Flat Tenants – Are Your Service Charges Fair?

Service charges are frequently a burning issue for flat dwellers and one case will stand as a warning to landlords that accounting provisions in leases must be complied with to the letter before bills are put in the post.

A tenant owned long leases of seven flats in two luxury developments. Although he had two landlords, the terms of the leases were identical. He complained that his service charges were unreasonable and that, despite numerous requests, his landlords had failed to explain how they had been calculated.

He challenged a number of service charge demands on the basis that they were not accompanied by professionally audited accounts, as required by the leases. Those arguments prevailed before the First-Tier Tribunal (FTT) which found that the bills were invalid and that no service charges were payable.

In allowing the landlords’ appeal against that decision, the Upper Tribunal (UT) found that they were entitled to put in estimated bills, based on projected future costs, and that the leases did not require them to be backed up by audited accounts. The landlords’ failure to provide such accounts did not suspend the tenant’s obligation to pay the estimated service charges on demand.

The UT expressed considerable sympathy for the tenant in that the landlords were plainly in breach of their accounting obligations under the leases. The matter was sent back to the FTT for a decision to be reached on the reasonableness, or otherwise, of the service charges. The landlords were directed to produce fully audited accounts prior to that hearing.