Service Charge Disputes: Your Questions Answered

For residential service charges, service charge demands must be lawfully served by providing specific information and complying with both the law and the lease. Disputes may arise over whether a service charge demand is valid.

For example, landlords must give tenants a name and address for the landlord and, if this is outside of England and Wales, an address within this region that the tenant can serve notice to.

If this information is omitted from the payment demand, the sum does not have to be paid until it has been given.

However, tenants should not hold back on paying a service charge, even if they disagree with it, without seeking legal advice.

Further, landlords must provide a notice of the tenant’s rights in statutory form. Again, the fee does not have to be paid until a demand with this notice has been provided.  

The landlord’s demand ought to also satisfy the requirements laid out by the Landlord and Tenant Act 1985 and those of the lease, which would often incorporate the terms contained within section 196 of the Law of Property Act 1925.

Nonetheless, service charge demands can still be valid if they do not contain absolute clarity or include minor errors, providing that the tenant does not suffer any prejudice due to the errors.  

Disputes may also arise over the costs of service charges. For example, the tenant may deem the sum as unreasonable or disproportionate. Also, tenants may believe that the landlord is demanding fees for services that are not referred to in the lease or that the works carried out need to be revised.

The charges ought to mirror the reasonable costs borne by the landlord, which are necessary, appropriate and directly in relation to the supplied services. Demands that incorporate unreasonable or excessive costs can be deemed invalid.

We understand that disputed and potentially unpaid service charges can disturb the operation of your business, divert time and attention away from your other commercial pursuits, and threaten the relationship that you have already built and maintained with your tenant. That is why we look to resolve disputed service charges swiftly and efficiently.

If a tenant disagrees with a service charge that you have demanded, we suggest that you check the terms of the lease. It will be your responsibility to prove that the charge was reasonable, so it may be worth having a transparent and catalogued procedure in order to organise the work in question and quantify the service charge.

It could also help if you are able to show that the service charge in dispute is of a similar price to comparable charges in the market. Before acting, we would suggest seeking out legal advice.