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Construction of the lease
Statutory control - reasonableness
Service charge demands
Administration charges
Summary of leaseholder's rights
Insurance
Managing agents
Reserve funds
The 18-month rule
Consultation of tenants
Compromise of service charge dispute
Legal costs
Transfer to First-tier Tribunal

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Statutory control - reasonableness

Introduction

At common law, service charges must be fair and reasonable both in regard to their quantum and their nature (Finchbourne Ltd v Rodrigues [1976] 3 All E.R. 581, C.A). However, the common law has been regarded as inadequate protection and there is now detailed and sophisticated control of residential service charges. This page deals with that system of control.

What are “service charges”?

The answer is in the statutory definition (s18 of the Landlord and Tenant Act 1985), not any definition in the lease otherwise the landlord could circumvent the tenant’s statutory protection.

“Service charge” is:
    “an amount payable ... as part of or in addition to the rent ... payable ... for services, repairs, maintenance, improvements or insurance or the landlord's costs of management ... the whole or part of which varies or may vary according to the relevant costs”.
“Improvements” were added to the definition of service charge by s150 of and (para 7 of Sched 9 of the Commonhold and Leasehold Reform Act 2002).

“Relevant costs” are:
    “the costs or estimated costs incurred or to be incurred by or on behalf of the landlord, or a superior landlord, in connection with the matters for which the service charge is payable”.
The service charge must be variable. Fixed service charges are not recoverable: Re 184 Stockwell Park Road P/SC/CR/008/027/00. A fixed management charge forming part of a variable service charge can still form part of a service charge within s18 (Longmint v Marcus (2004) Lands Tribunal LRX/25/2003, unreported).

“Reasonableness”

Above all, service charges must be reasonable (s19 Landlord and Tenant Act 1985)

Both the courts and the Leasehold Valuation Tribunal have jurisdiction to determine reasonableness issues. By the CLRA 2002, Sch 12 para 3 the court “may” transfer to the LVT. Venue is often an important issue early in county court proceedings as the landlord will not be able to recover costs at the LVT (unless the lease allows it). The parties cannot contract out of the LVT’s jurisdiction (... THIS IS AN EXTRACT OF THE FULL TEXT. TO GET THE FULL TEXT, SEE BELOW

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