Laura Severn: Service Charge Demands
Laura Severn is a Legal Executive and Operations Director and Head of Client Care at award-winning Brady Solicitors. As well as supervising debt recovery, Laura is involved in maintaining and developing the company case management system and works flow. Directly available to clients and regularly advising on all issues surrounding ground rent and service charges, Laura is also the firm but fair “Enforcer” in monitoring service standards and key performance indicators.
Here, Laura takes a look at a) the importance of the correct form of the Summary to accompany service charge demands being sent, and b) the accurate reflection of subsequent legislative changes .
Regulation of residential service charges is detailed in the Landlord and Tenant Act 1985. In particular, s.21B, states that a demand for the payment of service charges must be accompanied by a summary of the rights and obligations of tenants and there is a prescribed form for the demands. If the summary is not provided, a tenant may withhold payment of a service charge.
As originally drafted, the summary informed leaseholders of their ability to bring proceedings in the Leasehold Valuation Tribunal and, in turn, to appeal to the Lands Tribunal. On June 1, 2009, the Lands Tribunal was abolished and its functions transferred into the Upper Tribunal (Lands Chamber). One immediate effect of this was that the summary of rights and information changed to inform leaseholders of their right to appeal to the Upper Tribunal. Many managing agents and landlords have missed this change and are still sending summaries which refer to the Lands Tribunal. This is wrong. For all demands after June 1, 2009, the summary must refer to the Upper Tribunal.
What if your demand still says Lands Tribunal?
Strictly speaking if the rights and obligations are incorrect or not served then service charges can be withheld. However, the demand could still be re-served (subject to the statutory limitation period) and if the error is corrected then the service charges are then payable. In these circumstances legal advisors would advise their landlord and managing agent clients to make the amendment and then reserve the demands.
From a leaseholders point of view they could potentially withhold payment until the demand was correct. Some courts have previously been sympathetic if this was the only error on the demands and the courts seemed to give an unofficial period of grace for managing agents and landlords. However, it is some time since the demands should have been changed and therefore this may no longer be the case. There are a couple of LVT cases that have found each way and it is a tough call as it is the smallest of clauses and the smallest of errors. It should also be noted that the wording changed in England only and therefore the summary of rights and obligations in Wales still refer to the Lands Tribunal even though it no longer exists!
In practice, if leaseholders withhold service charge then they are likely to be pursued for payment and then there will be an obligation to provide a reason as to why the service charges are being withheld. In reality, withholding of service charges can create management issues for the whole development and therefore whilst it is true that they could be withheld on this technicality until the correct version of the demand is served it would not achieve a great deal and could be corrected. It would only really come down to a question as to whether legal costs are claimable (if any had accrued).
It is worthwhile considering the original purpose of the provisions of the Landlord and Tenant Act. There was clearly a need for Leaseholders to be able to see what their rights are. This need is met by the serving of the summary of rights and obligations. The small error relating to Lands/Upper Tribunal can be fixed relatively easily and in deciding whether there should be any repercussions in relation to this technicality then they would be likely to consider whether any actual loss/expense has been suffered by a leaseholder in these circumstances and it is clear to see that the small error has not cost the leaseholder anything.
The best solution would be to point the error out to your landlord/managing agent so that any delay in payment of service charge can be avoided. It is always advantageous for all parties to work together as a team towards the common goal of a well maintained development with well managed cash flow.
For further information please contact Laura Severn on:
Office Tel: 0115 985 3450
Fax: 0115 985 3457
Email: [email protected]