Leasehold With No Service Charge
A leasehold with no service charge means that the leaseholder doesn’t have to pay for the maintenance of a building or its grounds. However, if you’re buying a leasehold property with no service charge, it is important to know about your rights and obligations before you sign the deal.
Usually, you will be required to pay a service charge along with your ground rent for the upkeep of the building or land that it is on. These services can include drainage, heating, cleaning, alarm systems and insurance, among others.
In most cases, a service charge is calculated using an estimate of the cost of running the building and based on the costs incurred during the previous year. This can vary from one year to the next in line with actual expenditure.
Buying a Leasehold With No Service Charge
It is common practice for a landlord or manager to produce a budget for the coming year and consult the leaseholders about this. This is to try and ensure that the charge reflects what the landlord has actually spent on the building during the preceding year. The landlord or manager will then make a final decision about the service charge amount that will be charged in the year ahead and this will be included in the annual service charge statement.
Most leases contain clauses which allow the landlord or managers to recover the cost of works such as asbestos and fire risk assessments carried out in the communal parts of a block under Health and Safety at Work Regulations. These should be incorporated in the service charge and must be notified to the leaseholders within 18 months of the work being undertaken so that they can consider whether they want to pay the costs.
The lease may also provide that any deficits arising during the year must be collected by the landlord or manager on an annual basis and, in this case, the lease will have to state when this should be done. Some landlords or managers have been known to neglect this and have allowed the deficits to build up over time which can be expensive for the leaseholder.
If you are a leaseholder, you can challenge a service charge that you believe is unfair in court or by way of a First-tier Tribunal (FTT). You will have to satisfy the tribunal that it is reasonable and you should not have to pay it in full if the court makes a decision in your favour.
LKP’s cardinal rule is PAY FIRST, FIGHT SECOND and that is how we advise all of our clients to approach disputes over their service charges: if you can pay your own legal costs before the tribunal then this will help your chances of winning a claim. Alternatively, if you do not want to use your own lawyers you can instruct us to act for you and, as long as the claim is not frivolous or excessive, we will not charge you any fees in doing so.
