Find out whether a Service Charge Demand may be valid, or not, using the test provided.
Please note that this is not an exhaustive test. Always rely upon a professional assessment:
(1) Have the leaseholders already paid, or agreed payment of, the disputed service charge?
If the leaseholders wish to challenge the validity of a service charge they should seek legal advice before payment.
Once the leaseholders have paid a service charge it may be more difficult for them to argue that it is unjustified.
(2) Do the leaseholders consider the charge to be unreasonable (e.g. were works unnecessary, not carried out, carried out to a low standard, too expensive or not allowed under the terms of the lease)?
The leaseholders may be able to challenge the service charge demand on the basis of reasonableness.
If a service charge demand is not unreasonable, it will be difficult to challenge - even if the amount demanded is very high.
(3) Does the freehold company own their managing agents or buildings insurance brokers?
If the freeholder does not operate "at arms length" from a managing agent or insurance broker it may be possible for leaseholders to challenge excessive service charge demands (for example, if a freehold limited company shares directors with a managing agent company).
Even if the freeholder appears to be colluding with the managing agents to bill maintenance at above market rates, if the two are entirely separate legal entities, this may be difficult to challenge.
(4) Did the freeholder/managing agent consult with the leaseholders over expensive works or service contracts? For example, were they served a notice detailing works to be carried out inviting comments?
If leaseholders were not correctly consulted over major works it may be possible for them to challenge a service charge demand.
If leaseholders were correctly consulted over major works, a service charge demand may be more difficult for them to challenge.
(5) Did the leaseholders receive statutory documents requesting monies as and when they were due as well as a summary detailing all charges in a 12-month period?
If monies were demanded according to statue, a service charge demand may be more difficult for the leaseholders to challenge.
If monies were not demanded according to statue, it may be possible for the leaseholders to challenge a service charge demand.
Leaseholders may be able to challenge the Service Charge
This is not an exhaustive test. You should now obtain a professional assessment as to whether a Service Charge Demand is valid or not.
Leaseholders may NOT be able to challenge the Service Charge
This is not an exhaustive test. You should now obtain a professional assessment as to whether a Service Charge Demand is valid or not.
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