Do I have to pay an Administration Charge for late payment of Ground Rent?

Reader’s E-mail:

I am the owner of a flat, which I rent out to tenants. The tenants have recently moved out, breaching their tenancy agreement. On visiting the flat, I discovered a letter addressed to me from the premises Management Company, informing me that ground rent is overdue. As well as charging for this, they have added a £45.00 admin charge for late payment. I have written to the Management Company, explaining I have only just become aware of this, and immediately paid the outstanding ground rent. However, I dispute the late payment admin fee, which I consider unreasonable in that: 1. I have never been asked to pay this (letter not passed on), 2. My previous tenants did not pay this or pass on any mail or messages , 3. I have paid the outstanding ground rent as soon as I became aware of it 4. I have provided all this information in writing to the Management Company. 5. Additionally, I believe the £45.00 fee to be excessive (the ground rent due was only £50). Where do I stand?

​Reply from Service Charge Disputes Guide

There are a number of things to consider in this situation, which we have broken down into numbered points below for ease of reference:

1. Does your lease allow for an administration charge to made in these circumstances? If your lease does not then the Management Company needs to prove that they have the authority to make sure a charge. They can’t simply charge you for something if the Lease does not specifically allow them to do so.

2. Have you previously informed the Management Company in writing of an alternative correspondence (which must be in England or Wales)? If not then the delay in your receiving your mail is no defence against the charge.

3. Before you can be charged for Ground Rent you must be properly served with a Ground Rent Notice forewarning you of the impending charge. If no notice was issued you are not legally obliged to pay the Ground Rent (until such time as the process of issuing the Notice is followed correctly), and by extension the administration charge: your argument would be “how can you be charged a penalty fee for something you were never obliged to pay in the first place?”.

4. The rules around the issuing of Ground Rent Notices are complex and Landlords or their Managment Companies often get it wrong. For this reason we suggest that you carefully read our article entitled Section 166 (Ground Rent Notices) as this explains the process that should be followed, and the consequences for a Landlord or their Agent for failing to follow the process.

5. Demands for payment of an Administration Fee must be (by law) accompanied by a ‘summary of tenant’s rights and obligations’. If no such summary was included you are legally entitled to withhold payment of the administration charge. This is stated in Schedule 11 of the Commonhold and Leasehold Reform Act 2002.

6. You are legally entitled to challenge the reasonableness of an administration charge by applying to a First Tier Tribunal. To read more about this read our article entitled Section 158 (Administration Charges). Here is a link to the application form for the Tribunal.

7. Before you consider making such an application we should point out that for sums up to £500 the application fee is £65 will a further hearing fee of £190 if it gets that far. It would only be worth your while making an application if (as well as having a strong case) there were multiple charges to dispute or you felt that a strong point of principle was at stake and you needed to make that point to the Management Company in a forceful way.

8. Tribunals tend not to award costs and winning back your £45 might cost you a lot more than that amount. If this seems unfair and that it gives ‘licence’ for these unfair administration charges to be issued with impunity, many people would agree with you. This said, the more correspondence you write before legal action, pointing out any failures on the part of the Managing Agent and asking them to amend them, the greater your likelihood would be awarded your application fee back by the Tribunal.

9. Getting neighbours with a similar problem involved is also a really good idea and it puts pressure on the Management Company.

Click on the link to read more Reader’s Questions and Answers on Administration Charges and Legal Costs