Breaking Law: Services Charges and how cut them

Stephen Gold 

2nd edition 

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Back bigger, better and bang up to date 

77 chapters covering almost everything: from service 

charges to drink-drive and from wills to parking tickets

Chapter 50 

Residential Service Charges 

Cutting ’em down 

Paying service charges is as satisfying as self-extracting a molar during a 

pandemic. Paying them when they are excessive is as satisfying as self-extracting 

a molar and an incisor during a pandemic. With dental treatment, 

you should feel better afterwards. My aim is to make you feel better over 

service charges by reading this chapter and seeing how you may well be able 

to extract their excessiveness. 

County court v tribunal 

There are two ways of making a challenge to service charges apart from simply 

telling the landlord or their managing agent they are too high and why, 

which is likely to be a complete waste of paper and postage stamp or laptop 

power. You can simply refuse or neglect to pay which will induce your landlord 

to claim the charges in the county court or you can make a tribunal 

application in England to – wait for it – the First-Tier Property Chamber 

(Residential Property) and I am relieved that whoever thought up that title 

does not compile the words on greeting cards (‘Happiness on Anniversary 

of Birth (Forceps Delivery’) or, in Wales, to the Leasehold Valuation Tribunal. 

Preferable to a failure to pay a single penny would be to pay what you 

say should be the right figure and leave the difference in dispute or, if you 

are of a nervous disposition and, as you will read below, you could pay the 

sum demanded, making it clear that you challenge the amount, and then 

make the challenge to the tribunal. You would be entitled to repayment of 

any excess received by your landlord. 

Should the landlord claim against you in the county court, it is very, very, 

very highly likely that the dispute will be transferred to the tribunal. That’s 

because county court judges detest service charge disputes. Tenants – not 

you, of course – can get emotional about the porter who didn’t doff his cap, 

the paint that started crumbling before the decorator dropped his brush and 

the common garden that is overgrown with ragwort. Most issues raised in a 

county court service charge battle can be sent to the tribunal to decide: any 

issue over the ground rent cannot. You may favour staying in the county 

court because you reckon it will give you the protection of the costs regime 

which would normally apply to a service charge case (see chapter 25). Don’t 

let that rank as a consideration. The lease will usually state, in effect, that 

the landlord can personally charge you up for their costs and expenses in 

dealing with the dispute. If it doesn’t then I am the Lord Chief Justice or 

a banana (you choose). Generally (but see below), what the lease says will 

take precedence over the small claims costs regime and so, if you lose in the 

county court, you won’t have its protection and will have to pick up the landlord’s 

bill which could be heavy if they have been represented by a lawyer. 

Similarly, while the general rule at a tribunal is that losing there will only 

lead to you paying the landlord’s costs if you have acted unreasonably in 

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The Return Of Breaking Law 

bringing, defending or conducting a case, what the lease says will take precedence 

over that. But even if you win at the county court or tribunal, there 

is a nice big trap awaiting you on costs which we will have a look at shortly. 

Tribunal victorious 

So where does that take us? If I was at war over a service charge dispute, I 

would take the initiative and make an application to the tribunal at the outset 

because that is where the dispute would have probably ended up anyway 

and the tribunal members are specialists in these sort of cases. They love 

them. They dream of porters’ caps, crumbling paint and weeds. The application 

fee is £100 and, if there is a hearing, another £200 will be payable. 

‘Help with fees’ is available (see chapter 17). 

But does your dispute qualify? 

Having got this far, you may be inclined to clock me if you find that my route 

to challenging service charges is not open to you and I would not blame you 

which is why I seldom go out. You can take advantage of my route if the 

dispute regime under the Landlord and Tenant Act 1985 applies to you. The 

service charges must relate to a residential property so business tenants go 

back to your premises and take another route. Similarly, council tenants 

must do the same unless your lease is for more than 21 years. The service 

charge can directly or indirectly relate to services, repairs, maintenance, 

improvements, insurance or the landlord’s management costs. A service 

charge for a sum fixed in advance might be challengeable along some other 

route but such fixed sums are quite rare. 

According to the 1985 Act, service charges must be reasonably incurred and 

the services or works to which they relate must be of a reasonable standard. 

They must also be reasonable in amount. Your challenge can be under 

any or all of these limbs. You can additionally argue that some or all of the 

items that make up the service charge demand are not caught by the lease 

wording. You may put in evidence cheaper quotes that you have been able 

to obtain but you should take care to ensure that they are on a like for like 

basis. I would recommend that you look at the current (third) edition of the 

Service Charge Residential Management Code issued by the Royal Institution 

of Chartered Surveyors which you can download free on the internet. 

It sets out the best practice to be followed by landlords and their managing 

agents, so a bit like the motorists’ highway code. It does not follow as night 

follows day that breach of the code will automatically mean that you are on 

to a winner but breach will be taken into account by the court or tribunal 

and can only help your case. An argument that the landlord’s delay in carrying 

out the works has increased what eventually had to be done and, hence, 

the amount of the service charges, will not get you anywhere. However, if 

that failure amounts to a breach by the landlord of their repairing covenant 

then you can ask the tribunal to reduce the demand by an amount representing 

the increase and any losses arising. This will not be possible if there 

has been a change in landlord and it was not the current landlord who was 

at fault. Any attempt to knock out the entirety of the service charges and to 

recover compensation from the landlord on top would need to be dealt with 

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by way of a county court claim by you or a defence and counterclaim to the 

landlord’s proceedings in the county court against you. 

Can you challenge service charges in a tribunal which have been paid for 

many years before you acquired the lease? Yes, said the upper tribunal in 

a 2018 case called Gateway Holdings v Lynda Mckenzie. However, if the 

tribunal agreed that the charges were too high, you would fail in the challenge 

unless you could show that you, rather than the previous tenants, were 

entitled to a refund. The trick is to reach an agreement on the subject when 

you buy. The purchase contract could say that any repayment due following 

your challenge was to belong to you. After all, it would be you who had shed 

the blood and sweat (but hopefully not the tears) in making and pursuing 

the challenge. 

The coronavirus factor 

I foresee the coronavirus rearing its ugly head in a large number of future 

service charge disputes. Is it reasonable for the managing agents to charge 

their usual management fee when they weren’t managing as contemplated 

for the entirety of the service charge year because staff were either off work 

or working reduced hours? Should not certain services have been stopped 

or reduced during lockdown? What credit has been given for the no-shows 

by the window and guttering cleaners? Has the benefit of furloughing been 

factored into your overheads? Why charge £300 for porter masks when they 

never wore one? Should major improvements not be put on hold when the 

vast majority of tenants cannot afford to finance them because of the impact 

of coronavirus? 

The landlord’s costs – and that trap 

We have already seen how you can be stung, personally and directly, for the 

landlord’s costs if you lose against them on a service charge case. But there 

is a big trap. Whether they win or lose, the lease will probably allow the 

landlord to add their outstanding costs and expenses involved in the dispute 

to a service charge demand. That won’t please you and it won’t please 

your co-tenants who could end up having to contribute towards a bill for a 

dispute with which they not had been concerned and over which they had 

no control. You may be able to escape falling into this trap on behalf of yourselves 

and your co-tenants. 

Attempt at The Great Escape 

This is an application, under section 20C of the Landlord and Tenant Act 

1985, for an order which prohibits the landlord from adding their costs and 

expenses to the service charge. The county court or tribunal will grant such 

an application if it is satisfied that, in the circumstances, it is ‘just and equitable’ 

to do so. It would be madness for you not to apply for such an order. 

The application should be made on the tribunal form called Leasehold 7. 

The tribunal’s order on an application may let you off the hook entirely, 

let you off the hook partially or let one or more of your co-tenants off the 

hook, wholly or partially. You could even apply for an order preventing costs 

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incurred by the landlord in a challenge by a co-tenant being passed on to 

you. In so far as your own case in a tribunal is concerned, you can ask that 

an order be made in favour of you and any co-tenant who you name in the 

form Leasehold 7. The form specifically asks for details of other tenants who 

would wish to avoid being stung for the landlord’s costs by being added on 

to the service charge even though they are not parties to those proceedings. 

There is no time limit in the tribunal for a section 20C application being 

made: as indicated, co-tenants who might be effected can make their own 

application in the same proceedings or subsequently; and co-tenants can 

apply for a section 20C order even though the tenant making the challenge 

has been refused a section 20C order. 

Whether you can expect to succeed on an application under section 20C of 

the 1985 Act will depend on such factors as the conduct of each side; the 

circumstances of each side; who has won (and very much so); and whether 

or not the landlord does have resources other than service charge income. 

In a 2017 appeal case before the upper tribunal called Bretby Hall Management 

Company Limited v Christopher Pratt, the first-tier tribunal had 

decreed that the landlord could only pass on to the service charge 25% of 

its costs. That meant that the individual tenant who was challenging service 

charges would be liable for just 6.16% of the costs which worked out at 

around £3. The landlord was appealing against that decree but on a number 

on other points. After some encouragement from the upper tribunal (ridicule, 

shotgun to the head, astonished faces – that sort of thing) the landlord 

agreed to abandon that part of the appeal. 

But the landlord’s costs for the appeal hearing were substantial which was 

a serious matter for the landlord since its only income was from the service 

charges it collected from the tenants of the 30 apartments in the development. 

The tenant pleaded with the upper tribunal to prevent the landlord 

from adding on its appeal costs to the service charges. The appeal tribunal 

refused. The landlord had succeeded in the appeal on almost all points and 

against the tenant’s opposition. That the landlord had no resources apart 

from service charge income was a crucial point. It was just and equitable, 

said the appeal tribunal, that the tenant should bear his share of the costs by 

them being added on to the service charges. 

The administration charge trick 

Some leases seek to overcome a section 20C application by entitling the 

landlord to treat their litigation costs not as part of the service charge but as 

so-called administration charges. It so happens that administration charges 

in the form of litigation costs were not susceptible to a section 20C type regime 

– until 6 April 2017. Now the county court or tribunal can wipe out or 

reduce a tenant’s liability to have to pay them in connection with a service 

charge dispute under a section 20C type regime. This time the regime is set 

by schedule 11 paragraph 5A of the Commonhold and Leasehold Reform Act 

2002 (phew!). As with section 20C, in the tribunal you will find that form 

Leasehold 7 asks whether you want to ask the tribunal to make a schedule 

11 application. 

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There is no Leasehold 7 form which can be used in the county court should 

the landlord have started their claim there. Even if the county court has indicated 

that it is thinking of transferring the case to the tribunal or you have 

asked it to do so, it would be prudent for you to do this. Issue in the county 

court an application notice (form N244) asking for an order under section 

20c or schedule 11 (depending on whether the lease says the litigation costs 

can be recovered by them as part of the service charge or as administration 

charges) and this will cover the landlord’s costs while the case remains in 

the county court. Then, if and when the case is transferred to the tribunal, 

complete form Leasehold 7 asking for a section 20C or schedule 11 order and 

this will cover the landlord’s costs while the case remains with the tribunal. 

Service charge arguments at work 

Let’s have a look at some juicy court and tribunal decisions from recent 

times which may just give you some ideas. The names of the cases are given 

after each summary along with citations which should enable you to locate 

full case reports on the internet, should you want to rely on them in court 

or at the tribunal. 

The ‘spending that amount of dosh in the light of the sort of 

folk who live in our blocks is barmy’ argument 

In a case which started in a tribunal but was ultimately decided by the Court 

of Appeal (London Borough of Hounslow v Waaler [2017] EWCA Civ 45) 

the part of the service charge under attack was for the replacement of windows 

and cladding to 10 blocks of facts at the Ivybridge Estate in Isleworth 

where the landlord is the London Borough of Hounslow. The Estate comprises 

council flats and houses and some properties which have been bought 

under long leases by former council tenants under the right to buy scheme. 

One lady got a demand for a cool £55,000 as the required charge from her 

for the new windows and cladding and some other work. The windows had 

not been in disrepair but suffered from an inherent design fault which was 

a potential safety issue. The fault related to a hinge failure. Replacement 

hinges were available at a cost of £140 a pair but the problem would have 

eventually recurred with new hinges. So after the necessary consultation 

with lessees, the council decided to replace the windows and deal with the 

inevitable resulting replacement of cladding as well. The aluminium windows 

which were used will have a life span of twice that of the UPVC ones 

which might have been used at a lower cost. 

Our aggrieved lady (with other lessees) attacked the council’s decision. The 

Court of Appeal ruled that improvements such as these – and they were to 

be classified as improvements – had to be approached differently to repairs 

which the council was obliged to carry out. With improvements, a landlord 

had to take particular account of the extent of the interests of the lessees 

who would be charged up, their views on what was proposed and the financial 

impact of proceeding. It was not simply sufficient to rely on the right 

to recover the cost of repairs under the lease as a justification in itself for 

embarking on a scheme of very expensive work. 

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The landlord was not bound by the views of tenants but where it was exercising 

a discretionary power at the lessees’ expense, it made sense that 

the tenants’ views should be more influential than when repairs were concerned. 

The landlord need not embark on an investigation into the finances 

of particular tenants. However, in broad terms, the landlord was likely to 

know what kind of people were tenants in a particular block or estate. Tenants 

in a luxury block in Knightsbridge might find it easier to cope with a bill 

for £50,000 odd than tenants of a former council flat in Isleworth. 

The council had not acted as it should have done. The result was that only 

part of the service charge would be recoverable from our lady and it was left 

to the tribunal to decide how much. 

The ‘put your specs on mate and the lease doesn’t say you 

can charge us up for your costs of this dispute’ argument 

In a case decided by the upper tribunal (Sinclair Gardens Investments 

(Kensington) Ltd v Avon Estates (London) Ltd [2016] UKUT 317 (LC)), the 

tenant escaped paying the landlord anything towards over £11,000 in legal 

costs on the ground that the wording in the lease on which the landlord 

relied did not catch them. It allowed the landlord to employ solicitors for 

certain things and to charge up the tenant. However, the wording was not 

specific enough so as to relate to solicitors’ and barristers’ fees for defending 

the tribunal cases involved. Any liability had to be clearly spelt out in the 

lease and the lease in its entirety had to be looked at to decide whether or 

not the tenant had to pay up as the landlord had claimed. 

The ‘interim payment asked for is too high because of 

money coming from Buggins’ argument 

Your lease probably entitles the landlord to require you to stump up cash in 

advance of carrying out major works. When assessing what is a reasonable 

advance sum, does the landlord have to take into account a cash contribution 

which some third party may be making? If, say, an insurer might be 

forking out for some of the work, should this be ignored when your contribution 

is calculated? 

The amount of the advance payment can be challenged before a tribunal on 

the basis that it is unreasonable under the Landlord and Tenant Act 1985. It 

says at section 19(2) that where a service charge is payable before the relevant 

costs are incurred, no greater amount than is reasonable can be sought. 

And after the relevant costs have been incurred any necessary adjustment 

is to be made by repayment, reduction or subsequent charges or otherwise. 

In a Court of Appeal case (Avon Ground Rents Ltd v Cowley and others 

[2019] EWCA Civ 1827), there was the possibility of a payment by NHBC. 

It was not a certainty. It was, as I say, a possibility. In giving guidance on 

what significance the landlord should place on this possibility, the Court of 

Appeal ruled that flexibility in approach was required. Certainty of the third 

party payment was not necessary for it to be taken into account, it was held. 

That would constrain the discretion of a tribunal which was deciding on a 

challenge to the amount of the advance demand when in reality what was 

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required was a test which allowed account to be taken of all relevant matters 

and to those matters the appropriate weight would be attributed. 

So by ignoring a good chance of a third party payment, the landlord may 

well be in trouble. 

The ‘interim charge isn’t reasonable and you still have a 

problem with your specs’ argument 

We’ve seen that an interim demand must be reasonable in amount. The 

landlord could fail to follow the lease’s regime for requiring an advance payment 

to the letter. That failure in itself may well not be fatal to the landlord 

being lawfully able to recover the interim sum you are being told to pay 

– it will depend on the wording of the lease and how serious has been the 

lessor’s failure – but it might anyway come into the reckoning on whether 

that sum is reasonable. The other point is that the reasonableness of what is 

being asked for is to be assessed as at the date on which your liability to pay 

it arises and not subsequently. 

In an upper tribunal case (Wigmore Homes (UK) Ltd v Superbly Works 

Residents Association Ltd [2018] UKUT 252 (LC)), the landlord’s interim 

demands for six years were slashed by one-half. The amount sought for each 

of those six years had been precisely the same and the tribunal decided that 

this was a clear indication that the lessor had not carried out a careful assessment 

each year and that the sum claimed was not based on a genuine 

estimate of the likely expenditure. 

The ‘you didn’t consult over that fixed period contract, silly, 

so you can’t charge me up for all of that contract’ argument 

Although the tenant lost, an upper tribunal’s decision (Bracken Hill Court 

at Ackworth Management Ltd v Dobson and others [2018] UKUT 333 

(LC)) on consultation highlights a very important legal right for tenants. 

They must be consulted by the landlord under the Landlord and Tenant Act 

1985 section 20(1) and section 20ZA(2) – no joke! – about entering into 

a contract for a fixed period of more than 12 months. Slipping up on this 

will usually mean that the landlord cannot recover more than £250 from 

each tenant towards the contract price, unless the landlord is forgiven by 

the first tier tribunal. What happened in the case is that the landlord engaged 

a management company to look after a block of flats in Pontefract. 

The contract was renewed annually and the landlord and the management 

company always agreed that the new contract would last no longer than 364 

days. The upper tribunal ruled that none of these contracts was for longer 

than one year and so there had been no duty on the landlord to consult with 

the tenant about renewal. It might well have been that the landlord and the 

management company had an expectation that in all likelihood the contract 

would be renewed but an expectation of renewal was not the same as a contract. 

Either party would have been entitled to decline to renew. 

Generally, annual renewals will suit the landlord and save them having to 

consult. Following this course will keep the landlord out of trouble provided 

the arrangement is not a sham. If it could be shown that there was really 

415


a commitment to keep the management company or other contractor on 

board for more than 12 months and that the so-called renewal process was 

not genuine then a tenant should be able to take advantage of the consultation 

breach. 

The ‘you shouldn’t be forgiven for failing to consult with me’ 

argument 

The landlord may well apply to the first tier tribunal to dispense with the 

consultation requirements (see The ‘you didn’t consult over that fixed 

period contract, silly, so you can’t charge me up for all of that 

contract’ argument). In order to have a decent hope of defeating the 

landlord’s plea, you need to come up with evidence that the failure to consult 

has prejudiced you. You may be able to show that, had you and your 

co-tenants been consulted and been able to make your points, the work 

would not have been carried out or the particular contract would not have 

been entered into; would have cost less; or would have been done in a different 

way and would have been more acceptable or cheaper. If you can prove 

such prejudice, dispensation will probably be refused. If it is granted, it is 

likely to be on condition that the landlord pays any legal and surveyor’s fees 

you have incurred and compensates for any prejudice that has been suffered. 

Spout out to the tribunal the cases of Daejan Investments Ltd v Benson 

[2013] UKSC 14 and Aster Communities v Chapman and others [2020] 

UKUT 177 (LC). 

The ‘pay and argue’ argument 

You are precluded from a challenge if you admitted you owed the service 

charge or if a court (it will almost certainly be the county court) has given 

a judgment against you for the service charge about which you are arguing. 

But you will not be treated as having admitted the charge simply because 

you paid it. There will need to be some evidence other than payment to show 

you agreed it. An upper tribunal case points to how you can challenge despite 

having already paid (Marlborough Park Services Ltd v Leitner [2018] 

UKUT 230 (LC)). 

You might, for example, be under some pressure from your mortgage lender 

to pay because forfeiture proceedings are threatened by the landlord if the 

service charge is not settled. In this sort of situation, either wait until you 

have issued a tribunal application challenging the charge before settlement 

or make it abundantly clear to the lessor when settling that you dispute liability 

for the charge. 

‘This charge is an affront to decency. It is exorbitant, unreasonable 

and a disgrace. I challenge every new and old pence of it with every 

fibre of my body and will be taking my challenge to the first-tier tribunal 

(property chamber). I am paying strictly without prejudice and 

my action is not and is not to be taken as an agreement to or admission 

of the charge for the purpose of section 27A (4) of the Landlord and 

Tenant Act 1985.’ 

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That should do! 

If you have a court judgment against you for the service charge and it was 

obtained by default – you failed to put in an acknowledgment of service or 

a defence and so there was no hearing about the merits of the claim – then 

apply to the court for the judgment to be set side (see chapter 14). If the 

judgment is set aside, the probability is that the issue about the reasonableness 

of the service charge will be transferred to the tribunal. Then the way 

will be clear for your challenge as the court judgment will have gone. 

The ‘building insurance premium is unreasonable and look 

at the quotes what I got’ argument 

In an upper tribunal case (Cos Services Ltd v Nicholson and Willans [2017] 

UKUT 382 (LC)), the service charge in issue took the form of buildings insurance 

premiums for three years in respect of Chiltern Court in Harpenden 

which is a purpose-built block of 16 flats with separate garages. The tribunal 

upheld the decision of a first-tier tribunal that the premiums sought (which 

had to be shared between each flat) for each year in question should be respectively 

reduced from £12,598 to £2,803, from £12,670 to £2,819 and 

from £11,150 to £3,017. Wow! 

The critical point to be decided was whether the premiums asked for had 

been reasonably incurred. That meant, said the judge, that consideration 

had to be given to both the rationality of the landlord’s decision making and 

the reasonableness of the charge. It was not necessary for the landlord to 

show that the premium charged was the lowest that could be obtained in the 

market but it still had to be reasonable. A landlord would be required to explain 

the process by which the policy and premium had been selected, with 

reference to the steps taken to assess the current market. Tenants might, 

as happened in this case, place before the tribunal the quotations that they 

have been able to obtain from elsewhere although they would have to ensure 

that the policies were comparable. 

As also happened in this case, it was open to a landlord with a number of 

properties to negotiate a block policy covering the entirety. However, the 

landlord would then need to prove that the block policy had not resulted in a 

substantially higher premium which had been passed on to tenants of a particular 

building without any significant compensating advantages to them. 

Incidentally, you have a right to a written summary of an insurance policy 

on your premises from the landlord and to inspect any relevant policy and 

associated documents and without being charged up for the privilege, although 

the landlord’s expenses in granting inspection facilities can be added 

to their management costs. This does not apply to a local authority tenancy 

unless it is for more than 21 years. 

Dear Mismanagement (Rachman) Limited 

Re Flat 1106B Grandiose Buildings, Balham SW11 6AA 

As the long-suffering tenant of the above premises, I hereby request 

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you as agent for the landlord to take this communication as formal notice 

pursuant to section 30A and schedule 2 of the Landlord and Tenant 

Act 1985 to supply me within 21 days of receipt of this communication 

with a summary of the insurance cover which is reflected in the service 

charge to include the amount insured, the name of the insurer and the 

risks covered or, alternatively, a copy of the policy. I reserve my right 

under the 1985 Act to require reasonable facilities to inspect relevant 

documentation and take copies or to require copies from you. 

Yours faithfully 

Clive Troublesore 

The ‘you need to get your clock mended’ argument 

An 18 month rule applies to service charge demands under the Landlord 

and Tenant Act 1985. In so far as a service charge demand relates to expenditure 

incurred more than 18 months previously, you don’t have to pay – 

unless the landlord has told you in writing during those 18 months that the 

particular expenditure will be incurred and that you will be charged up for 

it in due course. For some years, it had been thought that the 18 month rule 

did not apply to interim (or on-account) demands for service charge contributions 

which are provided for by most leases (see above). But the Court of 

Appeal has ruled that the relevant law – you will find it in section 20B of the 

1985 Act – does in fact apply to interim demands as well as other demands. 

This means that if, by the time an interim demand is given to you, any of the 

costs covered by it were incurred more than 18 months earlier, you may not 

be liable to contribute towards them. Whether or not the landlord can get 

round this by sending you a supplemental demand will depend on what the 

lease says. In the Court of Appeal case (Skelton and others v DBS Homes 

(Kings Hill) Ltd [2017] EWCA Civ 1139), the landlord was too late to do this. 

Before telling your landlord to get on their bike once they have mended their 

clock, it would be wise to get some advice from a professional on how you 

stand, given the wording of your particular lease. 

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Breaking Law: Services Charges and how cut them

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