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Tue 27 Jun 2017

Is the sky the limit with service charges?



 

Background


To what extent can a landlord claim improvement costs from tenants? The Upper Tribunal has recently clarified the limits on what can be claimed; and following an earlier ruling, superior landlords must consult tenants, and sub-tenants, before carrying out major improvements.


Costs of improvements


Landlords must be cautious about reclaiming repair and renovation costs from tenants through their service charges. In a recent case involving a block of flats, many of the flats had single-glazed windows with wooden frames set in metal surroundings. However, not all of them were in good condition and needed repairs and redecoration. Some of the tenants asked for double-glazing to be installed, for which they agreed to pay.


The landlord took the decision to replace the wooden frames with all-metal frames whilst the double-glazing work was being carried out – adding the costs of the metal frames to all the tenants service charges. Not surprisingly, the two tenants who had not had double-glazing installed objected to paying and argued that the work was an improvement to their flats, and not a repair. Hence, they would not accept a charge.


In response, the landlord argued that as certain wooden frames needed work, it was best to replace the frames all at once.


The Upper Tribunal (UT) rejected its arguments and found that the real reason for replacing the frames was to make the property more energy-efficient, thus reducing the maintenance costs. It was deemed an improvement, not a repair. For this reason, the landlord was unable to add the costs to the claimant’s service charges.


The general principle is that the work which the landlord is obliged or entitled to carry out is limited to that which is reasonably required to remedy a defect. This can include ancillary work rendered necessary by the carrying out of repairs, but not additional work done at the same time for the sake of convenience which is an improvement to property.

 

There are immediate practical implications for landlords needing (or currently planning) to carry out improvements to their properties, and particularly those buildings with an F or G energy performance rating who are deciding how best to improve their properties to comply with new rules applicable from April 2018. The costs of improvements will be payable out of their own pockets and not chargeable to the tenants – even if their purpose is to reduce the future running costs of their building.


Major works


An important ruling makes clear that superior landlords must consult with both immediate tenants and sub-tenants before carrying out major works – otherwise they will be limited to claiming just £250 from each of them.

 

Residential landlords seeking to carry out major repairs which would potentially lead to a contribution of more than £250 in their service charges must discuss this with tenants first, otherwise they cannot claim the money.


In a recent case, the superior landlord proposed works to a property that had been let to the tenant, however, there were a lot of sub-tenants who were liable to the costs of the repair through their service charges. Some important issues had to be addressed including

 

·         Who had the superior landlords first consulted with and

·         Did the tenant have to consult separately with the sub-tenants (as their landlord)?

 

The UT ruled that only the landlord proposing to have the works done (ie. the superior landlord) had to consult – the tenant did not have to consult with the sub-tenants. However, the superior landlord was required to consult directly with the sub-tenants as they were to be charged for the costs through their service charges. This, said the court, was the natural effect of the statutory language.

 

 

 

 

Yashmin Mistry is Partner and Property Practice Group leader at JPC Law.

For more information on leasehold matters, please contact her:

E: ymistry@jpclaw.co.uk

T: 020 7644 7294

General Enquiries:

E: enquiries@jpclaw.co.uk

T: 020 7625 4424

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