The Landlord and Tenant Act 1985 regulates residential service charges. It gives leaseholders the right to challenge charges that they believe are unreasonable and applies where landlords charge for services, repairs, maintenance, improvements, insurance and management, where all or part of the amount charged is or may be variable. Consequently, the legislation does not apply to fixed charges.
In Re Southern Housing Group Ltd; Re Family Housing Association (
The landlords cited the Lands Tribunal decisions in Home Group Ltd v Lewis [2008] PLSCS 48 and Chand v Calmore Area Housing Association Ltd [2008] PLSCS 246 in support of their arguments, but the tribunal distinguished both decisions. It decided that it was irrelevant that the landlords could choose not to vary their service charges. The leases enabled them to vary their charges by reference to the cost of the services provided and this meant that service charges may vary for the purposes of the 1985 Act.
The lease in Family Housing Association enabled the landlord to vary the service charge every six months by four weeks’ written notice specifying the amount of the proposed new charge. The tribunal accepted that this gave the landlord the right to vary the service charge without reference to the cost of the services provided. However, the lease also included a separate policy statement that the landlord would seek to recover only “actual expenditure incurred in providing services, equipment and furniture plus an administration fee”. This led the tribunal to conclude that the service charge was variable by reference to the cost of the services provided.
In Southern Cross, the lease provided that the landlord could change the service charge more than once a year if the services provided or their cost changed materially. The lease also provided that if service charge costs in any one period were higher or lower than service charge income, the deficits and surpluses were to be added to or subtracted from the service charge for the following 12 months. These clauses led the tribunal to conclude that variations in the amounts charged were clearly associated with the services provided. In addition, the lease described the charge as a “variable service charge”, which was subject to the provisions of the 1985 Act.
Draftsmen take note: the key difference in the provisions of the tenancy agreements in Home Group and Chand was that there was nothing in those leases to indicate how any altered payments were to be calculated or to link any alterations in the sums charged to the cost of providing any relevant services.
Allyson Colby is a property law consultant