Service charge disputes | A complete guide

Service charge disputes arise when landlords and tenants disagree about the costs charged for shared services or upkeep of a property. These disagreements can cause stress and uncertainty for tenants, especially when charges feel unclear or unfair, and can be frustrating for landlords who rely on service charges to manage and maintain the building.

When not handled well, even small service charge disputes can strain relationships and make day-to-day property management more challenging for everyone involved.

In this guide, we answer some commonly asked questions about service charge disputes and what you can do should you find yourself in a disagreement over shared services or property upkeep. With support from our landlord and tenant specialists, you’ll have the best chance of resolving your dispute smoothly and with as little stress as possible.

Contact us for a free initial consultation with a specialist property disputes solicitor to discuss your situation in detail.

Frequently-asked questions:

Click on the links below to jump to the different questions.

• What is a service charge?
• How do service charge disputes arise?
• What are common causes of service charge disputes?
• Can a tenant dispute a service charge?
• How can you determine whether a service charge increase is reasonable?
• How can service charge disputes be resolved?

What is a service charge?

A service charge is a charge paid by tenants to the landlord contributing towards the maintenance, insurance, management and repair of the shared areas of a property. The details surrounding these payments should be outlined in the lease agreement.

How do service charge disputes arise?

Service charge disputes arise when tenants want to challenge the charges imposed upon them as they believe the charges are unwarranted, inflated or in breach of the terms of the lease.

The Landlord and Tenant Act 1985  states that landlords can only recover the costs of these works if are recently incurred and carried out to a reasonable standard.

What are the common causes of service charge disputes?

Breaching the terms of the lease

If the landlord does not adhere to the terms of the lease when inflicting service charges, this may provide grounds upon which the tenant may challenge the service charge. Tenants may require legal assistance in examining the agreement to highlight these breaches.

Overcharging

When cost estimates are higher than anticipated, tenants can feel as if the landlords are profiting at their expense. Landlords are obliged to provide the accounts concerning these expenses to tenants. If it is found that the landlord has exploited tenants and inflated the true cost of the works undertaken, a service charge dispute may arise.

Disagreements over repairs

Tenants may wish to challenge any claim by their landlord to carry out repairs or improvements to the property, and particularly whether these are proportionate or necessary.

Equally, the tenant may bring challenges where the works carried out are not of satisfactory quality, leaving the property poorly maintained.

Can a tenant dispute a service charge?

There are various grounds upon which a tenant may dispute a service charge. These include where in calculating the service charge the landlord is in breach of the lease; the landlords have overcharged, or if the requested fee imposed is unreasonable.

If tenants believe the above occurs to them, or alternatively, if a landlord believes an unjust claim is being brought against them, it is advisable to seek legal advice.

How can you determine whether a service charge increase is reasonable?

Tenants should initially look at the terms of the lease to evaluate whether increases in service charges are allowed and under what conditions they may be acceptable.

Tenants may also request a breakdown of the cost expenditure of the works completed on the property. Honesty surrounding the allocation of spending will ensure transparency between the landlord and tenant which prohibits disputes from arising.

A more evident method of determining if a service charge is reasonable is to check the quality of the works and services being provided. For example, if the property’s cleanliness is unsatisfactory, or the lift is not functioning, it may be unreasonable to be charged as a tenant.

When evaluating the price of service charges, tenants could look at similar properties in the area and the fees imposed upon their leaseholders. If there are disproportionate fluctuations in pricing, it would indicate the landlord is unreasonably inflating his charges above the market value and is potentially exploiting his tenants.

How can service charge disputes be resolved?

Open communication between tenant and landlord

Having clear communication between tenant and landlord is always a good first point of call. With these matters, it is favourable for them to be solved swiftly and without the need for legal proceedings. Often, a simple discussion with the landlord surrounding the issue can clarify any problems and resolve the situation without the need to get outside help.

Legal assistance in negotiations

If discussions with your landlord do not resolve the problem, then it is advisable to seek legal assistance.

Our property litigation specialists can lead negotiations between the parties and help you to seek a resolution. Alternatively, mediation could be an option to facilitate an environment for both tenant and landlord to reach an agreement in which both parties are satisfied.

Tribunal

If a service charge dispute cannot be resolved, tenants can make an application to the First-Tier Tribunal (Property Chamber). Landlords or tenants may seek legal representation for the hearing. The Tribunal will then determine whether the charge and the proposed works are reasonable.

What should you do?

Our friendly landlord and tenant experts have experience in helping both landlords and tenants to resolve service charge disputes and are here to support you at every stage of the process.

From reviewing your lease agreement to helping with negotiations or representing you at tribunal, we’ll guide you each step of the way. If you’d like to chat, please get in touch with our property disputes team.

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Disclaimer: Please note that this page is for guidance only and does not replace legal advice. Speak to us if you seek advice, we’d be delighted to help you resolve any neighbour disputes you are experiencing.