Read and Understand All Leases relating to the properties

The most important task to perform when undertaking service charge management work for a client is to read and understand all the leases relating to that property. Based on our experiences, we have compiled some common areas of potential issues to tell you the ‘why’;

• You may end up with Incorrect apportionment of the service charge because the service charge does not take account of what the different leases dictate. This could potentially put you in legal disadvantage in an event of a dispute.
• Invalid service charge demands made as they were not issued in the frequency specified in the lease. If issued incorrectly tenants may have the right to withhold payment.
• Failure to consult leaseholders when charges of costs are either more than £250 as a single charge or £100 a year on a contract lasting more than 1 year. Tenants must be consulted which is done by issuing a section 20 notice as required by the Landlord and Tennant Act 1985.
• Lease does not allow a property owner to charge a cost. The lease sets out what can be charged in the service charge and then you need to ensure that only those costs are recharged.

A common error is to charge for improvements when the lease only allows repairs or maintenance.

• Be aware of the 18 Months Rule to avoid issues collecting costs from tenants. Section 20B of the Landlord and Tenant Act 1985 states costs must be charged or notified to tenants as a cost within 18 months of being incurred or sent to the Landlord for payment.
• Is the Quality-of-Service charge works upto regulations?

Schedule 19 of the Landlord and Tenant Act 1985 states works charged to the service charge must be of a reasonable standard if not the cost can be reduced.

• Was the work necessary?

Section 19 of the Landlord and Tenant Act states that costs are only payable if reasonably incurred.

• Can you show Value for Money?

The work represents value for money and major works costs should be tendered for (3 quotes) and not automatically given to current suppliers.

• Were the repairs done in timely manner?

If the repairs are not done on a timely basis, it could be argued that the building is being neglected.

• Do you have Supporting Documents?

The managing agent needs to produce ALL supporting invoices as failure to do so can invalidate the charge to the service charge.