QUESTION
The block of flats in which I live consists of 32 flats, (31 leasehold and 1 manager). You will no doubt know that leaseholders share the cost of communal electricity. We currently are in dispute with management regarding a considerable sum of money owed due to underpayment for several years. Our budget forecast for financial year 2016/17 is £9,587.00 which is a considerable more than the 10 years up to 2013 when average annual cost was around £3,400.00.
As the landlord has complete control over engaging the supplier, supplying meter readings and making payment on time it is considered to be unfair, if due to any negligence or lack of diligence by management, leaseholders who have no input whatsoever become responsible for underpayment.
The anticipated cost for electricity as already mentioned would under normal circumstances trigger S20 Consultation, our cut-off point being £7,750.00. We understand this particular expense is not covered by legislation.
We were wondering if you aware of any other leaseholders who have been faced with similar problems and perhaps could advise us on the best way forward.
ANSWER
Thank you for your email. The problem of “late service charges” has been addressed by Section 20B of the Landlord and Tenant Act 1985. The landlord must, within 18 months of incurring the costs, either:
- Demand it from the tenant as a service charge; or
- Notify the tenant in writing that the costs had been incurred that they will subsequently be required under the terms of the lease to contribute to by payment of a service charge.
For these purposes, as was held in the case of Burr v OM Property Management Limited in 2013 costs are incurred not when the service is provided to the landlord when the liability to pay has crystallised either by presentation of an undisputed invoice or actual payment.
It is not however clear from your email how the under-payment has arisen? Has the underpayment arisen due to the failure of the freeholder or their agents to collect sufficient funds to cover the actual cost of electricity?
Or is it because the landlord or their agents, have received an up-dated invoice from the electricity suppliers? Depending on the cause of the shortfall, the advice will be different.
Leaving that aside, in your email you make reference to the Section 20 Consultation requirements and the threshold of £250. Arguably this threshold would not apply as the placing of the electricity contract would not usually be considered to be “qualifying works” where any tenant would be required to contribute more than £250 towards the cost of such works. Depending on the length of the contract it may be considered to be a Qualifying Long Term Agreement which has a different threshold but of course we would need more information about the nature and scope of the contract before any advice can be given in this respect.
Hope that helps.
Yashmin Mistry, Partner at JPC Law
