It is always advisable to check the service charges you are asked to pay rather than simply assuming they are correct. This point was illustrated by a recent case in which four leaseholders obtained refunds of service charges relating to electricity costs and roof repairs.
The leaseholders lived in a block consisting of more than 100 flats, most of which had been converted from offices between 2015 and 2017. They applied to the First-tier Tribunal (FTT) under Section 27A of the Landlord and Tenant Act 1985 for a determination of the amount of service charges payable in respect of the 2022 service charge year.
The leaseholders claimed that some electricity costs for 2022 had been charged twice. They provided a table showing the invoices relating to electricity, and the FTT found that eight of these had been duplicated. The RTM company that managed the block accepted that those charges had been double counted.
The leaseholders also claimed that a roof covering an atrium in the middle of the block had not been in good repair when they entered their leases, and therefore service charges in 2022 relating to its disrepair were not payable. Two of the leaseholders, who occupied pre-existing flats but had been granted new leases at the time of the block’s conversion, argued that their leases required the landlord to keep the roof in good repair and a settlement consent order reached with the landlord meant that they did not have to pay for the roof works. The other two leaseholders argued that they had bought newly built flats that should have no patent defects. They pointed out that their leases had been granted before the completion of the development, so that no survey prior to purchase could have identified a patent defect. The RTM company said that the works were maintenance works rather than restoration or putting right a patent defect.
The FTT determined that no service charges were payable for the roof works. It considered that the settlement consent order had been designed to ensure that the leaseholders of the pre-existing flats were not required to contribute to the roof works. With regard to the leaseholders of the new flats, the FTT determined that no service charges could be demanded for works that had been necessary before the practical completion certificate was provided, which did not occur until July 2022.
The FTT ordered the RTM company to refund the leaseholders’ fees in respect of the hearing, and made an order under Section 20C of the Act that the RTM company could not pass on any of its costs of the proceedings through the service charge.