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Section 158 (Administration Charges)

Summary

1. This section states Schedule 11 of the Commonhold and Leasehold Reform Act 2002 shall effect in respect of Administration Charges payable under the terms of a long lease.

2. The Legal rights which Leaseholders have in respect of variable Service Charges do not apply to Administration Charges. Schedule 11 attempts to address this situation by giving Leaseholders some important legal rights which specifically apply to Administration Charges.

What is an Administration Charge?

1. Schedule 11 states that an Administration Charge means a charge from a Landlord to a the holder of a Long Lease (in addition to any rent or Service Charge) for any one of the following four types of thing:

i. Being granted an approval from a Landlord to do something. Common examples include permission to sub-let or permission to alter the property.

ii. Provision of information from the Landlord. For instance, a Landlord may charge for providing a copy of the Lease.

iii. A late payment penalty charge from a Landlord.

iv. A penalty charge from a Landlord as a consequence of the Leaseholder purportedly breaching the terms of their Lease. This could include a Landlord’s legal costs in connection with a Service Charge dispute.

Administration Charges must be reasonable

1. Schedule 11 introduced into Law a requirement that a Variable Administration Charge must be ‘reasonable’. An Administration Charge is said to be ‘variable’ if the amount of that charge is not fixed by the wording of the Lease.

2. Schedule 11 does not define what reasonable means. This left to the courts and tribunals to decide.

3. Courts and tribunal have the discretion to consider a wide range of factors in determining what a reasonable amount would be charge in the circumstances, including any evidence a Leaseholder can provide on what other Landlords might charge for the same thing.

First Tier Tribunals and Administration Charges

1. Schedule 11 brought the issue of the payability of an Administration Charges within the jurisdiction of the Residential Property Tribunal Service. Jurisdiction means the types of legal disputes a legal body can make decisions on.

2. Schedule 11 states that a Leaseholder is permitted to apply to a First Tier Tribunal to ask that they decide on any of the following issues in relation to an Administration Charge from a Landlord to a Long Leaseholder:

i. Who is required to pay an Administration Charge.

ii. To whom the Administration Charge should be paid.

iii. How much should be paid.

iv. The date when the Administration Charge is payable.

v. How the Administration Charge should be paid.

3. The wording of the Lease is a key consideration for a First Tier Tribunal in deciding any of these issues.

Variation of a Lease

1. Where an Administration Charge is not variable, but fixed by the terms of the Lease, Schedule 11 also gives Leaseholders the legal right to apply to a First Tier Tribunal for the wording the Lease which states the level of the Administration Charge to be changed (‘varied’ in legal language’).

2. There are two types of concern that a Tribunal will consider in relation to application to vary a Lease in respect of Administration Charges:

i. That the amount stated in the Lease is unreasonable, either because it is too high, or because the Landlord is allowed to charge for something they should not reasonably be allowed to charge for, for instance information that they are obliged to provide by law anyway.

ii. The Lease states a formula for calculating the amount of the Administration Charge which is unreasonable.

3. If a Leaseholder can convince a Tribunal that either type of concern genuinely applies to the wording of their Lease, then the Tribunal can issue a ‘memorandum’ altering the relevant part of the Lease. This memorandum will be binding on current and future owner of both the Leaseholders and Landlords for the property.

Notice to accompany demands to pay Administration Charges

1. Schedule 11 introduced a requirement for Landlord to send a summary of tenant’s rights and obligations when they demand payment of an Administration Charge.

2. This summary must be in a prescribed format with prescribed wording.

3. If the summary is not sent with the demand for payment of an Administration then a Leaseholder may legally withhold payment.

4. Payment of that Administration Charge only becomes due when the Landlord send the correct summary.

5. Landlords are not entitled to charge interest, or other late payment fee, for the period when the Leaseholder was legally entitled to withhold payment.

6. To view the prescribed wording and format of the summary of rights and obligations to accompany a demand for Administration Charges click on the link in red lettering.

Click on the link to read more about the Commonhold and Leasehold Reform Act 2002