice from experienced leasehold property experts:
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