How to Challenge Unfair Service Charges on Your Leasehold Property
Service charges are a common part of owning a leasehold property, covering maintenance and management costs for communal areas. However, disputes can arise when these charges seem unreasonable or excessive. If you believe you’re being overcharged, there are steps you can take to challenge the fees. This guide explains how to identify unfair charges, your legal rights, and how to resolve disputes effectively.
Understanding Service Charges
Service charges are payments made by leaseholders to the freeholder or managing agent to cover:
- Repairs and maintenance of communal areas (e.g., hallways, lifts, gardens).
- Insurance for the building.
- Management fees and administrative costs.
Service charges must comply with the terms outlined in your lease and must be "reasonable" under Section 19 of the Landlord and Tenant Act 1985.
Signs of Unfair Service Charges
Common reasons leaseholders challenge service charges include:
- Lack of Transparency: Insufficient breakdown of costs or vague descriptions.
- Excessive Fees: Charges that far exceed what is reasonable for the services provided.
- Unnecessary Work: Being billed for work that wasn’t carried out or wasn’t required.
- Poor Quality Work: Paying for repairs or maintenance that were substandard.
- Conflicts of Interest: When the managing agent appoints contractors with inflated prices.
Steps to Challenge Unfair Service Charges
1. Review Your Lease
- Check the lease agreement to understand what the freeholder or managing agent is allowed to charge for.
- Ensure the charges align with the obligations set out in the lease.
2. Request a Breakdown of Charges
- Ask for a detailed statement of accounts.
- Under the Landlord and Tenant Act 1985, you are entitled to inspect invoices, receipts, and other documentation supporting the charges.
3. Identify Discrepancies
- Compare the charges with market rates for similar services.
- Highlight any work billed but not completed or costs that seem inflated.
4. Communicate with the Freeholder or Managing Agent
- Write to the managing agent or freeholder, explaining your concerns and providing evidence of why you believe the charges are unreasonable.
- Keep all correspondence in writing for future reference.
5. Seek Mediation or Alternative Dispute Resolution (ADR)
- If communication fails, consider using a mediation service.
- Organizations like the Property Redress Scheme (PRS) or Ombudsman Services can help resolve disputes.
6. Apply to the First-tier Tribunal (Property Chamber)
- As a last resort, you can apply to the tribunal to challenge the charges.
- The tribunal will decide whether the charges are reasonable based on evidence from both parties.
Legal Protections for Leaseholders
Leaseholders benefit from several legal protections:
- Reasonableness Test: Charges must be reasonable, and the services provided must be of a reasonable standard.
- Notice Requirements: Freeholders must give advance notice of major works costing more than £250 per leaseholder.
- Time Limits: Service charges must be demanded within 18 months of the costs being incurred.
How to Avoid Future Disputes
- Join a Residents’ Association: Collective action with other leaseholders can give you a stronger voice.
- Consider Right to Manage (RTM): Leaseholders can take over the management of the building if the freeholder or managing agent fails to act in the best interests of residents.
- Stay Informed: Attend annual general meetings (AGMs) and review financial statements.
How Fraser Bond Can Assist
At Fraser Bond, we specialize in supporting leaseholders with service charge disputes. Our services include:
- Lease Reviews: We help you understand the terms of your lease and identify unjustifiable charges.
- Negotiation Support: Our experts negotiate with freeholders and managing agents on your behalf.
- Tribunal Representation: We provide guidance and representation for First-tier Tribunal applications.
Conclusion
Challenging unfair service charges is your right as a leaseholder. By understanding your lease, gathering evidence, and taking the appropriate steps, you can ensure you’re only paying for what is fair and reasonable.
If you need professional assistance with your service charge dispute, contact Fraser Bond today. Our experts are here to help you protect your rights and achieve the best outcome.
