Q&A - Service charge proportions

QUESTION

When I bought my property in 2010, I signed a lease and it contained share percentages. The landlord and estate management have changed since then. What is the procedure if the landlord wants to change proportioned contribution of leaseholder to the services?

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I have flagged it up with the managing agent and received a reply (see below), but I have not seen any formal documentation.

With reference to the previous 2015, 2016 and now 2017 service charge, apportioned contribution was calculated using figures other than those in my lease deed.

Officially, my lease deed contains the following figures:

Insurance costs is 0.7135%
Building block costs is 0.7135%
Estate service costs is 0.5427%

Your proposed service charge demand has the following:

Insurance 1.0346%
Building Block 1.6292%
Estate 0.5847%

I do not believe that these figures are official since I have not seen nor signed a mandate of change. Please provide me with a document where these new figures are present.

Managing agent reply: Your landlord has the right under the terms of the lease to charge a fair and reasonable proportion of the expenditure. The percentages in the leases do not add up to 100% therefore all expenditure would not be recoverable. The landlord therefore charges proportionately, albeit, not as per the percentage contained in the leases.

ANSWER

Your landlord is only allowed to vary the service charge percentages in your lease without your agreement in certain limited situations.

The first is where the terms of your lease allow your landlord to vary the service charge percentages. Your managing agent has claimed that your landlord has the right under the terms of the leaseto charge a fair and reasonable proportion of the expenditure. I recommend that you check your lease to see whether this is actually the case.

If your landlord does not have the right to vary the percentages under your lease, there is a statutory procedure which allows landlords to apply to the Property Chamber of First-Tier Tribunal under Part IV of the Landlord and Tenant Act 1987 in certain circumstances. One of those circumstances is where the service charge percentage contributions contained in leases in a building do not add up to to 100% of the landlord’s expenditure. In that case, the Tribunal is likely to make a determination so that the service charge percentages are varied so that the landlord can recover his costs in full. However, the Tribunal would need to make a determination before the variation could be imposed on the leaseholders and it appears from your enquiry that this has not happened.

If your landlord does not have a contractual right under the lease to vary the percentages and has not applied to the Tribunal for a variation, it cannot do so without your agreement.  
 

Lauren Fraser, Associate at Charles Russell Speechlys LLP

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