Service Charges (Residential Leases)

Different regimes apply to residential and commercial leases

In respect of residential leases,

The Landlord cannot ask for Rent and Service Charge, unless and until he has written to the Tenant, giving the Tenant an address within England and Wales, at which Notices and Court proceedings can be served.

This information must also appear on the face of every demand for Rent and Service Charge that is made.

A Tenant sending Rent and Service Charge to a non-UK Resident Landlord may have to pay the Landlord's tax bill, unless Inland Revenue clearance is obtained beforehand.

A Landlord can only seek to charge a Service Charge, if it was reasonable to spend money on a particular item and that the amount is reasonable.

A Landlord now has to get the Tenant's agreement that the Service Charge is reasonable (or get a decision from the Leasehold Valuation Tribunal to that effect) before he can bring proceedings against the Tenant.

Before doing work over a certain value, a Landlord has to get a number of estimates and consult the Tenant before starting.

No costs can be awarded in proceedings before the Leasehold Valuation Tribunal, other than to order an unreasonable Tenant to reimburse the Landlord's issue fee (which will be between £300-500 depending on the number of flats in the Building).

The Landlord must hold any service charge received in trust to spend it on the Building. He should keep this money separate from any money he receives in respect of other Buildings.

Neither Landlord nor Tenant can require the other to improve a facility or structure, if that other's obligation is only to repair it.

An obligation to repair a Property or particular item is construed as a covenant to "put it into good repair and then keep it so".

A Tenant cannot argue that a Property was in a bad state of repair when he took it, unless there is specific wording to limit his obligation.

Landlords cannot use the Repairing clause oppressively.

In certain leases, Landlords must show that the value of their freehold interest is being harmed, if there is still three years or more to run on the Lease.

There is a maximum amount of damages that the Landlord can recover for breach by the Tenant of his covenant to repair.

• It is that amount by which the value of the Landlord's freehold interest is diminished as a result of the disrepair.

• This is very often much less than the cost of putting right the disrepair.

Tenants can apply to the Court for a Manager to be appointed in respect of a very badly run block of flats.

A Lease might require the Tenant to contribute towards a reserve fund, but the Landlord might be reluctant to spend that money, particularly if there are empty flats and he has to contribute too.

All parties to a Lease might wish to have the insurance policy in their name. This inhibits the Insurer from suing them, if that party can be shown to be in some way to blame for the damage.

A Tenant cannot challenge the Insurance Premium that he has to pay towards the insurance of the Building, merely on the grounds that he could arrange cheaper insurance elsewhere.

A Tenant's Lease must originally have been for a period of 21 years or more for the Tenant to have the right to a new longer lease or to participate with other tenants in buying the freehold.

There are few rights for a Tenant to stay on at the end of a short Lease, unless the tenancy is one which is "Assured". This is not to be confused with an "Assured Shorthold" tenancy. This is not straightforward so please consult us.

These notes are in very general terms and the list is certainly not exhaustive. If you have a problem or wish to investigate a particular situation, please get in touch with us.

Related topics you may find useful:

Commerical leases
Enfranchisement
Landlord/Tenant disputes

Call Michael Breeze on 07900 195 195 or call 0845 270 2511 to set up an appointment