Claims for service charges can lead to seemingly intractable disputes.
Landlords who have spent money in providing services, are out of pocket and can see no reason why they should not be reimbursed.
Tenants face demands for what they see as large sums of money for repairs that they describe as shoddy and services which are poor or non-existent.The starting point in deciding whether service charges are recoverable must always be the lease.
It is impossible to advise without seeing it.
Often there is a 'general mopping up' clause, but in the absence of such a provision, service charges are not recoverable unless the particular category claimed is specifically mentioned in the lease.
(For example, Embassy Court RA v Lipman (1984) 271 EG 545, CA and Lloyds Bank v Bowker Orford  31 EG 68, ChD.) Some leases contain conditions precedent to the recovery of service charges -- for ex ample, service of an accountant's certificate.
Such clauses must be compiled with if service charges are to be legally recoverable (cf Finchbourne v Rodrigues  3 All ER 581, CA and Northways Flats Management Co (Camden) Ltd v Wimpey Pension Trustees Ltd  EGLR 42, CA).If there is a contractual right to recover charges, the next step is to consider the statutory limitations on recovery of service charges.
These are mainly contained in Landlord and Tenant Act 1985.
Section 19 provides that costs making up service charges must be reasonably incurred and services and works carried out must be of a reasonable standard.
Where they do not reach a reasonable standard, the judge may find that sums are not recoverable to all or deduct a proportion of the service charge expenditure claimed by the freeholder (for example, Yorkbrook Investments v Batten (1985) 18 HLR 25, CA and Gordon v Selico (1985) 275 EG 899, CA).
Where payment in advance is demanded, that payment should be of no greater amount than is reasonable.
The amount payable by lessees is limited accordingly.Although the Landlord and Tenant Act 1985 s 19(4) (power of county court to grant declarations as to reasonableness of service charges) was repealed by the Housing Act 1996 Schedule 19, Part 111, county courts still have jurisdictions to grant such declarations even if no other relief is sought -- see the County Court Act 1984 s 38.
However, the Housing Act 1996 s 83 amended s 19 to provide that lessors and lessees may apply to rent assessment committees sitting as leasehold valuation tribunals (LVTs) to determine whether costs incurred for services, repairs, maintenance etc were reasonably incurred, whether such services or works were of a reasonable standard and whether sums payable by lessees before costs have been incurred are reasonable.
If court proceedings include questions as to the reasonableness of service charges, the court may transfer the claim to a LVT.
(See Housing Act 1996 s 83 introducing a new Landlord and Tenant Act 1985 s 31C, the Housing Act 1996 (Commencement No 11) Order 1997 SI No 1851 and Housing Act 1996 (Commencement No 12 and Transitional Provisions) Order 1998 SI No 1768.) Costs are not recoverable in the LVT.Section 20 provides for consultation with lessees before the carrying out of major works.
These are defined by The Service Charges (Estimates and Consultation) Order 1988 SI No 1285 as works costing more than either £1,000 or 50 times the number of flats involved, whichever is greater.
In such circumstances, the lessor should obtain at least two estimates -- one of them from a person who is wholly unconnected with the landlord -- serve copies on the lessees and invite comments.
Works should not commence until at least one month after service of the notice with the estimates.
However, the court may, if satisfied that the landlord acted reasonably, dispense with all or any of the relevant requirements in s 20.Section 20A, inserted by the Landlord and Tenant Act 1987, imposes limitations on the recovery of service charges where a lessor has obtained local authority grants to enable work to be carried out.
Section 20B provides that no charges which were incurred more than 18 months before any demand is served on a tenant are recoverable as service charges unless notification is given to the lessee within that 18-month period that such charges have been incurred.The Landlord and Tenant Act 1987 s 47 provides that any written demand for rent or other sum payable to a lessor -- including service charges -- must contain the name an d address of the landlord.
If the address is not in England and Wales, an address in England and Wales at which notices may be served on the landlord must be given.
If a demand does not contain that information, then any part of the amount demanded which consists of a service charge shall be treated as not being due from the tenant until that information is supplied by landlord.
See s 48 and Rogan v Woodfield Building Services (1994) 27 HLR 78, CA.Landlords' rights to bring forfeiture proceedings based on arrears of service charges have been limited by the Housing Act 1996.
Section 81 prevents landlords from exercising a right of re-entry of forfeiture of premises let as a dwelling for failure to pay service charges unless the amount claimed is either agreed or admitted by the lessee or has been determined by a court or an arbitral tribunal in accordance with the Arbitration Act 1996 Part 1.
This provision means that mortgagees securities are not at risk prior to determination and should mean that there is no longer any excuse for banks or building societies to pay disputed arrears of service charges and then to add them to the outstanding balance of the mortgage.
Section 82 provides that Law of Property Act 1925 s 146 notices relating to arrears of service charges must refer to s 81 and state that s 81 has been complied with.If lessors do commence forfeiture proceedings based on failure to pay service charges, the normal provisions as to relief from forfeiture apply.
In county courts, if the service charges claimed count as rent -- because they are expressly reserved as rent in the lease -- the County Court Act 1984 s 138 applies.
There is automatic relief from forfeiture if all arrears and costs are paid into court at least five days before the hearing (s 138(2)).
Lessees are also entitled to automatic suspension of forfeiture for a minimum of 28 days from the date of the hearing to allow the debt to be paid off.