How to Dispute a Service Charge
Making an Effective Complaint
Effective complaints about problems with Service Charges will do two things:
- Provide good grounds for claiming that some kind of error in management of the building, calculation of the service charge, consultation or invoicing, has occurred.
- Include a credible statement of how this error has had a detrimental effect on them as leaseholder.
Leaseholders who attempt to dispute their service charges on a ‘technicality’ (something which hasn’t really caused them any real loss) are less likely to successfully dispute their service charge. Service charge practitioners working for landlords are unlikely to respond well to these types of complaints. Tribunals and Courts can also take a dim view of these. Put simply, a complaint has a much greater chance of succeeding if it’s a genuine one.
It is not advisable for any leaseholder, not matter how sure they feel that their landlord is in the wrong, to go straight to a Court or Tribunal. In the first instance, they should try to discuss the matter directly with their landlord. The reason for this is twofold: firstly, they may well be able avoid unnecessary legal costs for all concerned, and importantly for themselves (leaseholders can end up being penalised if they too hasty in taking legal action); secondly, discussions with a landlord can be enormously helpful to a leaseholder who is attempting a build a case against their landlord.
All disputes are different, and different landlords have different approaches to dealing with disputes, nonetheless we advise leaseholders to always follow our simple three step process when disputing their Service Charge bills.
Step 1: Write to Your Landlord
Put something in writing to your landlord.
Letters, and e-mails, are very important in the process of disputing a service charge. The ability to write a good letter may mean the difference between winning and losing a dispute.
A good letter will be grammatical and stick to the point. Emotional outbursts in letters, particularly in the form of wild allegations, tend to detract from the effectiveness of a letter as a whole. Short simple sentences and short paragraphs work best. A straightforward way to structure a letter is:
- First paragraph sets out what part or parts of the service charge are cause for concern.
- Second paragraph lists the reasons, in summary, why the leaseholder is concerned with these parts of the service charge.
- Following paragraphs deal, in turn, with each reason for disputing the charge. You need to put in references to the law, the lease and any evidence you have. Without references to the lease or the law you have not given any kind of legal reason for disputing the charge.
- Final paragraphs to state how these problems have had a negative effect on you as a leaseholder. At this stage, perhaps right at the end, you can briefly state how it has made you feel emotionally. More reputable landlords place value on providing a good customer experience.
Step 2: Make a Formal Complaint
If you don’t receive a satisfactory reply from your landlord, you should write again as a formal complaint. Many large landlords, and the managing agents they sometimes employ, have a formal complaints procedure. Formal complaints are often to dealt with by more knowledge staff with a greater desire to resolve disputes than perhaps the person who answers the first letter.
Most complaints procedures have a number of stages, as a general rule we advise leaseholders to follow the complaints procedure right to the final stage before taking any further action. Sometimes it can be helpful for Leaseholders to also contact their local councillor or MP to write on their behalf.
Step 3: Apply to a First Tier Tribunal
If after completing the complaints procedure (if there is one) a leaseholder remains dissatisfied then they can consider making an application to a First Tier Tribunal (FTT). These bodies, formerly known as Leasehold Valuation Tribunals, are a type of less formal court. Landlords and leaseholders often represent themselves, although if a complex legal issue is in dispute a competent barrister will tend to do a better job of representation. Tribunal hearings typically involve a panel of three persons adjudicating, usually a lawyer, a surveyor and a ‘lay’ person. Hearings can last anything from an hour or two up to several days.
First Tier Tribunals have the power to make decision on a wide range of service charge issues. Section 27 of the Landlord and Tenant Act 1985 says:
1) An application may be made to a leasehold valuation tribunal for a determination whether a service charge is payable and, if it is, as to—
(a) the person by whom it is payable,
(b) the person to whom it is payable,
(c) the amount which is payable,
(d) the date at or by which it is payable, and
(e) the manner in which it is payable.
(2)Subsection (1) applies whether or not any payment has been made.
The only situations where a leaseholder is not permitted to apply to an FTT is where they have already admitted that the service charge is properly due, the same service charge has been or will be the subject of a separate Tribunal or Court case, or an agreement has previously been reached in arbitration. In addition to these restrictions, leaseholders may have difficulties in making an Application if their landlord is in administration. The law protects companies and individuals who have been declared bankrupt from having to contest certain types of legal claims.
Before embarking on any kind of legal action, it would be wise for the leaseholder to consider what it will cost them. The application fee itself is relatively low, and some people on benefits may be eligible for a waiver of the fee. As of April 2014 the fees were (Source: http://www.justice.gov.uk/tribunals/residential-property/fees):
|If the amount of the charge which is in dispute is not more than £500
|If the amount of the charge which is in dispute is not more than £1000
|If the amount of the charge which is in dispute is not more than £5000
|If the amount of the charge which is in dispute is not more than £15000
|If the amount of the charge which is in dispute is more than £15000
|Plus Hearing Fee : £190 (only payable if the case proceeds to a full hearing)
FTTs do have the authority to award costs to a landlord if a leaseholder makes an application with ‘has no merit’ or the leaseholder is acting very unreasonably. This happens very rarely, however, leaseholders should think carefully before making an application as there is a danger that they may end up footing the bill for the landlord’s barristers as the Landlord may be able to recharge their legal costs as service or administration costs. Leaseholders, on the other hand, are very unlikely to be able to recover any costs they incur in hiring lawyers or commissioning surveyor’s reports. For this reasons, leaseholders may benefit from talking to their neighbours (who may have same problem) about making a joint application to share the cost, share information and provide support to each other during the process. There is no legal limit to the number of people who can apply together so long as they are all subject to the same service charge.
A leaseholder should consider their case and the possible costs very carefully before making an application, and talk to their neighbours and their residents’ association if there is one. If a leaseholder chooses to go ahead and apply, an application to an FTT is fairly simple to make. You fill out the form (download at: http://hmctsformfinder.justice.gov.uk/HMCTS/GetForm.do?court_forms_id=3082) and enclose a cheque for the fee. The Tribunal will then write to you with instructions on what happens next.
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