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Service Charges

SERVICE TENSION – Landlords of residential properties may be left subsequently out of pocket if they do not follow the statutory provisions for recovery of service charges.

THE CASE – A tenant challenged her liability for service charges totalling £10,000 for major works to Brancaster House, which were undertaken by Islington Council in 2003/4. The defendant claimed she had not been provided with proper estimates before the works started and that no proper demand or notice about payment had been made with the permitted time (London Borough of Islington v Abdel-Malek, 07.08.07).

Brancaster House is one of four adjoining blocks of flats owned by Islington Council, which sought estimates in early 2003 for cyclical repairs, enhancements and window repairs to all four blocks. The lowest tender received was for £556,000. Islington notified the defendant, and presumably all other tenants, of the estimates received and the likely contribution payable. However, it did not circulate or make full copies of the estimates and only circulated a summary of the lowest one, which it had accepted.

In November 2003, Islington wrote to the defendant with an estimated invoice for her contribution. Works had started but not finished and they gave no information about what costs had actually been incurred to that date. The estimated invoice was for the same sum originally notified.

Under the Landlord and Tenant Act 1985, a landlord undertaking major works has to provide its tenants with certain information before it proceeds to enter into a contract for such works. It must obtain at least 2 estimates for the works and, as the Lands Tribunal has now made clear, it has to provide the tenants with copies of all estimates received or make them all available for inspection. It is not sufficient to just circulate extracts from tenders or to summarise their contents.

Islington had failed to comply with the consultation requirements, but this was not the main problem as the tribunal can overlook such a failure if it considers it just to do so.

Islington’s problem was that Section 20b of the act prevents a landlord from recovering any of the costs in respect of which consultation is required, if it does not, within 18 months of incurring these costs, either invoice these costs or notify the tenants that the costs have been incurred and will be invoiced. No invoice had been rendered and the letter sent in November 2003 gave no details of costs incurred at that time.

Islington argued that the defendant was made aware of her likely liability and that the whole point of being able to notify a tenant in advance that there was a pending liability for actual costs. Accordingly, Islington cannot recover from the defendant any costs beyond the small sum in respect of which no consultation was required.

If other tenants seek reimbursement of sums already mistakenly paid, Islington will pay a high price for its failures to comply with the act.

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