My aunt lives in a studio flat paying rent of £102 per week and service charge £65 making a total of £167 a week. In my opinion that weekly service charge is too high. Please could you help me to understand how the service charge is calculated?
Reply from Service Charge Dispute Guide
1. A total annual service charge of £3,380 (52 x £65) may or may not be correct depending on what the charges are for, what type of lease or tenancy agreement she holds, and what that lease or tenancy agreement says.
Type of Lease or Tenancy Agreement Held
1. The first thing to establish is what type of tenancy agreement or lease your aunt holds. Is it:
i. A long lease (over 21 years) purchased through a shared ownership scheme, where she pays rent in respect of the part of the flat she is yet to purchase.
ii. A tenancy agreement for a fixed period of less than 7 years, which automatically renews after the end of the period stated on the tenancy agreement finishes. These types of tenancies are most commonly associated with local authorities and housing associations.
iii. A tenancy agreement for a period of less than 7 years which does not automatically renew after that period expires.
Protection Under Section 11
1. If your aunt holds either type ii. or iii. tenancy agreement referred to above (both of which are for a fixed period of less than 7 years) then the types of costs for which she may be charged are limited by Section 11 of the Landlord and Tenant Act 1985.
2. Section 11 states that in respect of leases (including tenancy agreements) of a shorter period than 7 years the landlord is responsible for costs associated with:
a) Repairing the structure and exterior of the dwelling-house (including drains, gutters and external pipes),
b) Keeping in repair and proper working order the installations in the dwelling-house for the supply of water, gas and electricity and for sanitation (including basins, sinks, baths and sanitary conveniences, but not other fixtures, fittings and appliances for making use of the supply of water, gas or electricity), and
c) Keeping in repair and proper working order the installations in the dwelling-house for space heating and heating water.
3. Unless your aunt holds a lease or tenancy agreement for a fixed period of 7 years or more (not counting further periods of tenancy arising from a renewal of the agreement on expiry of prior fixed period) she cannot be asked to contribute towards any the costs associated with items a), b), or c).
Eligibility for protection under Sections 18 to 30 of the Landlord and Tenant Act 1985
1. Your aunt may also be entitled to protection under sections 18 to 30 of the Landlord and Tenant Act 1985 in relation to the amount of service charges she is required to pay.
2. Whether your aunt receives such protection will, however, in the first instance depend on whether she pays a ‘fixed’ or ‘variable’ service charge.
3. Only people tenants or leaseholders who pay a ‘variable’ service charge receive protection under Sections 18 to 30 of the Landlord and Tenant Act 1985.
4. A ‘variable’ service charge is one which goes up or down depending on how much a landlord spends on the relevant item of expenditure.
5. By contrast a ‘fixed’ service charge is for an amount which is set by the terms of the lease or tenancy agreement, with the amount only changing periodically in a way described in the lease or tenancy agreement.
6. Typically if a lease or tenancy agreement allows for a fixed service charge it will give a formula for it to increase annually by a fixed percentage, or by reference to an index which measures price inflation.
7. It is very important to carefully read the lease or tenancy agreement in question to establish whether the amount payable is ‘fixed’. We suggest asking your aunt’s landlord (via their agent or housing officer) whether the service charge is fixed or variable.
8. Unfortunately, if the amount is ‘fixed’ your aunt is unlikely to have valid legal grounds for challenging the amount payable. Where service charges are for a fixed amount it is likely a court or tribunal would decide that your aunt simply has a contractually obligation to pay a certain amount as consequence of entering into the lease or tenancy agreement and that the amount cannot be disputed.
9. If the service charge is variable then a leaseholder or tenant generally has more rights to challenge it.
Protection under Sections 18 to 30 of the Landlord and Tenant Act 1985
1. For tenants and leaseholders who pay a variable service charge, the Landlord and Tenant Act 1985 protects them from being overcharged in a number of ways.
2. A full explanation of the most relevant parts of the Landlord and Tenant Act 1985 is given in the relevant section of the Leasehold Law Explained guide on our website.
3. To briefly run through the most important points in relation to the protection given to service charge payers:
i. Section 19 (1) (a) states that a service charge is only payable to the extent that it is ‘reasonably incurred’. Amongst other things, this means that the amount charged must be ‘reasonable’ in comparison for the services provided or works undertaken.
ii. Section 19 (1) (b) states that a service charge is only payable to the extent that the services or works are carried out to a ‘reasonable standard’.
iii. Section 20 states that in certain circumstances landlords are limited in relation to the amount they can charge if they do not first consult the service charge payer.
iv. Section 21B states that a tenant or leaseholder may withhold payment if the service charge invoice is not accompanied by a statement of ‘rights and obligations’ which has the correct prescribed wording.
v. Section 22 gives service charge payers the right to require to ask that their landlord provides access to inspect documents, such as invoices, relevant to the costs to which a service charge invoice relates.
Protection under the Terms of the Lease or Tenancy Agreement
1. The tenancy agreement should, in more or less detail depending upon how it was written, explain what your aunt is required to contribute towards, how her contribution should be calculated, and when it should be paid.
2. As a general point of law, a landlord does not have the ‘authority’ to charge for something if it is not clearly referred to in their tenancy agreement or lease.
3. Because of the amount referred to in your e-mail is high (£65 per week) if it may relate to both contributions towards for costs which relate to the building as a whole, such as cleaning common areas or repairing the fabric of the building itself, and costs which relate to services used by individuals alone, such cleaning their flat or care services.
4. If the amount your aunt is charged is not fixed by the terms of the lease or tenancy agreement, in order to determine whether the charge is a fair one you need to distinguish between these two types of costs. Your aunt’s legal rights may be different depending upon which heading each charge falls under.
5. The costs relating to the common parts of the building are likely to be a service charge and therefore governed by the terms of sections 18 to 30 of the Landlord and Tenant Act 1985. Costs for services which are used directly by your aunt may not be a service charge and different (and less) restrictions may apply.
1. As you will be aware from the information given above, the question of whether of your aunt is paying too much is not a straightforward one to answer. Its depends on the wording and type of tenancy agreement or lease she holds, and exactly what it is she is being charged for and how her share of any costs related to the common parts is calculated..
2. You next steps are therefore to:
i. Read the tenancy agreement or lease.
ii. Examine any bills she has received.
iii. Obtain your aunt’s consent to speak to her landlord about any issues which are unclear, and to discuss any concerns you may have with them at the same time.
3. If you then have further questions SCDG is here to help.
Click on the link to read more Reader’s Questions and Answers on Tenant Service Charges
Click on the link to read more Reader’s Questions and Answers on Billing and Refunds