Andrew Brookes, Partner
Email Andrew
A recent court decision has given a boost to Leaseholders who complain that their service charges are high because the council has neglected maintenance of their properties in the past.
Leaseholders often ask why they should have to pay for the consequences of the Council’s failure to carry out repairs. Problems build up over the years. When the council finally does the work, the service charges are huge. Can the council really pass on all of the cost to the leaseholders?
The Leasehold Valuation Tribunal (LVT) is the body where leaseholders can challenge the amount of their service charges. Until a recent decision of the Lands Tribunal (the appeal body for the LVT), it was not at all certain that LVTs could take into account historic neglect. Most LVTs had taken a very narrow view. They just looked at the situation at the time the works were done. They did not take into account the Council’s failure to maintain in the past. They only took into account matters like whether the contractors were too expensive, or whether unnecessary work had been done.
However, a recent decision of the Lands Tribunal in a decision called Continental Property Ventures v White changes the law in leaseholders’ favour. Leaseholders can now ask the LVT to consider historic neglect. The Lands Tribunal decided that, because the LVT can decide whether a service charge is “payable”, this should include consideration of claims by leaseholders against the landlord for compensation for historic neglect.
The Continental Property Ventures v White case concerned a damp problem which had got out of control when it could and should have been dealt with earlier. The leaseholders themselves had a claim against the landlord for the landlord’s failure to keep to the terms of the lease. This claim could be set against the service charge to reduce it.
In future, the LVT will have to determine how much compensation is payable to the leaseholder, then deduct this from the service charge. How will this work in practice? An example might be if the service charge for replacement windows was £10,000, but the windows had been neglected for years, so they were rotten and leaky. The LVT would deduct from the £10,000 the compensation due to the leaseholders for the council’s failure to repair.
It is even conceivable that in some situations, leaseholders’ compensation will be greater than the council’s service charge demand, so the result will be that the council owes the leaseholder money rather than the other way round.
Leaseholders can still take action in the county court to claim compensation for a landlord’s breach of lease in not doing repairs. However, they can now also ask the LVT to assess compensation to oppose claims for service charges.
This is likely to have a major impact and should encourage leaseholders to challenge service charge where their property has suffered from historic neglect by the council.
For further information email Andrew Brookes or call 020 7940 4000.
