Service charge recovery delay

Services charges are a common source of contention between landlords and tenants of multi-occupied buildings.

They are usually the subjects of much negotiation when leases are entered into, and tenants often request concessions from landlords, such as a financial cap on their service charge liability.

Landlords need to keep in mind that they have granted such concessions and make sure that they do not inadvertently disadvantage the tenant. This was underlined in a recent case where the landlord knew the roof needed repairing and had arranged to do the work in 2003. This was during the period that the tenant benefited from a service charge cap. The repairs were delayed in order to incorporate some extra work and in the meantime, the tenant’s service charge cap expired.

The appeal court ruled that the delay in carrying out the roof repairs was not necessary or acceptable, particularly since it prevented the tenant from benefiting from his service charge cap. The net effect of the court’s decision was that the landlord was unable to recover the additional costs of carrying out the roof repairs over and above the tenant’s service charge cap.

The case shows that landlords need to actively manage their multi-let buildings and be aware of any financial caps that would affect service charge recovery. Where they know that repairs are required they cannot delay them just to avoid a service charge cap.

Tenants should note that, although general service charge caps are valuable concessions, they are usually limited in time. They need to notify the landlord in good time before their cap expires, of any major repairs which need doing as part of the service charge. It is also worth negotiating a specific cap that is not time limited in respect of any major items that the tenant knows will need to be carried out during the lease.

As always, if you need commercial and pragmatic legal advice, we’re here to help so please get in touch.

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