There’s still another couple of weeks to complete the Government’s consultation on service charges. Here’s why it’s worth your time.
Service charge disputes typically arise over a lack of detail about what’s been spent and why. The reforms propose a timetable for managing agents to deliver a series of documents in the course of the year, including annual accounts at year end, a report on the condition of the building, and the service charge demand to come with a budget for previous & current year. Any fees for permissions or deeds of variation also need to be set out in writing at the start of each year. This is also a game-changer for leaseholders wanting to convert their loft and subject to arbitrary demands for permission. The consultation is a good opportunity to suggest that where the loft is not part of the demised premise, but of no use or access to anyone else, the freeholder should be obliged to publish the cost of including this space within the demised premises.
Leaseholders will also gain new rights to see relevant information in a timely manner, e.g. fire risk assessments, building surveys, asbestos surveys, electrical safety testing report, specifications for major works, type of construction and flooding risk. The consultation invites feedback on anything else not covered, and reasonable time limits for a response.
But in case this all sounds too good to be true, pay attention to the proposed exemptions – managing agents could be permitted to withhold information deemed ‘commercially sensitive’ or in the case of a ‘vexatious’ request. If you think agents are likely to abuse these, say so in Question 46 – Do you agree with the proposed exemptions to the duty to provide requested information?
Although this extra documentation is undoubtedly good news for leaseholders who pay service charges. For those who don’t, or are only billed for insurance, there is a theoretical risk that the agents might say now the Govt insists we do all this extra work, we’re going to have to bill you for it.
Question 23 asks “Should there be any other exemptions for provision of some or all parts of the proposed annual report which should apply?” Suggested answer: Yes – where maintenance is not the responsibility of the freeholder/agent
Likewise Question 29 asks “Should there be any exemptions from providing service charge demands using standardised forms?” Suggested answer: Yes – where there is only one item.
Most freeholders/managing agents put part of the service charge into a reserve fund for major works. This is currently optional but the reforms propose to make this mandatory.
Many leaseholders in dispute don’t bother to go to court because of the risk their freeholder may claw back their legal costs in future service charges – even where the leaseholder wins!
The reforms address this power imbalance by allowing both sides the right to claim their legal costs, by applying to a tribunal.