service charge costs
📖 What is service charge costs? Meaning and definition
Service charge costs are expenses that can arise when there is a disagreement over service charges between a landlord and a tenant. These costs often relate to legal proceedings, such as applications made to the First-Tier Tribunal (Property Chamber) under the Landlord and Tenant Act 1985. The core issue is whether the landlord's costs incurred during such applications can be passed on to the tenant as part of the service charge.
Tenants may apply to the Tribunal for an order under section 20C of the Landlord and Tenant Act 1985. This section allows the Tribunal to limit or prevent the landlord from recovering their legal costs through the service charge account, even if the lease terms would otherwise allow it. The Tribunal considers whether it is just and equitable in the circumstances for the landlord's costs not to be regarded as relevant costs recoverable.
Conversely, landlords may argue that their costs are recoverable under the terms of the lease. The Tribunal's role is to determine if the lease allows for such recovery and, if so, whether it is fair to allow it in a specific case. Decisions by the Tribunal can deny a tenant's request to limit these costs, meaning the landlord may be able to recover them through the service charge.
Therefore, 'service charge costs' in this context primarily refers to the legal and administrative expenses associated with resolving service charge disputes, and the question of who ultimately bears these costs.
📋 Requirements
- A dispute must have arisen over service charges.
- An application is typically made to the First-Tier Tribunal (Property Chamber).
- The lease terms must be examined to see if they allow the landlord to recover costs through the service charge.
- The Tribunal must consider if it is just and equitable to allow or deny the recovery of costs.
📝 Procedure
- A tenant (applicant) makes an application, often under section 27A of the Landlord and Tenant Act 1985, regarding service charges.
- The tenant may also seek an order under section 20C of the Landlord and Tenant Act 1985 to limit their liability for the landlord's costs.
- The Tribunal reviews submissions from both the applicant and the respondent (landlord).
- The Tribunal determines if the landlord's costs are recoverable under the lease.
- The Tribunal decides whether to make an order under section 20C, considering if it is just and equitable to limit cost recovery.
💡 Examples
- A leaseholder applied to the Tribunal for a determination on service charges from 2019 onwards and also sought an order to limit the landlord's ability to add legal costs to the service charge.
- After a dispute over service charges was settled, the only remaining issue was whether the landlord's costs for the application could be recovered through the service charge account.
- A tenant's appeal to limit their liability to pay legal costs, which they had submitted as 'Costs Applications', was rejected by the First-Tier Tribunal.
- The Tribunal considered whether, under the terms of the lease for several apartments, the landlord's costs of an application were relevant costs recoverable through the service charge account.
📚 Legal basis
- Landlord and Tenant Act 1985
❓ Frequently asked questions
What is a Section 20C order?
A Section 20C order is a decision by the First-Tier Tribunal (Property Chamber) that prevents a landlord from recovering their legal or administrative costs incurred during a service charge dispute through the service charge account. This is important because without such an order, the costs might be passed on to all tenants.
Can my landlord always recover their legal costs from me through the service charge?
Not necessarily. While some leases may allow landlords to recover their costs, the First-Tier Tribunal has the power under Section 20C of the Landlord and Tenant Act 1985 to decide whether it is just and equitable for those costs not to be recoverable through the service charge, even if the lease permits it.
What factors does the Tribunal consider when deciding on service charge costs?
The Tribunal considers whether the landlord's costs are 'relevant costs recoverable' under the terms of the lease. Crucially, it also assesses whether it is 'just and equitable in the circumstances' for those costs to be recovered through the service charge account, taking into account the specifics of the case and the conduct of the parties.
I am a tenant and I disagree with my service charges. What should I do about potential costs?
If you are disputing service charges, you can apply to the First-Tier Tribunal (Property Chamber) for a determination. As part of your application, you can also specifically request an order under Section 20C of the Landlord and Tenant Act 1985 to limit your liability for the landlord's costs. It is advisable to seek advice from a qualified solicitor.
What happens if the Tribunal denies my request to limit service charge costs?
If the Tribunal denies your request for an order under Section 20C, it means that the landlord may be able to recover their costs related to the dispute through the service charge account, provided the lease terms allow for it. This would effectively mean that you, and potentially other leaseholders, would contribute to those costs.