Wednesday, 31 October 2018

Service Charge Loopholes: You love 'em!

You seem to like service charge loopholes. I hear that some of you have been retiring to bed with a print out of  http://www.breakinglaw.co.uk/search/label/service%20charges What's wrong with you? Lessors are cuddly little opossums just trying to scratch out a living and recoup what they reasonably shell out to keep your homes up to scratch. Aren't they? What shall we do? A flag day for lessors or  some more recent cases which may pave the way to outwitting them? OK, you win.

Interim service charge demands, like final demands, must be reasonable in amount. The Landlord and Tenant Act 1985 section 19(2) says so. Your lease will almost certainly contain a regime for the lessor to make interim demands and the lessor could fail to follow the regime to the letter. That failure in itself may well not be fatal to the lessor being able to lawfully recover the interim sum you are being told to pay - it will depend on the wording of the lease and how serious has been the lessor's failure - but it might anyway come into the reckoning on whether that sum is reasonable. The other point is that the reasonableness of what is being asked for is to be assessed as at the date on which your liability to pay it arises. 


And so it was that in Wigmore Homes (UK) Ltd v Superbly Works Residents Association Ltd [2018] UKUT 252 (LC) the upper tribunal  has just slashed the lessor's interim demands for six years by one-half. The amount sought for each of those six years had been precisely the same and the tribunal decided that this was a clear indication that the lessor had not carried out a careful assessment each year and that the sum claimed was not based on a genuine estimate of the likely expenditure.



Over to another case where the upper tribunal's judgment has just been published - Bracken Hill Court at Ackworth Management Ltd  v Dobson and others [2018] UKUT 333 (LC). Here the lessees lost but the case highlights a very important legal right for lessees. It is to be consulted by the lessor under the Landlord and Tenant Act 1985section 20ZA(2) - no joke!- about entering into a contract for a fixed period of more than 12 months. Slipping up on this will usually mean that the lessor cannot recover more than £100  a year from each lessee towards the contract price. What happened here is that the lessor engaged a management company to look after a block of flats in Pontefract. The contract was renewed annually and the lessor and the management company always agreed that the new contract would last no longer than 364 days. The upper tribunal ruled that none of these contracts was for longer than one year and so there had been no duty on the lessor to consult with the lessees about renewal. It might well have been that the lessor and the management company had an expectation that in all likelihood the contract would be renewed but an expectation of renewal was not the same as a contract. Either party would he been entitled to decline to renew.


Generally, annual renewals will suit the lessor and save them having to consult. Doing so will not trip up the lessor if the arrangement is not a sham. If it could be shown that there was really a commitment to keep the management company or other contractor on board for more than 12 months and that the so-called renewal process was not genuine then lessees should be able to take advantage of the consultation breach.

Much more in Breaking Law. Even some advice to lessors . Sorry.