Leonard Kasler & Company
Service Charges
(20 Things to know about Leasehold Premises )
1. Claims for service charges can lead to seemingly intractable disputes2. Landlords who have spent money in providing services, are out of pocket and can see no reason why they should not be reimbursed
3. Tenants face demands for what they
see as large sums of money for repairs that they describe as shoddy and services which are
poor or non-existent
4. The starting point in deciding whether service charges are recoverable must always be the lease
5. It is impossible to advise without
seeing it. 
Often there is a "general mopping up" clause, but in the absence of such a provision, service charges are not recoverable unless the particular category claimed is specifically mentioned in the lease
6. Some leases contain conditions precedent to the recovery of service charges – for example, service of an accountant’s certificate. Such clauses must be compiled with, if service charges are to be legally recoverable
7. If there is a contractual right to recover charges, the next step is to consider the statutory limitations on recovery of service charges
8. Landlord and Tenant Act 1985 Section 19 provides that costs making up service charges must be reasonably incurred and services and works carried out must be of a reasonable standard
9. Where they do not reach a reasonable standard, the Judge may find that sums are not recoverable to all or deduct a proportion of the service charge expenditure claimed by the freeholder
10. Where payment in advance is demanded, that payment should be of no greater amount than is reasonable. The amount payable by Lessees is limited accordingly
11. Lessors and Lessees may apply to rent assessment committees sitting as leasehold valuation tribunals (LVTs) to determine whether costs incurred for services, repairs, maintenance etc were reasonably incurred, whether such services or works were of a reasonable standard and whether sums payable by Lessees before costs have been incurred are reasonable
12. If Court proceedings include questions as to the reasonableness of service charges, the Court may transfer the claim to a LVT
13. Costs are not recoverable in the LVT
14. Section 20 provides for consultation with Lessees before the carrying out of major works.
15. These are defined by The Service Charges (Estimates and Consultation) Order 1988 SI No 1285 as works costing more than either £1,000 or 50 times the number of flats involved, whichever is greater
16. In such circumstances the Lessor should obtain at least two estimates – one of them from a person who is wholly unconnected with the Landlord – serve copies on the Lessees and invite comments
17. Works should not commence
until at least one month 
after service of the notice with the estimates. However, the Court may, if satisfied that the Landlord acted reasonably, dispense with all or any of the relevant requirements in s.20
18. Section 20A, inserted by the Landlord and Tenant Act 1987, imposes limitations on the recovery of service charges where a Lessor has obtained local authority grants to enable work to be carried out
19. Section 20B provides that no charges which were incurred more than 18 months before any demand is served on a Tenant are recoverable as service charges unless notification is given to the Lessee within that 18 month period that such charges have been incurred
20. The Landlord and Tenant Act 1987 s.47 provides that any written demand for rent or other sum payable to a Lessor – including service charges – must contain the name and address of the Landlord. If the address is not in England and Wales, an address in England and Wales at which notices may be served on the Landlord must be given.
If a demand does not contain that information, then any part of the
amount demanded which consists of a service charge shall be treated as not being due from
the Tenant until that information is supplied by Landlord
Michael Breeze
Leoanrd Kasler & Company
Sunday, 13. October 2002