Can I refuse to pay a Service Charge Bill because I can’t afford it?

By | 07.10.2018

Reader’s E-mail:

My husband and I have recently been sent a large major works service charge bill (over £12,000). This is more than we can afford to pay. Can we refuse to pay on the basis that the cost is unaffordable to us?

Reply from Service Charge Dispute Guide

1. The short answer to your question is that yes the law does say that affordability is relevant to whether a service charge bill is legally due for payment, however, in practice is likely to be very difficult for a leaseholder to convince a First Tier Tribunal (previously known as Leasehold Valuation Tribunal) to reduce their service charge bill for this reason alone.

2. The relevance of affordability to the issue of whether a service charge is legally due was established by a Lands Tribunal case in 2011: Garside v RFYC Limited & B R Maunder Taylor [2011] UKUT 367 (LC). What the Judge in this case ruled was that a Tribunal may take affordability into account in determining whether a service charge is ‘reasonable’ under the terms of Section 19 of the Landlord and Tenant Act 1985. This is not the same as saying that service charge bills are only payable in so far as they affordable. There are other factors a Tribunal will take into account as well in determining whether a service charge is correctly charged. A Tribunal is likely to consider other issues such as whether the works represent value and whether they were necessary.

3. There have been some cases since 2011 where Tribunals have decided that Landlords were required to consider affordability (for instance: Waaler v LB Hounslow [2015]). However, decisions like this are rare with Tribunals placing more importance on issues other than affordability when determining the reasonableness of a Service Charge. For this reason, as well as others, leaseholders should think very carefully about making a challenge on this basis alone. This may change in the future if a Court or Tribunal makes a decision reducing a service charge on the basis of affordability as the main or only issue, but as things stand a leaseholder faces a challenging task in attempting to dispute a service charge liability entirely on the basis they are unable to pay it.

4. Leaseholders tend to have a better prospect of success if they challenge their service charge over other issues. The ones which tend to come up frequently are:
• Incorrect consultation under Section 20
• Whether the lease permits the landlord to charge for the works
• Whether the work represents value for money
• Whether the works were necessary
• The quality of the work
• The way the bill for the work was calculated

5. If affordability is the only issue that a leaseholder has with their Service Charge bill they may be better off contacting their landlord and stating their problem. Many landlords, particularly those which receive public funding, such as local authorities or housing association, will have some kind of scheme in place to assist leaseholders experiencing financial difficulty in pay for their Service Charges. They may also be willing to negotiate payment terms or settlement figure on the basis that they may simply struggle to collect the money from a leaseholder. There are free advice centres, such as the Citizen’s Advice Bureau, who will assist you in making arrangements with your landlord.

Click on the link to read more Reader’s Questions and Answers on Service Charge Arrears & Affordability