Top Tips to Avoid Service Charge Disputes for Landlords

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For many leasehold properties, service charge demands or estimated budgets for the year will be sent out around the 1 January each year. As such, now is a good time for landlords and managing agents to double-check that they have taken all necessary steps to ensure that the service charge demands comply with both the terms of the individual leases and relevant legislation.  Ensuring the demands are correct at the outset can significantly reduce the risk of disputes, delays in payment and the need for costly legal action to recover amounts due.

In this article, we provide an overview of the common errors we encounter with service charge demands, reminder of some of the key legal requirements to consider when preparing the demands, possible upcoming changes to legislation and how a defective service charge demand can impact the recovery of the service charges.

Need help with a service charge dispute? Please contact Lindsey Reid-Cook who will be happy to advise.

Key points for landlords – how to limit service charge disputes

  • Landlords should make sure they get the basic details right. This includes the right name and address for the current leaseholder of the property. It is important to use the last known address as communicated by the Leaseholder. It is vital for landlords to keep an accurate record of any request from the leaseholder to change the address for service.
  • Service charge demands must be issued and sent in accordance with the individual lease. Leases may not allow service of demands by email and will still require a copy to be sent by post.
  • Landlords may only recover sums from the leaseholder which are set out in the Lease or legislation and are reasonable.
  • Landlords and managing agents should familiarise themselves with all relevant lease mechanisms and procedures to make sure that these are followed before issuing a demand. The lease may direct how and when demands should be made during the year.
  • Transparency with how charges are described in the demands is also key in seeking to limit disputes or delays in payment. It is also sensible to provide a breakdown of exactly what specific charges relate if they are not obvious, e.g. contributions to a reserve fund or major works etc.
  • The demands must comply with section 47 & 48 of the Landlord and Tenant Act 1987 – the demand must include the name and address of the Landlord (including an address in England and Wales) for service of notices.
  • Demands for payment of a service charge must be made/sent to the leaseholder within 18 months of the landlord or their agent incurring the underlying cost. Any demand served outside of this time limit will not be recoverable from the Leaseholder pursuant to section 20B(1) of the Landlord and Tenant Act 1985.

Ensure service charge demands are compliant with relevant legislation and Lease provisions

Minor errors in a service charge demand will not automatically render them unenforceable provided the mistake does not unreasonably confuse or prejudice the leaseholders.

Failure to serve a compliant demand  may result in the demand being considered defective and potentially unenforceable against the leaseholder. Sums will not be due and payable unless and until a compliant demand is served.

Stay up to date with how the rules around service charge demands may be changing

Service charge demands could soon be changing following the Leasehold and Freehold Reform Act 2024  receiving Royal Assent. However, we are still awaiting a date for when the finer details of how the provisions will be  implemented .

Proposed Key changes relating to service charge demands covered in the Act include:

  • All demands for service charges issued by landlords or agents must include specific content to ensure leaseholders are given greater transparency over the charges.
  • Landlords must provide accounts for service charges in a set written format
  • The format of the statement must include a written report prepared by a qualified accountant, and the landlord must provide their accountant with the appropriate invoices, receipts and other evidence of the costs.
  • Leaseholders will have the right to be provided by their landlord with information about service charges and the services included, as well as any repairs, maintenance and other costs included  in the charges.
  • Landlords must provide leaseholders with year-end reports which are to include details of any major planned works.

The government intends to consult on the above proposals in 2025 so it is unlikely the changes will come into force until later  next year, at the earliest.

Get expert advice if a leaseholder withholds service charges over a “defective” demand

If a leaseholder withholds payment because they believe a service charge demand is defective, it is a good idea to get expert legal advice as soon as possible.

If debt recovery proceedings or other court/tribunal proceedings are required, having the right legal expertise can significantly increase your chances of a swift and successful resolution.

How Longmores can help with service charge demands

At Longmores, our Property Litigation team are very experienced in dealing with a wide range of leasehold property matters. We will be happy to advise landlords and property managers on issuing service charge demands and can assist with any disputes that may arise.

Our team can act for landlords and managing agents in pursuing unpaid amounts from Leaseholders , including issuing county court claims to recover outstanding debts when required. We can deal with the court process, including defending claims and enforcing judgments.

To discuss how we can help with service charge demands and disputes, please contact Lindsey Reid-Cook who will be happy to advise.

Please note the contents of this article are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.