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Obligation to pay for services

This content applies to England

A tenant's liability to pay service charges, and circumstances where a tenant can argue for a reduced service charge.

The lease

The starting point for any consideration of the service charges is the lease.

The lease will usually contain a separate clause or schedule detailing the services and repairs that the landlord is required or permitted to carry out and the tenant's liability to contribute to the costs of doing so. The tenant will be liable only for items which the lease says s/he is liable for.

Interpretation by courts

The courts will interpret any clause by applying the principles of contractual interpretation, in particular they will consider the wording used, its context and have regard to its commercial purpose.[1] For example, where the lease:

  • provided for the landlord to keep the building insured 'against explosions', it was held to include taking up terrorism insurance[2]
  • contained a covenant on the part of the landlord to carry out repairs but not improvements, a separate covenant binding the leaseholder to contribute a 'fair proportion of the cost of the improvement' was implied in a poorly drafted lease to indicate that a power to carry out improvements was intended to be included[3]
  • provided for the landlord to keep the premises and 'additions thereto' in a good state of repair and for the leaseholders to pay a proportion of the associated costs, the leaseholders were held liable to contribute to the repair costs of conservatories which had been built in breach of the lease by previous leaseholders, as those conservatories formed part of the premises to which the landlord's repairing obligations extended and there was no reason for their historic unlawfulness to make any difference[4]
  • allowed the freeholder to recover the cost of fulfilling its obligations under a 'repair and redecoration' covenant through a service charge, the obligation to 'keep in repair' only applied where there was damage that needed to be made good[5].
  • obliged the landlord to provide services (heating and hot water) and ensure they were maintained at a reasonable level, the landlord was allowed to recover the cost of fitting a new hot water and heating system.[6]

Legal costs

Legal costs incurred by the landlord in relation to the payment of service charges may be recoverable from the tenants under a general service charge clause in the lease, however the language must demonstrate a clear intention that such expenditure is recoverable.[7]

A 'sweeping clause'

It is not generally in the interest of the tenant for there to be no mechanism for the landlord to recover costs of essential works or maintenance. Often, a general 'sweeping' clause will allow the landlord to recover the costs of a range of items not specified in the lease but that lies within the general wording of the sweeping clause. Even a sweeping clause has its limits and will be interpreted according to its wording.[8]

Varying the lease in respect of service charges

It is possible for either landlord or tenant to apply to the First-tier Tribunal (Property Chamber) for the terms of the lease to be varied if the lease fails to make satisfactory provision in respect of:[9]

  • repair or service obligations
  • insurance
  • recovery of expenditure
  • computation of service charge.

A typical example where this power might be exercised is an estate where new properties are built, or part is sold, as a result of which the service charge proportions stated in the existing leases no longer add up to 100 per cent. An application to vary the lease would likely be easier to achieve than obtaining consent from all tenants and mortgagees, even if the proportions could be agreed. The provision does not appear to allow the Tribunal to vary leases that work but which are perceived as unfair by landlord or by one or more of the tenants.

See Changing the terms of the lease for more information.

Challenging service charges

Disputes about service charges are common and, where the dispute cannot be resolved, a leaseholder or group of leaseholders may apply to the First-tier Tribunal (Propery Chamber) for a resolution of the dispute. For more information see Challenging service charges.

Wales

The information on this page applies only to England. Go to Shelter Cymru for information relating to Wales.

[1] Arnold v Britton [2015] UKSC 36; Francis v Philips [2014] EWCA Civ 1395; Assethold Ltd v NM Watts and others [2014] UKUT 527 (LC).

[2] Qdime Ltd v Various Leaseholders at Bath Buildings (Swindon) and others [2014] UKUT 261 (LC).

[3] Waaler v LB Hounslow [2015] UKUT 17 (LC).

[4] Christopher Moran Holdings Ltd v Carrara-Cagni [2016] UKUT 152 (LC).

[5] Southwark LBC v Various Lessees of the St Saviours Estate [2017] UKUT 10 (LC); Tedworth North Management Ltd v Miller and Others [2016] UKUT 522 (LC).

[6] Southwark LBC v Baharier [2019] UKUT 73 (LC).

[7] Arnold v Britton [2015] UKSC 36; (1) Union Pension Trustees Limited (2) Bliss v Slavin [2015] UKUT 0103 (LC); Sinclair Gardens Investments (Kensington) Ltd v Avon Estates (London) Ltd [2016] UKUT 317 (LC).

[8] Lloyds Bank v Bowker Orford [1992] 2 EGLR 44.

[9] s.35 Landlord and Tenant Act 1987, as amended by ss. 162-3 Commonhold and Leasehold Reform Act 2002.

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