The service charge is a fee the homeowner agrees to pay when they buy the leasehold of a property. The reason for the charge is to cover the cost of things like maintenance and repair of the common areas of the property for example lighting, maintenance, insurance and repairs. The government have recently had to step in to curb the extortionate rates some management companies have been charging in service charges. Management companies are no longer allowed to profit from the tenants. However, there are still some landlords that will try to take advantage of tenants and charge extortionate service charges.
The most effective way of removing all service charges indefinitely is to buy the freehold of the property. Naturally you will have to pay for the freehold but your service charge obligations will reduce potentially to zero depending on the property. If you are not in a position to buy the freeholder there are still options available to you. The three options you could explore are:
Complain to the management company or freeholder
Before you consider any of the other options this should be your first port of call. Sorting this out informally without the cost of litigation is always the better option. You should write a letter to your point of contact explaining why you think you are paying too much and what you think a more reasonable charge is. Make sure to do your homework and come up with a detailed explanation of your reasons.
Give the freeholder or agent a reasonable amount of time to respond to the letter. If they do not respond send a follow up letter as a letter before action. This letter will use a lot of the same information of your first letter. Explain to them the situation and present your offer. The letter should also inform the landlord that if they do not respond in the specified period of time you will initiate proceedings.
If the landlord does not respond, or the negotiations are not leading anywhere you have 2 further options.:
The Right to Manage
If certain conditions are met, then leaseholders have a statutory right to manage. This means the leaseholders (under the umbrella of a right to manage company) will be responsible for the maintenance of the property and so the levying of service charges. An application for the right to manage will need to be made under the Commonhold and Leasehold Reform Act 2002. Under this application the leaseholders can form their own right to manage company, or employ a different management company to take over.
Tribunal
Your other option is to go to the Tribunal and ask the Tribunal to assess the amount of service charge you are paying and decide a more reasonable rate. If the Tribunal believes the current charge is unreasonable they can significantly reduce the amount being paid, and even order an amount to be returned to the leaseholders.
