Q&A - Landlord / Freeholder Charges

I have a 125 year lease, I live in a group of 6 and 4 of the leaseholders own the property as a freehold.

ANSWER

1.    Can my landlord charge me for work he did for cash and no receipt was shown to us?

It is often difficult to know, when faced with a service charge demand on what basis the charges have been calculated.  In particular it is nearly impossible to work out what sums have been invoiced to the landlord and what sums have been paid out.

Most leases usually contain a provision within them that requires the landlord to keep records and receipts relating to the service charge costs and if requested by the tenant (giving reasonable notice) allow the tenant to inspect the accounts, records and receipts by appointment with the landlord (or its accountants or managing agents).  You would need to check your lease to see whether such a clause is included within it.

In addition, pursuaunt to Section 21 of the Landlord and Tenant Act 1985, a tenant may request in writing that their landlord supply them with a “summary of relevant costs” for the previous accounting period (12 month period). The summary of costs will summarise the costs that were incurred and were then payable by or demanded from the tenant. Any cost, part or all of which has been, or will be, passed onto the tenant as the service charge must be included within the summary.  This is sometimes called a “Section 21 Request”.  If there are more than 4 dwellings, in order for the summary to be valid, a qualified accountant must have certified that the summary is a fair summary and being supported by accounts and other documents produced to them.

Once a summary of relevant costs has been received by the tenant, the tenant may, within 6 months of receiving the summary, make a request in writing to the landlord to afford them facilities to inspect the accounts, receipts and other supporting documents and take copies or extracts from them – Section 22(2) of the Landlord and Tenant Act 1985.  No charge may be made for the inspection of the documents although a reasonable charge may be made for taking copies/abstracts.

2.    Can my freeholder charge me for Directors liability insurance?

To answer this question, I would need to have sight of the lease. What can and cannot be charged through the service charge will wholly depend on what the terms of the lease permits. From experience I suspect however the obligation to contribute to Directors Liability Insurance is not something covered by the lease. You mention in your email that 4 of the 6 tenants have purchased the freehold and for the purpose of answering this question I have assumed that you did not take part in the freehold purchase. If that is case, unless the lease specifically provides that the cost of the directors liability insurance can be re-charged through the service charge, such a charge would generally fall to the freehold owners only and something operated outside the service charge regime under the lease.

3.    Can my freeholder charge me for work they did personally (gardening) with no invoices or receipts.

Again this depends on the wording of the lease. Some leases does include a provision within the lease requires the landlord to keep records and receipts relating to the service charge costs and if requested by the tenant (giving reasonable notice) must allow the tenant to inspect the accounts, records and receipts by appointment with the landlord (or its accountants or managing agents).  In addition, some leases occasionally contain provisions within them allowing the landlord to undertake works themselves (rather than employing managing agents) and make a reaonsable charge for it.

Any such agreeemnt or contract would of course be subject to the usual consultation provisions (S.20 consultation provisions) and would also require the landlord to provide clear receipts/vouchers etc.

Yashmin Mistry, JPC Law