QUESTION 1
Residential Block A” which is circa 10 years old has never had a service charge increase. According to the lease the service charge amount should be determined by 3 things, cost of contracts in place for maintenance, a reasonable amount to go towards building a reserve and a reasonable amount to remunerate the management company’s agents. As there has not been an increase for 10 years an increase is well overdue. Are we required to consult with the leaseholders regarding any increase or can we make an increase at the beginning of the next period by showing a budget and breakdown of the costs etc?
ANSWER
Consultation with leaseholders is required in the following situations:-
- If works of repair, maintenance or improvement will cost any one contributing leaseholder more than £250 inc. VAT. These are known as “Qualifying Works”.
- If a contract is entered into for a period of more than 12 months and the payment by any one contributing leaseholder in any accounting period exceeds £100 inc. VAT. These are known as ”Qualifying Long Term Agreements (QLTA)”.
- If work undertaken pursuant to a QLTA will result in any one contributing leaseholder paying more than £250 inclusive of VAT.
Although not specifically dealt with in the legislation it is generally felt that ongoing contracts with no specific termination date come within the definition of a QLTA. So, if the “contracts in place for maintenance” will, as a result of any increase, mean a payment from one or more leaseholders exceeding £100, consultation will be required.
Similarly, if any work carried out under a QLTA will cost £250 or more to any one contributing leaseholder, consultation will be required. The Managing Agent contract may well be an example of an ongoing contract where each leaseholder might be charged in excess of £100 bearing in mind there has been no increase for 10 years. Other examples may include contracts for cleaning and gardening, insurance, utilities and maintenance agreements in respect of lifts, entry phones and waste management.
Regardless of the legal position, we would advise it as good block management practice to inform the leaseholders of the reasons for the increase, prior to demands being sent, to maximise the chances of timely payments.
QUESTION 2
Residential Block B” consists of 16 flats in 2 buildings on 2 floors. We have had a leak reported into a ground floor flat reportedly form the flat above. The landlord of the flat above has never paid his service charge (we take him to court once it builds up to 2k every few years and his mortgage provider pays it!) He is a difficult belligerent individual who owns 2 flats in the block and constantly makes unfounded reasons and excuses not to speak to us or why he won’t pay. His response to our request that he look into the cause of the leak was, ‘there is no leak. After repeatedly calling him, asking and pleading him to do something he said ‘he’ll look into it’. A few days later when we called him his response was, ‘there was a leak a few weeks ago but I fixed it’. Shortly after this we had a contractor in the building (who I had asked to request access from the landlord to investigate and was refused) who happened to bump into his tenant and he asked him if he could look around the flat and he agreed. What we found besides the appalling state of the flat (apparently the tenant is as strange as the landlord as he had failed to report a minor leak from the roof as it was ‘dripping in a bucket so it didn’t matter’) there were 3 obvious visible leaks within the properties plumbing, meaning the landlord had clearly not even looked into the matter. My question - finally, what powers do I have to either force the landlord to allow us to carry out the repairs or to force the landlord to carry them out properly?
ANSWER
As always the answer will depend on the lease. In general however, we would expect a provision in the lease allowing the landlord and/or management company and their agents to enter the flat at reasonable times on giving reasonable notice (usually written), to examine the property. If repairs are required there will probably be further provisions allowing a notice to be served on the leaseholder specifying a time by which the repairs should be executed.
If the repairs are not carried out by the required date, there should be provisions allowing the landlord / management company to enter the flat to carry out the required repairs themselves. The reasonable notice requirement may be dispensed with if emergency repairs are required.
The lease may contain cross-indemnities for costs such that if a landlord enters the property and finds no repairs are required he will be required to put right any damage done consequent on his entry. Similarly there will be an indemnity for the leaseholder to pay the landlords’/management company’s costs if repairs are required and are carried out at the landlords’/management company’s expense.
In the absence of any express right of entry (which would be unusual) the landlord/management company has an implied right of entry so that it can carry out its own repairing obligations but, beyond that and save for some statutory exceptions (which on the limited facts available don’t appear to be relevant here), there is no general right to enter the premises.
As an alternative to carrying out the repairs themselves, and if the lease so allows, the landlord (and in some cases the management company) may exercise its right of re-entry pursuant to the right of forfeiture for the leaseholder’s breach of the repairing covenant.
Jonathan Watts, Operations Director at Brady Solicitors
