Resolving Leaseholder Non-Payment for Repairs in the UK

When a leaseholder refuses to pay for repairs to a property, it can lead to disputes between the leaseholder and the freeholder or managing agent. In the UK, most lease agreements include clauses that require the leaseholder to contribute to the cost of repairs and maintenance, either through a service charge or a contribution to specific works. Here's what both freeholders and leaseholders should know, as well as the steps to resolve such disputes:

1. Understanding Leaseholder Responsibilities

• Lease Agreement: The lease document outlines the leaseholder's responsibilities, including obligations to pay for repairs, maintenance, and service charges. This usually covers communal areas, external repairs, and building structure maintenance, but specifics vary by lease.
• Service Charges: Most leases require leaseholders to contribute to service charges, which cover the cost of repairs, maintenance, insurance, and management of the building.

2. Reasons Leaseholders Refuse to Pay

There are several reasons why a leaseholder might refuse to pay for repairs:

• Dispute Over Necessity of Repairs: The leaseholder may believe the repairs are unnecessary, poorly managed, or excessive in cost.
• Poor Communication: If freeholders or managing agents don’t communicate effectively or provide sufficient justification for repairs, leaseholders might refuse payment.
• Financial Hardship: Some leaseholders may simply be unable to afford their share of the repairs.
• Disagreement Over Service Charge Increases: Sudden or unexpected increases in service charges, without prior notice, can lead to disputes.

3. What Freeholders Can Do

If a leaseholder refuses to pay for repairs or service charges, freeholders have several options:

a. Review the Lease Agreement

The first step is to review the lease. Ensure that the repairs or works fall within the responsibilities outlined in the lease, and that the correct procedure for notifying the leaseholder has been followed.

b. Consult with a Surveyor

If there’s a dispute over the necessity or cost of the repairs, a qualified surveyor can assess the property and confirm whether the repairs are necessary and if the costs are reasonable.

c. Provide Transparent Cost Breakdown

Freeholders or managing agents should provide a clear, itemised breakdown of the repair costs. This can help address concerns about overcharging and provide reassurance that the charges are justified.

d. Engage in Mediation

Before resorting to legal action, it’s often helpful to engage in mediation or negotiation. This can resolve disputes more quickly and with fewer costs. Mediation services can help both parties reach an agreement without formal proceedings.

e. Formal Legal Action

If all else fails, the freeholder can take legal action:

• Service Charge Arrears: If the dispute concerns unpaid service charges, the freeholder can take the matter to the First-tier Tribunal (Property Chamber). The tribunal can decide whether the charges are reasonable.
• Forfeiture of Lease: In extreme cases where the leaseholder refuses to pay or breaches their obligations, the freeholder may seek to forfeit the lease. However, this is rare and only occurs after other avenues have been exhausted.

4. What Leaseholders Should Do

Leaseholders who believe they are being unfairly charged should take the following steps:

a. Review the Lease

Check the lease terms to see if the requested repairs and associated costs are justified. Some leases may specifically outline the types of repairs and works leaseholders are responsible for paying.

b. Request Justification for Repairs

Leaseholders have the right to request information from the freeholder or managing agent regarding the scope of works and cost estimates. Ensure the charges are in line with what the lease allows.

c. Challenge Excessive Costs

If the costs seem excessive, leaseholders can challenge them at the First-tier Tribunal (Property Chamber). The tribunal will assess whether the repairs and the associated charges are reasonable and in accordance with the lease.

d. Consider Financial Assistance

If financial hardship is preventing payment, leaseholders should communicate this to the freeholder or managing agent. In some cases, a payment plan or deferred payment option may be arranged.

5. The Role of the First-tier Tribunal (Property Chamber)

This tribunal is often the final arbiter for disputes between freeholders and leaseholders regarding service charges and repairs. Either party can apply to the tribunal if there’s disagreement about:

• The necessity of the repairs.
• The quality or scope of the work.
• The reasonableness of the costs.

The tribunal will examine the case, review evidence (e.g., surveys, invoices, etc.), and make a decision on whether the leaseholder is liable to pay for the repairs or service charge.

6. Potential Consequences for Leaseholders

If a leaseholder refuses to pay service charges or repair costs without a valid reason, they may face:

• Debt Collection: Freeholders may engage debt collection agencies to recover unpaid service charges, which could affect the leaseholder’s credit rating.
• Interest and Late Payment Penalties: Leaseholders could incur additional costs if interest and late fees are outlined in the lease.
• Forfeiture of Lease: As a last resort, a freeholder could seek forfeiture of the lease. However, this is a complex and costly process that requires a tribunal’s permission, and usually only applies to serious breaches.

How Fraser Bond Can Help

Disputes between leaseholders and freeholders can be stressful and complex. Fraser Bond offers expert advice and mediation services to both parties, helping resolve issues related to service charges, repairs, and maintenance obligations. Whether you are a leaseholder challenging unreasonable charges or a freeholder dealing with non-payment, our team can guide you through the legal process and ensure a fair resolution.