reasonable and payable
📖 What is reasonable and payable? Meaning and definition
The term "reasonable and payable" is frequently used in the context of service charges for properties, particularly flats in managed developments. When a Tribunal determines that service charges are "reasonable and payable," it signifies that the charges have been scrutinised and deemed appropriate in their calculation and allocation, and that the tenant is legally obligated to pay them. This often arises when tenants challenge the charges, leading to a Tribunal hearing to resolve the dispute.
The Tribunal's role is to assess whether the expenses incurred by the landlord or management company are justifiable and whether the method of calculating and distributing these costs among tenants aligns with the lease agreement. For instance, a Tribunal might examine if the allocation of costs for electricity, staff salaries, or pension contributions between different parts of a development was reasonable. If the Tribunal finds that the charges were correctly calculated according to the lease and that the expenses themselves were reasonable, then they are declared "reasonable and payable."
This determination is crucial for both landlords and tenants. For landlords, it confirms their right to recover the specified costs. For tenants, it means they must pay the charges, even if they initially disputed them. The Tribunal's decision is binding and can cover various types of service charges, including those for general maintenance, major structural repairs, or other shared costs associated with the property.
📋 Requirements
- The charge must be a service charge, typically under a long lease.
- The charge must be challenged by applicants (tenants) in proceedings before a Tribunal.
- The calculation of the charge must be in accordance with the lease terms.
- The allocation of expenses must be deemed reasonable by the Tribunal.
📝 Procedure
- Applicants (tenants) apply to a Tribunal for a determination on the payability of service charges.
- The Tribunal hears evidence and representations from both the applicants and the respondent (landlord/management company).
- The Tribunal assesses the calculation of the service charges and the allocation of expenses.
- The Tribunal issues a decision stating whether the service charges are reasonable and payable.
💡 Examples
- A Tribunal found that the service charges for a block of flats for 2020-2021 were reasonable and payable, confirming the correct calculation of the proportion and the reasonable allocation of electricity and staff salary expenses.
- A freeholder's claim for payment of service charges was allowed after a Tribunal determined that the charges for structural repairs to a block of flats were reasonable and payable under the long lease.
- Tenants who are buy-to-let investors challenged service charges, but the Tribunal ultimately decided that the charges were reasonable and payable by them to the freeholder company.
- A Tribunal might refuse an application to amend a statement of case or admit a second witness statement before determining if the challenged service charges are reasonable and payable.
📚 Legal basis
- Landlord and Tenant Act 1985
❓ Frequently asked questions
What does it mean if my service charges are found to be 'reasonable and payable'?
If your service charges are found to be 'reasonable and payable' by a Tribunal, it means the Tribunal has reviewed them and determined they are fair, correctly calculated according to your lease, and you are legally required to pay them.
Can I challenge service charges that I believe are not 'reasonable and payable'?
Yes, you can apply to a Tribunal for a determination on the payability of service charges if you believe they are not reasonable or not correctly applied under your lease. The Tribunal will then assess the evidence.
What kind of expenses are typically scrutinised when determining if charges are 'reasonable and payable'?
The Tribunal often scrutinises expenses such as electricity costs, staff salaries, pension contributions, and fees for services, as well as the overall calculation and allocation of these costs across the property development.
Does 'reasonable and payable' apply only to new service charges?
No, the term can apply to service charges from previous years, as seen in cases where charges for specific past years (e.g., 2020-2021) are challenged and subsequently determined to be reasonable and payable.
What if the service charges are for major structural problems?
Even if service charges are for significant issues like major structural problems, a Tribunal will still assess whether these charges are reasonable and payable under the terms of your lease, based on the evidence presented.
Who decides if service charges are 'reasonable and payable'?
A Tribunal, such as the First-tier Tribunal (Property Chamber), is the body responsible for making a determination on whether service charges are reasonable and payable after hearing an application from the parties involved.