Unreasonableness of service charge after assignment

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    Unreasonableness of service charge after assignment

    I have an interesting question that arose at LVT hearing in respect of my challenge to the unreasonableness of service charge under s27A of the LTA.

    Facts are

    * I purchased a long leasehold property in June 2012 (service charge years run April - March). No retention agreed with previous leaseholder for any adjustment for 2011/12 service charges (as seller was mortgagee in possession).
    * Landlord issues final accounts for 2011/12 after June 2012, which were more than double the estimated service charge.

    As I understand it, the operation of s23 of the Landlord and Tenant (Covenants) Act 1995 means that I am liable for any upward adjustment to the service charge for 2011/12 above the full estimate paid by previous tenant on assignment - as this adjustment was invoiced after the date of assignment of the lease by tenant.

    However, what is not clear is whether, as the new tenant liable for this charge, I have the right to challenge Landlord over the unreasonableness of the adjustment under s27A on other grounds (such as failure to consult on major work costing more than £250 per leaseholder) even though I was not the tenant at the time.

    The tribunal judge seemed to oppose my application on the basis that as I was not the tenant at the time, I have no right to challenge this charge on any grounds.

    In my mind, this cannot be correct, as this would leave no one with the a right to challenge the reasonableness of this adjustment.

    I have seen tribunal determination that suggests obiter that a challenge is possible, but I cannot seem to find anything that supports this as most cases I read stop short as the liability under s23 is the only matter at issue.

    Any help in clarifying my understanding would be greatly appreciated.

    #2
    Was a section 20b notice served prior to June? This would give the gross unaccrued expenses prior to the accounts?
    Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

    Comment


      #3
      Thank you for your response.

      No - there was no consultation at all so no s20(b) notice (this is admitted by Landlord). There are also other reasons that the service charge is unreasonable (which have been conceded by the landlord in all future service charge years).

      The issue is not demonstrating the unreasonableness - the LVT (FTT) is refusing to consider the adjustment to the 2011/12 service charge year on the same basis as the other years AT ALL simply because I was not the legal owner of the property during 2011/12.

      I understand that I am prevented from reclaiming unreasonable service charges for previous years that were not my liability (as this would be a windfall). But surely if I am liable for the service charge by the operation of s23 LT(Covenant) Act 1995 (which is not in dispute), then I also have the right to challenge the reasonableness of these charges (for reasons under s19 and s20) under s27A of the LTA?

      Thanks

      Comment


        #4
        The section 20b notice is not consultation but a statement of the overall expenses of the year or period, instead of a set of accounts.

        I cannot fully answer the rest until I have that answer.
        Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

        Comment


          #5
          Thank you.

          Yes - the previous tenant received an initial notice showing the breakdown of the estimated service charges at the beginning of the service charge year and the amounts stated in this notice was paid in full at completion of the sale).

          The Landlord then provided me the second notice showing the actual service charges (along with an invoice for the upward adjustment) within the 18 month time limit.

          The first notice was prior to the assignment of the lease, the second was after assignment.

          I am not wanting to challenge the estimated service charge contained in the first notice (as after all this was paid in full by previous tenant). I only want to challenge the unreasonableness of the upward adjustment contained in the second notice.

          Hope this makes sense.

          Comment


            #6
            Ok so I am clear now that either by section 20b or a set of accounts the service charge shortfall fell due "in time" and were notified and demanded after you became the owner.

            As a consequence of section 23 if the lease was granted before 1-1-96 then in the absence of any contractual agreement the charges run with the land and irrelevant of whether you owned the property or not, you pick up the tab. You can therefore challenge under s 27.

            If however it was after 1-1-96 then you have, under section 23 et al, a "new tenancy" and therefore have no liability for the upward adjustment, it lies with the old owner. that said, check the small print of your contract as in most cases you have agreed to pay these charges by one means or another.

            it is this that the Panel has to be made aware of as, fair enough, they should ask these questions.
            Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

            Comment

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