Andrew Jack, Solicitor looks at pitfalls in the law relating to service charges which can affect flat owners and Landlords.
A house owner has control over which repairs to undertake and which contractor to use. However, if you own a flat the decisions regarding repairs are often made for you, be it by your Landlord or a residents association of which you may be a member.
Recent legislation has inserted new service charge consultation procedures when it comes to work on and management of flats.
Consultation by the landlord is now required in relation to “Qualifying Works” (works which require a contribution from any flat owner which exceeds £250). For Qualifying Long Term Agreements, those over 12 months, the figure is £100.
Under the new procedure, notice of intention must be served on the flat owner by the landlord. The notice must invite observations and nominations of people who can provide estimates for the works. The flat owner must respond within 30 days, the landlord must then obtain the prescribed number of estimates and advise the flat owner of these and other prescribed information. The owner then has 30 days to respond to the estimates. Depending on who is chosen to do the work the landlord may have to provide further prescribed information to the flat owner.
For work carried out under a qualifying long term agreement there is a speeded up consultation procedure for the landlord to follow. The landlord must serve a notice of intention to the flat owner describing the proposed works and inviting observation. The owner then has 30 days to respond and within 21 days of receiving observation the landlord must reply to each of the respondents
The new rules MUST be followed precisely. Failure to follow all the requirements will usually mean that the landlord can only recover from the flat owner £250 per property for qualifying works and £100 per property for qualifying long term agreements.
So, for a landlord failure to follow the rules precisely can leave you significantly out of pocket. For a flat owner, failure to respond to notices can leave you without the opportunity to dispute the works to be carried out and unable to challenge service charge bills than can run in to thousands of pounds!
The position for residents associations that double as landlords can be very difficult. If the residents association carries out work in breach of the consultation procedures then the flat owner may only have to contribute the limited maximum above.
However, the residents association is still liable for this debt. The contractor may enforce payment for the work. If the association is a limited company without sufficient funds and is unable to reclaim the money from the flat owners the residents association may be wound up by companies house. If the residents association owns the freehold of the property this could leave the flat owners with significant problems on any sale of their property. People are reluctant to buy a property with no landlord and many mortgage lenders will not lend against a flat or apartment with no landlord.
Not following the required consultation procedure can therefore be very expensive for either landlord or flat owner! It is therefore essential to be well informed.
Andrew and the Commercial Team at AMD Solicitors give tailored advice to Landlords and those managing property on the procedures to follow. They also offer advice on other legal issues for businesses and individuals. Telephone 0117 9621205 or email firstname.lastname@example.org.
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