In most leases there are provisions for the landlord to recover service charges or charges for major works against their tenant. When seeking to recover these costs; section 20 of the Landlord and Tenant Act 1985 obliges landlords to serve certain documents or notices upon their tenants within certain timescales. The sanctions imposed upon a landlord for failing to serve these documents or notices include the loss of the landlord's right to recover costs incurred or limits recovery to £250 per tenant.
It is normal for annual service charges to exceed £250 per tenant per year, however landlords have long avoided the need to serve a "section 20 consultation notice" by arguing that the underlying costs of the service charges consist of separate works, such as cleaning the block, electricity for the common areas and buildings insurance.
In the recent case of Phillips v Francis CH/2012/0515 the High Court determined that if the annual cumulative costs of the service charges were likely to exceed £250 per tenant per year then the landlord would need to serve a section 20 consultation notice before the costs were incurred.
Whilst on the face of it this ruling appears to protect tenants’ interests by ensuring that a consultation is undertaken before lesser value costs are incurred, it will cause the landlord to incur further expense. Such expense will no doubt be sought from the tenant.
At Benchmark Solicitors LLP we can assist with all landlord and tenant matters including disputes concerning service charges and charges for major works.