Long lease landlords are able to recover reasonable costs incurred in maintaining the property as part of a service charge paid by tenants. This means relevant costs taken into account in determining the level of the service charge must be reasonably incurred and, where incurred during the provision of services or the carrying out of works, these must be delivered to a reasonable standard.
However, large or costly works carried out by landlords can impose a significant financial burden on tenants through their increased service charge. The recent case of Garside v RFYC [2011] illustrates that whether or not such significant works are phased – so as to spread the cost over a number of months or years – is an important consideration when deciding whether the costs of such works are reasonable.
In the above mentioned case, tenants of an estate recognised a significant amount of maintenance work needed to be carried out due to a number of years of neglect by the landlord. Upon the appointment of a manager, £100,000 was added to the service charge for 2009 followed by a further £538,012 to be added to the proposed service charge for 2010. Whilst recognising the work was necessary and accepting the cost was reasonable, they argued it was not appropriate to carry out the work in such a short period of time and applied to the leasehold valuation tribunal (LVT).
The tribunal highlighted a number of important points which will be considered when determining whether costs are reasonable and therefore recoverable through a service charge:
Where individual tenants claim to be unable to pay their service charge, or at least any increase in their charge, they can put forward case for hardship relating to their personal circumstances. However the LVT cannot alter a tenant’s contractual obligation to pay costs recoverable by the landlord for reasonable works, carried out at a reasonable cost and to a reasonable standard.
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