Trying to get out of service charges

There have been a couple of interesting ‘try ons’ by flat owners, trying to avoid having to pay service charge. You know there is a rule that a landlord can’t recover service charge for expenditure incurred more than 18 months before the service charge demand. But nearly every service charge arrangement works on the basis that the landlord will charge something on account, and then have a balancing charge at the end of the year when the accountants have checked all the figures. So, in this particular case, the landlord charged ‘on account’ of the expenditure well within the 18 month period, but the final balancing account didn’t come through until more than 18 months after the actual expenditure. The tenants tried to argue that none of the service charge could be levied, and what’s more they should have their advance payment back. Their argument was that service charge was only what you paid when it was finally calculated, and that advance payment wasn’t actual service charge, just a kind of loan. The court disagreed. The flat owners’ case probably wasn’t helped by the fact that the service charge was actually in credit, so that there was a small balance due back to the tenants at the end of the year, rather than payment required from them. But I admire their cheek in coming up with an ingenious way to try to avoid paying service charge.

In another case, which doesn’t seem quite so fair, the tenants objected to having to pay a big service charge for some repairs which only cost so much because the landlord had neglected to do the repairs for several years. The law says a landlord can only recover a service charge amount which is “reasonable”. The flat owners’ argument was that it was unreasonable to let the damage mount up. Unfortunately, the court took the view that the only thing which had to be reasonable was whether the cost at the time was correct for the work needed, not whether the landlord was reasonable in not doing the work earlier.