Landlord/Tenant Disputes

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Often we are consulted after there has been a long history of allegedly high or late service charge demands or complaints that work has not been done on the building, that work done is poor or outside the terms of the lease.

Relevant legislation includes the following. The notes below take into account the Commonhold and Leasehold Reform Act 2002, which is being brought into effect in stages and therefore some provision may not apply to older disputes.

Reasonableness of service charge demand

Tenants may make an application to the Leasehold Valuation Tribunal (LVT) to challenge service charge demands, estimates, or budgets that they feel are unreasonable and whether or not the charge has already been paid.

The LVT will decide whether it was reasonable for the costs to have been (or to be) incurred and whether the works or services were to a reasonable standard (or will be)

Each party may present evidence and question the evidence given by the other .

Administration charges - 'an amount payable by a tenant as part of or in addition to rent, which is payable directly or indirectly for:

The grant of approvals under the lease or applications for such approvals
The provision of information or documents by or on behalf of the landlord
Costs arising from non-payment of a sum due to the landlord
Costs arising in connection with a breach (or alleged breach) of the lease

Any administration charge levied by the landlord must be reasonable in order for the landlord to recover the charge. It may be a variable charge or fixed by the lease or a formula in the lease :

Variable. The tenant may make an application to the LVT for a determination of reasonableness
Fixed by the lease or a formula in the lease. The tenant may apply to the LVT to vary the lease, on the grounds that the amount specified is unreasonable or that the formula is unreasonable.

Regular statements of account

The requirement for landlords to issue a regular statement of account has not yet been commenced and is not likely to be in operation before mid-2004. Until then, leaseholders can demand a summary from the landlord.

Rights to further information

Within a period of six months from receipt of the summary, the Tenants may write to the landlord requiring him to allow access to and the inspection of the accounts, receipts and any other documents relevant to the service charge information in the summary and to provide facilities for them to be copied.

Consultation on major works

Where a Landlord proposes to carry out works of repair, maintenance, or improvement which would cost an individual service charge payer more than £250, he must, before proceeding, formally consult all those expected to contribute to the cost.

The Landlord must serve a notice on each Tenant (and on the secretary of the recognized tenants' association, if there is one), which:

Describes in general terms the proposed works
Explains why the Landlord considers the works necessary;
Identifies the persons the Landlord has asked, or proposes to ask, for an estimate of the costs;
Invites observations in writing and states where the observation should be sent;

Invites the Tenant (and the recognized tenants' association) to nominate a person from whom the Landlord should try to obtain an estimate.

The Tenants must then within 30 days send their views to the Landlord and, if they wish, nominate an alternative contractor

After this, the Landlord must supply at least two estimates for the work

One of the estimates must be from a contractor wholly unconnected with the Landlord
Where the Tenants have nominated a contractor, the Landlord must try to obtain an estimate from that contractor

The Landlord must 'have regard to' the observations he has received. This does not mean he is obliged to follow or act on the comments, but, if challenged later at the LVT on the reasonableness of the costs, he will need to show that he paid regard to observations or provide justification of why he did not.

If the Tenants make any observations or nominate an alternative contractor, then, as soon as reasonably practicable after entering into the contract, the Landlord must serve a further notice on all previous recipients stating his reasons for awarding the contract, a summary of any observations received and his response to them.

In cases where the works are considered urgent, for example, a leaking roof or a dangerous structure, or in other cases where the Landlord wishes to proceed quickly, the Landlord may apply to the LVT for an order to dispense with the consultation procedure. In such a case, the LVT will notify all service charge payers of the proposal.

If the Landlord fails to carry out the consultation process in the correct form and has not sought a dispensation from the LVT, he will be unable to recover the cost of the works from the Tenants beyond a statutory limit of £250 per Tenant.

Consultation on long-term agreements

Where the Landlord proposes to let a contract for the provision of services (e.g. a maintenance contract for a lift, burglar alarm, garden or generally but not employment contracts) for a period of more than 12 months, and the apportioned cost to any individual Tenant is £100 a year or more, he must also consult the Tenants.

Contracts of employment are exempt from the consultation procedure.

The procedure and timescales are similar to those for major works but the statutory limit is £100 per tenant.

Works under long-term agreements

In some cases, the Landlord may wish to enter into a long-term agreement for maintenance, repair, and improvement works to the building and this requires a different consultation process. We do not propose to give more information on this here.

Insurance

The landlord must supply a written summary or a copy of the insurance policy for the property within 21 days of request. He can charge a reasonable copying charge. The tenants may challenge the insurance premium levels through the LVT. It is likely that in 2004 the tenants will be able to insist on insurance with their own choice of insurer.

For information on Enfranchisement and the "Right to manage" please see our Enfranchisement page.