Landlords used to be able to arbitrarily charge for giving their consent in a number of areas that were not covered by statutory charges imposed by leasehold legislation. Leaseholders had been unable to challenge these payments as to their reasonableness. Under Schedule 11 (s158) of the Commonhold and Leasehold Reform Act 2002, such charges come under a new legal category, administration charges. Administration charges are not defined in Landlord and Tenant law because they are neither service charges nor ground rent. Additionally, since the 2002 Act came into force it has become possible to levy variable administration charges for breaches of a lease, such as late payment, even if the lease does not specify this.
TENANTS RIGHTS AND OBLIGATIONS (ADMINISTRATION CHARGES)
When advising a leaseholder of an administration charge it is necessary to ensure that the leaseholder also receives a notice of the Tenant’s Rights and Obligations (Administration Charges).
As with service charge demands, from 1st October 2007 leaseholders have been legally entitled to withhold administration charges from the landlord if they fail to provide this summary. A landlord will not be able to apply to the First Tier Tribunal to dispense with the requirement to serve these summaries and any clauses of the lease relating to non-payment or late payment (i.e. interest charges etc) are deemed to have no effect during the period that administration charges are withheld.
The content of the summary reads as follows:
‘This summary which briefly sets out your rights and obligations in relation to administration charges must by law accompany a demand for administration charges. Unless a summary is sent to you with a demand, you may withold the administration charge. The summary does not give a full interpretation of the law and if you are in any doubt about your rights and obligations you should seek independent advice’.
- An administration charge is an amount which may be payable by you as part of or in addition to the rent (directly or indirectly) for or in connection with the grant of an approval under your lease or an application for such approval, for or in connection with the provision of information or documents, in respect of your failure to make any payment due under your lease or in connection with a breach of covenant or condition of your lease.
- If you are liable to pay an administration charge it is payable only to the extent that the amount is reasonable.
Any provision contained in a grant of a lease under the right to buy under the Housing Act 1985, which claims to allow the landlord to charge a sum for consent or approval, is void;
- You have the right to ask a leasehold valuation tribunal whether an administration charge is payable. You may make a request before or after you have paid the administration charge. If the tribunal determines the charge is payable it may also determine who should pay it, and who it should be paid to, the amount, the date it should be paid by and how it should be paid. However you do not have this right where a matter has been agreed to or admitted by you, a matter has been, or is to be, referred to arbitration or has been determined by arbitration and you agreed to go to arbitration after the disagreement about the administration charge arose or a matter has been decided by a court.
- You have the right to apply to a leasehold valuation tribunal for an order varying the lease on the grounds that any administration charge specified in the lease or any formula specified in the lease for calculating an administration charge is unreasonable.
- Where you seek a determination or order from a leasehold valuation tribunal, you will have to pay an application fee and where the matter procees to a hearing, a hearing fee, unless you qualify for a waiver or reduction. The total fees payable to the tribunal will not exceed £500, but making an application may incur additional costs such as professional fees, which you may have to pay.
- A leasehold valuation tribunal has the power to award costs, not exceeding £500 against a party to any proceedings where it dismisses a matter because it is frivolous, vexatious or an abuse of process or it considers that a party has acted frivolously, vexatiously, abusively, disruptively or unreasonably. The Lands Tribunal has similar powers when hearing an appeal against a decision of a leasehold valuation tribunal.
VARIABLE OR FIXED?
When the administration charge is variable the fee levied must be reasonable and under s158 of the 2002 Act, leaseholders have the right to ask the First Tier Tribunal whether they are payable. The request can be made before or after payment because the FTT doesn’t presume that simply because the charge has been paid that the issue of reasonableness doesn’t arise. If the Tribunal determines that the charge is payable it may also determine:
- Who should pay it;
- Who it should be paid to:
- The amount;
- The date it should be paid by;
- How it should be paid.
On the other hand, if the administration charges are fixed, then the only way to challenge them is to apply to the First Tier Tribunal for a lease variation on the grounds that either the calculation formula is unreasonable or the administration charge specified in the lease is unreasonable.