If a leaseholder believes their service charges are unreasonable, they can take their concerns to the First-tier Tribunal (FTT). Brady Solicitors’ Sumi Begum highlights the importance to property managers of ensuring their demands are water-tight should they face a ‘reasonableness’ claim.
Under section 27A of the Landlord and Tenant Act 1985 a leaseholder can make an application to the FTT to consider the reasonableness of their service charges and their liability to pay them. The consequence of this to the landlord or managing agent is that their activities and service charge demand procedures come under scrutiny. The onus is on them to prove and justify their actions.
FTT determination of service charges
It is not enough to simply produce a copy of the service charge demand and state that it is payable by the leaseholder. The FTT will also consider:
- What the charges relate to
- Are the charges permitted by the terms of the lease?
- Have the charges been properly demanded?
- The reasonableness of the charges
The importance of keeping accurate records
A leaseholder can request that the FTT considers service charges dating back to the last six years, whether they’ve been paid or not. It is therefore essential that property managers keep accurate records of all expenditure incurred on their developments, as this will need to be produced as evidence in a claim against them. These invoices will form the foundations of their case.
Reasonableness test of service charges
This is perhaps the most onerous task with matters proceeding to the FTT.
Unfortunately, there is no set standard an FTT panel will follow when determining the test of reasonableness. However, the following factors may come into consideration:
- The necessity of the works commissioned
- The size of communal parts e.g. the garden
- The size of the development in general
- The commerciality of the agents selected to carry out the works
- The frequency of the works carried out
Thinking about the above, and ensuring that you can provide evidence of alternative quotes from contractors to show that you have acted reasonably, before you carry out any works to a development will help to make sure your demands will stand up at the FTT.
Brady Solicitors’ advice
Ensure you can fully justify every aspect of your service charge demands by accurately documenting any works carried out on a development. It also goes without saying that you must issue service charge demands correctly and in accordance with the lease. Staying on top of these ‘housekeeping’ practices will provide solid grounds for any test of reasonableness made against you.