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Lawbite: no statutory consultation required for on account service charge

  • United Kingdom
  • Real estate dispute resolution


23 Dollis Avenue (1998) Limited v Nikan Vejdani, Nahideh Echraghi [2016] UKUT 0365

The Upper Tribunal (“UT”) has confirmed that the statutory consultation requirements (section 20 of the Landlord and Tenant Act 1985 (“1985 Act”) and The Service Charges (Consultations Requirements) (England) Regulations 2003 (“2003 Regulations”)) do not need to be satisfied where the landlord requires monies on account for future works.

Not unusually, the leases in question allowed the landlord, Dollis Avenue, to demand sums in advance on account of the service charge, such sums to be fair and reasonable interim payment.

The 1985 Act and 2003 Regulations require landlords to consult with residential leaseholders before carrying out works above a certain value or entering into any long term agreement for the provision of services. Where consultation requirements have not been complied with they place a £250 limit on the landlord’s recovery of service charge. Further the 1985 Act requires service charge payable in advance to be reasonable.

The landlords (whose directors were two of the four tenants of the premises, with the respondents, Vejdani and Echraghi) identified that works were required to the property and attempted to carry out the consultation exercise. Once a contractor had been identified it sent a demand to the tenants for service charge sums on account reflecting the contractor’s estimate. The contractor had not, however, yet been awarded the contract.

The First Tier Tribunal (“FTT”) found that issues with the tender exercise invalidated the consultation exercise and therefore the £250 limit applied to the on account demand. The FTT further found that the demand for monies was unreasonable and any such estimated demand for service charge was premature until a proper tender exercise had been carried out.

The UT disagreed. The £250 limit only applied to claims where work had been carried out and there was non-compliance with the 2003 Regulations. In this case the work had not been carried out. The UT therefore dealt with the matter afresh, considering only the requirement for service charge payable in advance to be reasonable – both in the decision to charge and the amount.

Relevant to the UT’s decision as to the reasonableness of the decision and amount demanded was the fact that the works in question needed to be done, the landlord had tried to comply with the consultation procedure and the lack of engagement on the part of the tenants with the process. The decision to charge was reasonable but the sums demanded was not as the estimate on which the demand was based included sums for works which were not originally proposed. The sums were reduced from £10,200 to £7,810 per tenant.

Key points

- Whilst there is no need to fulfil the consultation requirements in order to collect sums in excess of £250 for future works those requirements will need to be satisfied at some point before the works are carried out. At that point the landlord will still be open to challenge if not carried out correctly.

- The issue with the tender process in this matter stemmed from the fact that the landlords had not provided adequate specifications to the contractors and as such like for like tenders had not been received. A reminder therefore to landlords to ensure that the process is not undermined by similar failures to specify the works and also to ensure that the estimates only cover the works intended to be carried out.