6 Federation of Private Residents’ Associations Newsletter Ask the FPRA continued from page five
FPRA Committee Member Simon Haswell replies: I have read the lease and have found under section, The First Schedule Number 1 “Not to use the flat or permit the same to be used for any purpose whatsoever other than as a private dwelling house in the occupation of one family only”. However, the lease only refers to the word one family not the definition of one family. “Oxford Dictionary, definition of family”: a group consisting of two parents and their children living together as a unit, also the word family has a number of meanings depending on the context you are using it in, for instance, it means parents plus their offspring, considered as a group, whether they are dwelling together or not, It also refers to the children of one individual or one couple collectively. It also refers to the spouse and children of an individual. Anything outside of this definition would be a breach of your lease.
Service Charges – Fixed or Variable? Ever since the inception of our residents’ association, about 28 years ago, it has charged a fixed service charge, which was and is kept the same for as long as possible before increasing. On occasions when work was required, a specific extra amount was requested, usually spread out over a period of time until paid. Due to a current dispute over current extra costs for works, with two of the flat owners, we have spoken to the LEASE service for advice and they have said that we should be charging a “variable” service charge, and therefore adhere to Section 20 etc. We do something like it but less formal. The LEASE service says we have been doing it wrong all these years. Are they correct, or can we say we are charging a “Fixed” service charge? FPRA replies:
I have considered the provisions of the lease. The Lessee pays a proportion of the costs incurred by the management company. See clause 4.1: “The Lessee hereby covenants with the Lessors and as a separate covenant with the Management Company to contribute and pay the proportion mentioned in the Sixth Schedule hereto of the costs expenses outgoings and matters mentioned in Part 1 of the Fourth Schedule hereto.” The relevant costs (in connection with the matters for which service charge is payable) are set out in the Fourth Schedule, Part 1; and the leaseholders each pay a 1/36th proportion of those costs. The mechanism for the recovery of a service charge follows a common procedure: a) An estimate of expenditure is produced at the beginning of the year (clause 4.2).
b) The Lessee then pays an estimated contribution by two equal instalments on 25th March and 29th September in each year (the estimated contribution was fixed at £100 until 31st December 1985); also per clause 4.2.
c) The management company produces end of year accounts; and, as soon as reasonably may be after the costs for that
Issue No. 107 Winter 2013
year have been ascertained, the management company notifies the lessee; and either demands a balancing charge if actual expenditure exceeds the estimated expenditure for that year, or raises a credit if the opposite is true (clause 4.3). It follows that the service charge varies according to the costs incurred or to be incurred by or on behalf of the management company. It is, accordingly, a variable service charge within the meaning of Section 18 of the Landlord and Tenant Act 1985; and subject to the provisions of that Act. That means, among other things, that: a) Section 19 applies, and costs are only recoverable to the extent that they have been reasonably incurred;
b) Section 20 applies, and the management company will need to comply the consultation requirements, where (for example) it carries out qualifying works which result in any leaseholder paying a contribution of more than £250 towards those works.
c) Service charge demands should be accompanied by a summary of rights and obligations.
It may be that your member could argue that the “fixed” charges that were being levied were in fact estimated contributions, followed by relevant adjustments at the end of the year, but I cannot see anything in the lease which would enable them to recover any “specific extra amounts”. This is a common mistake, and one which is neatly exemplified by the recent Upper Tribunal (Lands Chamber) decision L.B. Southwark v Woelke. If you do not follow the mechanism set down in the lease for the recovery of a service charge, your demands are contractually invalid, and the amounts demanded are not recoverable until you follow the correct procedure. Occasionally, this can have serious repercussions, as we know from L.B. Brent v Shulem B Association Ltd. that a demand which is not contractually valid is not a valid demand for the purpose of s.20B of the Landlord and Tenant Act 1985 (whereby costs which were incurred more than 18 months previously become irrecoverable, if they have not been included in a valid demand, and the lessee has not been previously notified in writing that those costs have been incurred, pursuant to s.20B(2) of the 1985 Act).
Electrical Inspection Costs The Management Company have put out to tender the checking of all the electrical items in the communal areas on site. There are 21 flats in total. The frequency of inspection – apart from one item which is the battery/mains smoke detector with two checks per year – is for all the rest four checks per year. Previously the only checks made were smoke detectors and emergency lighting. The cost of which was £500 per year plus any replacement parts. One quote we have seen is £4,544 per year. This to leaseholders is well over the top. Can you say what the legal position is please? Simon Haswell replies:
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