This section of our Case Law Library looks at cases related to:
- Whether a Service Charge is Variable or Fixed
- Whether a demand for payment is an Administration Charge, Service Charge or something else
Is the Service Charge variable?:
Decision by the Court of Appeal that a Service Charge which increases in amount in reference to an index, rather than in relation to the expenditure of a Landlord, does not fall within the definition of a Service Charge for the purposes of Sections 18 to 30 of the Landlord and Tenant Act 1985.
Decision by the Lands Tribunal in respect of an assured non-shorthold tenancy that if a lease does not link the level of the service charge to the level of the costs incurred by a landlord then it is not a variable service charge for the purposes of section 18 of the Landlord and Tenant Act 1985, even if the level of the fixed service charge is set by reference to the actual or estimated expenditure of a landlord.
Decision by the Upper Tribunal that it was within the Jurisdiction of the Tribunal to consider the whole amount of a Service Charge even if that part of that Service Charge were fixed, as opposed to ‘variable’ for the purposes of Section 18 of the Landlord and Tenant Act 1985.
In this case a Service Charge is found to be variable because the Upper Tribunal established that there was a link between the cost of providing services and the amount of the Service Charge demands. The Tribunal stated that it was not a question of whether a Landlord actually chooses to vary the cost in relation to actual costs which determines whether a Service Charge is fixed or variable, but rather a question whether there is a “right conferred on the landlord to vary the service charge and the limitation on that right by reference to the cost of providing the services that means that the charge may vary according to the cost“.
Definition of a Service Charge in relation to Park Homes:
Decision by the High Court that Park Homes (chalets occupied for part of the year) are dwellings for the purposes of Section 18 of the Landlord and Tenant Act 1985. This is important because Section 18 defines a Service Charge as being something payable in connection with a ‘dwelling’. The consequence of this decision is that the Leaseholders of a park home who pay a variable service charge have the same protection under the law from sections 18 to 30 of the Landlord and Tenant Act 1985 as the Leaseholders of flats and houses.
Can a Landlord’s cost of renting premises be considered a variable Service Charge?
In this case the Upper Tribunal decided that the charge levied by the Landlord for the cost of renting a concierge office, gym and CCTV equipment was a variable Service Charge. The reason for the decision was because the rents were taken to be a cost incurred in the provision of services, and because the amount charged as rent would increase in the future when the existing leases on these premises expired.
Can the Costs of a Management Company be recharged as a Service Charge?
Decision by the Court of Appeal that there is an important legal distinction between a payment made under the terms of a Lease, and a payment made by a Leaseholder as a member of a Company owning the Freehold, even if both types of payment are made in respect of maintaining the same building or development. Payments under a lease are subject to sections 18 to 30 of the Landlord and Tenant Act 1985, whilst payments made under contracts associated with membership of a Company are not.
In this case the Upper Tribunal found the costs of running the Management Company were rechargeable to the Leaseholder as a Service Charge. In making this decision the Tribunal considered the precise wording of the Lease detail, in particular the relationship between the costs of the Management Company and it functions in respect of managing the provision of services at the property.