Service charges Interim payment clarification

[Starlane]

I hope you are all well and have had a good Christmas!

I would like to ask for your help and guidance - what is your definition of an interim payment?

I have been served only one service charge demand May 2021 for the period 1^st January to 31^st December 2021 so I asked the landlord what is the purpose of the service charge and sinking fund quoting the following from my lease:

By clause 5.3 of my lease the landlord is required to: “ To serve on the Lessee a notice giving full particulars of the Service Charge Costs and stating the Service Charge payable by the Lessee and the date on which it is payable as soon as reasonably practical after incurring making a decision to incur or accepting an estimate relating to any of the Service Costs.”

Despite repeatedly asking what the service charge is for and the purpose of the service charge sinking fund I am being blanked and now threatened with legal action.

The Sixth Schedule (“Service Charge”) in my lease states that the lessee is required to comply with the following and last year quarterly service charge demands were made however this year the landlord has made one demand and not any other demands, he is calling the demand an interim payment as (b) below:-

1. The total expenditure incurred by the Lessor in providing the services is hereinafter referred to as the Service Charge
2. The Lessee’s proportion of service charge as an referred to in clause 1.20 (By Clause 1.20 “the Lessee’s share of the Service Charge” means 45% of the costs incurred by the Lessor in providing the Services listed in the Fifth Schedule)
3. The Lessee shall pay to the Lessor or managing agents as the case may be the Lessee’s proportion of:

1. In advance in each year the amount which shall be reasonably estimated by the manging agents or the Lessor as the case may be of the Service Charge for the year
2. Any further sums as shall be required by way of an interim charge during the course of the year

1. The Lessee will pay all such sums notified within twenty-one days of demand

In my view the landlord has not complied with the lease the service charges are required to be paid quarterly according to the lease so I have told the landlord that the May demand is invalid

Can you shed any advice on the above and any case law as I don’t accept that I should be asked to pay out large sums of money in one go and don’t know what the monies are for or being spent on?

[Gordon999]

The service charge is paid by the leaseholder ( you ) of a flat for maintenance of the building and communal areas to the freeholder or managing agent. This service charge is usually paid in advance at the beginning of the year.

Your conveyancing solicitor or estate agent must have explained this to you when you decided to buy a leasehold property..

[Section20z]

The only way you'll fight this is getting the FTT to rule on it. If you have concerns on what the money is being spent on then it may be worth fighting it

[AndrewDod]

None of the terms you quote say it is quarterly. It says in advance.

The thing works as follows:
- Not providing the details of the service charge is a criminal offense
- However the only entity that can prosecute such an offense is the Local Council
- The council don't give a stuff about you
- Not providing the details is not an excuse not to pay

Therefore what you do is FIRST PAY, then ask again, then take it to FTT. Never go to FTT without paying unless you are 100% certyain it is not payable. You cannot be 100% certain because you have no information.

Next time don't buy a leasehold property...

[eagle2]

There is no point arguing whether or not the service charges should have been paid quarterly because they would have been payable by September 2021 anyway,

[Section20z]

Ah, which law would that be an offence under please ?

Not providing the details of the service charge is a criminal offense
...

[AndrewDod]

Ah, which law would that be an offence under please ?

The law gives leaseholders a right to request a summary of the service charge account and to **inspect receipts**, accounts etc in relation to the last accounting year

Where a landlord fails without reasonable excuse to comply with either a request for a summary or to inspect supporting documents they commit a summary offence on conviction and are liable for a fine of up to 2,500 (level 4 on the standard scale).

section 21 of the Landlord and Tenant Act 1985

Unfortunately an court precedent created a situation where this criminal offense could not be prosecuted.

https://www.lease-advice.org/faq/my-...-act-1985-wha/

[fos333]

Unfortunately an court precedent created a situation where this criminal offense could not be prosecuted.

IMO it only found there was no civil remedy in the given circumstances of that case.

It also went on to say that in many leases the landlord may be required to provide a certified summary of expenses incurred during the service charge period.
Failure to provide this would be a contractual breach of that covenant that should allow the leaseholder the right of private legal action.

[AndrewDod]

IMO it only found there was no civil remedy in the given circumstances of that case.

It also went on to say that in many leases the landlord may be required to provide a certified summary of expenses incurred during the service charge period.
Failure to provide this would be a contractual breach of that covenant that should allow the leaseholder the right of private legal action.

Indeed -- but the practical effect of all this is that it is a criminal offense which cannot be prosecuted as a criminal offense. FH fraud relating to service charges is common and is hidden by non-transparency -- and the number of cases of prosecutory legal action approaches zero (or is zero) -- can bring to FTT though, but there is no sanction for the offense here either.

[Starlane]

One demand was made by clause 5.3 To serve on the Lessee a notice giving full particulars of the Service Charge Costs and stating the Service Charge payable by the Lessee and the date on which it is payable as soon as reasonably practical after incurring making a decision to incur or accepting an estimate relating to any of the Service Costs.

The follow up letter cahsing arrears demanded a different amount and The insurance rent was due in June NOT November

[Starlane]

There is no point arguing whether or not the service charges should have been paid quarterly because they would have been payable by September 2021 anyway,

what makes you think that? The insurance rent was due June and there was no demand for this? This would be a half yearly demand?

[Starlane]

The only way you'll fight this is getting the FTT to rule on it. If you have concerns on what the money is being spent on then it may be worth fighting it

They asked for a reserve/ sinking fund contribution representing almost 60% of the demand and will not say what these monies are for? I have asked the purpose?

[eagle2]

what makes you think that? The insurance rent was due June and there was no demand for this? This would be a half yearly demand?

You have not made it clear but if the insurance is payable separately, it should have been demanded as a separate item payable on the due date. If the full amount is payable in June instead of May, again there is not much point going to the FTT and arguing the point.

[eagle2]

They asked for a reserve/ sinking fund contribution representing almost 60% of the demand and will not say what these monies are for? I have asked the purpose?

You can argue whether or not the charge is reasonable but it is difficult to argue that a reserve fund contribution is unreasonable.

[Starlane]

The paragraph not in my lease clause reads "that the lessor shall be liable to pay " any further sums as shall be required by way of an interim charge during the course of the year"....but I am NOT the LESSOR I am the lessee?