Landlords must comply with laws on service charges

Two recent cases that went to the Lands Chamber (formerly the Lands Tribunal) remind landlords of the need to comply with the law governing service charges.

In Garside and another v RFYC Ltd and another, the manager of a block of flats increased the service charge dramatically to pay for substantial repair works after years of neglect. Tenants complained that they could not afford the massive increase in the service charge.

The tribunal ruled that the decision to carry out all of the repair works at once was not reasonable. All factors could be taken into account when judging reasonableness, including the financial impact on tenants and whether work should be phased to spread costs.

It is also important for landlords to comply with service charge consultation requirements. In Dean Investments Ltd v Benson and others a landlord failed to meet the requirements, did not publish observations and responses, did not provide estimates, did not give sufficient time for comments and incorrectly stated that the building contract had already been awarded, leading the tenants to believe that further comments were useless. They suffered significant prejudice as a result.

The tribunal refused to dispense with the need for consultation and confirmed that the landlord could only recover the statutory limit of £250 per tenant. On appeal, the court ruled that his considerable financial loss was irrelevant when deciding whether or not to dispense with the requirement to consult, whereas the prejudice suffered by the tenants was critical.

Landlords should not conclude that the courts are biased against them and tenants cannot simply refuse to pay service charges where these are ‘reasonable’. Landlords are just being told to stick to the rules and consider the financial impact on tenants. It’s all a matter of following the procedure.

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