Section 125C (Right to Buy: Reference Period for Estimates)
1. This section states the period which will be covered by the estimates (Section 125A and Section 125B of the Housing Act 1985) included in the Offer Notice which is given by Landlords to applicants for the Right to Buy or Right to Acquire Schemes.
2. This period is known as the ‘Reference Period’.
1. Section 125C says that the Reference Period should:
i. Commence on a date not more than 6 months after the notice was issued, and that this should be the date when the Landlord reasonably predicts that the Lease will be granted.
ii. End on a date 5 years after that, unless the lease specifies an annual service charge period, in which case the Reference period shall end 5 years after the start of the first full service charge accounting year after the grant of lease.
Why is the Reference Period Important to Leaseholders purchasing under the Right to Buy or Right to Acquire
1. The protection given to leaseholders under Section 125A and 125B only applies to costs incurred during the Initial Period, and the amount of protection they receive then depends upon whether the costs were incurred during the Reference Period.
When is a Cost Incurred?
1. Case Law defines a cost as being ‘incurred’ (in relation to variable Service Charges) when the Landlord is issued with an invoice which relates to that cost, or when they actually pay for it, whichever occurs first.
2. This means that if a Service Charge bill is issued after the end of the Initial Period, a Landlord may still be restricted in what they can charge if the costs were incurred during the initial period
3. The important point here is that it is not the date of the Service Charge bill which determines whether the costs fall within the Initial Period or the Reference Period, it is the date upon which the Landlord incurred the costs.
Relevant Case Law
Hyams and Anderson v Wilfred East Housing Co-operative Ltd  3 EG 126
LB Southwark v Ms Bee A Smith  UKUT 295 (LC)
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