Section 42B (Penalties for Failure to Comply with Section 42A)
Summary (NB: Section 42B is Not in Force)
1. The current wording of Section 42B was introduced by Section 156 of the Commonhold and Leasehold Reform Act 2002.
2. Section 42B of the Landlord and Tenant Act 1987 has never been brought into force, except in so far as the wording of the Act confers rights upon the Government to make regulations, which to date they have not done.
3. In respect of Section 156 of the Commonhold and Leasehold Reform Act 2002 the relevant commencement order is The Commonhold and Leasehold Reform Act 2002 (Commencement No. 1, Savings and Transitional Provisions) (England) Order 2002. See Article 2(c).
4. Leaseholders cannot therefore rely on Section 42B in respect of withholding their Service Charges and they cannot demand that their Landlord comply with these requirements.
5. Were Section 42B to be brought into law it would then a failure to comply with the Section 42B of the Landlord and Tenant Act 1987, without a ‘reasonable excuse’, would be an offence punishable by a fine not exceeding level 4 on the standard scale. At the time of writing (August 2014) this means a fine of up to £2,500.
What counts as an offence?
1. It means failing to comply with either of the three main requirements of Section 42A of the Landlord and Tenant Act 1987:
i. That Service Charge contributions are held in a designated account of the type of financial institution prescribed under Section 42 of the Landlord and Tenant Act 1987.
ii. To allow the inspection of documents proving the existing of the designated bank account within the time scale given in Section 42.
iii. To allow copies to be taken of documents proving the existing of the designated bank account within the time scale given in Section 42.
Enforcement of Section 42B
1. Section 42B states that the enforcement of Section 42B may be made by a local authority by a prosecution in a Magistrates Court.
2. If Section 42B were brought into force then following the decision in the case of Morshead Mansions Ltd v Di Marco  EWCA Civ 96 (12 February 2014) it is doubtful that a Court would allow a private prosecution to be brought. This case involved an unsuccessful attempt by a leaseholder to enforce Section 25 of the Landlord and Tenant Act 1985 for failure by a Landlord to provide information under Section 22 of the 1985 Act. The Court decided that the Law only allowed local authorities to initiate a prosecution of this nature, not private individuals. Section 25 of the 1985 Act is very similar to Section 42A of the Landlord and Tenant Act 1987 and there is a good likelihood that a Court would follow the same reasoning.
Relevant Case Law
See the section of our case law library on Reserve Funds
Click on the link to read more about The Landlord and Tenant Act 1987