Services Charges - Delay and Repay
20th October 2010
Last month the Leasehold Valuation Tribunal ordered one of the UK's largest property management companies, Peverel Property Management Company ("Peverel"), to repay lessees over £100,000 in service charges.
Section 20B of the Landlord and Tenant Act 1985 ("the Act") introduced an important time limit on landlords. It requires that demands for payment of service charges cannot include expenses incurred more than 18 months before service of the demands. Any expenses demanded after 18 months cannot be recovered from lessees unless lessees were informed in writing within the 18 months of the expenses that have been incurred.
It was found that Peverel failed to demand service charges within 18 months of them becoming due.
It is important for residential landlords or their property managers to get service charge demands right otherwise they may not be able to recover charges or may need to refund all or part of charges already paid.
Another important provision in the Act is the requirement that each service charge demand contain a summary of lessees' rights and obligations regarding service charges. Any demand not containing such a summary is not valid and lessees could in that case rightly withhold payment of charges.
One provision which is usually overlooked is the service of a section 48 notice. Leases normally contain a notice of the landlord's address for service pursuant to section 48 of the Landlord and Tenant Act 1987. In the event that the lease does not contain an address for service and no section 48 notice has been served on a lessee no rent or service charges will be due. However, once a notice has been served any rent or service charges previously demanded will be due retrospectively.
In addition to the above statutory provisions, landlords also need to have regard for provisions in individual leases which might prescribe how and when service charge demands should be served on lessees. This applies equally to service charges in respect of commercial premises.
Landlords get away with their failure to comply with the relevant statutory provisions because lessees usually do not have the knowledge and time to challlenge these failures. However, as the above case has shown, ignorance might prove to be very costly.
Walter Kramer is a member of IBB's Real Estate Dispute Resolution Team which regularly advises landlords, tenants and managing agents on the recovery of service charges in respect of commercial, residential and mixed use premises. Walter can be contacted on 08456 381 381 or walter.kramer@ibblaw.co.uk.
