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Archive for October, 2016

As easy as it sounds?

A recent decision of Martin Rodger QC, Deputy President of the Upper Tribunal (Lands Chamber), has highlighted one reason why service charges have proven, over the years, to be so problematic.  The Leaseholders of the Foundling Court and anor v The London Borough of Camden and others [2016] UKUT 366 (LC) concerns substantial works conducted by the freehold owner of “a grade II listed complex of shops, flats, offices, car parks and other premises”.  The London Borough of Camden held a long lease of some residential parts of the Centre.  Pursuant to its lease, it was required to pay, through a service charge, costs incurred by the freehold owner.  In turn, Camden required leaseholders to contribute, again through a service charge, towards certain costs incurred by Camden.

If a landlord of residential premises intends to conduct works, the costs of which are recoverable from tenants pursuant to a service charge, the landlord has to give notice of its intentions to its tenants and to consult with them concerning the works before the works are conducted (see Landlord and Tenant Act 1985 and The Service Charge (Consultation Requirements) (England) Regulations 2003).  As a second stage of the consultation, the landlord must submit to its tenants estimates for carrying out the intended work giving at least 30 days’ notice enabling them to respond to the notices.  If the landlord fails to follow this procedure, it can only recover a maximum of £250 from each of its tenants towards the cost of the works conducted.  The landlord will suffer any shortfall.

The preliminary question before Martin Rodger QC was whether the obligation to consult with the leasehold owners of the flats was imposed on the freehold owner or upon Camden.  He held the statutory obligation to consult fell on the freehold owner as it was conducting the works.  He recognised the practical difficulties of so doing but expressed the view that it could obtain the information required from its tenant (in this case Camden Council) which would co-operate as it would be it (and not the freehold owner) that suffered any shortfall in the service charge.  This sounds easy but it needs little imagination to anticipate the problems that could arise.

If you wish to hear more about service charges, why not contact Hatherleigh Training?