Limits to service charges: Section 125 Notice

Transcription

1 Limits to service charges: Section 125 Notice Nadeem Hussain and Emma Fuller 24 April 2014

2 Summary The Notice served on the Tenant by the landlord after the tenant has claimed the Right to Buy (RTB) and the right has been established. Lots of issues covered by the S.125 Notice Statutory control over service charges levied during the first 5 years. Tenants liability for service charges and improvement contributions restricted during this period by the information provided in the Notice.

3 The Law Legislation Housing Act 1985 S.125 Schedule 6 Part III Para 16 Service charges and other contributions payable by the tenant Housing (Right to Buy)(Service Charge) Order 1986 S.I Case Law

4 Who is covered? Tenants who have exercised the RTB and are levied service charges within the reference period Tenants who have exercised the Preserved RTB and are levied service charges within the reference period Subsequent purchasers of the lease who are levied service charges within the original reference period

5 5 Section 125 Notice contents Description of property Price for the long lease of the flat Discount Provisions of lease Service Charges Any structural defects Affecting the dwelling or building Only those known to the landlord How to proceed

6 6 Service Charge Information S.125(4) Where you will be requiring the leaseholder to pay service charges or contributions towards improvements you must provide information about the following: Annual Service Charges S.125A Repairs S.125A Improvements S.125B

7 Annual service charge S.125(A) S.125(A) The estimated annual cost under each head of charge for the individual S.125(A)(1)(a) The totals S.125(A)(1)(b) The reference period adopted for the estimates

8 Repairs S.125(A) ITEMISED WORK Estimated cost of each item Estimated cost to the leaseholder for each item, and The totals WORK NOT ITEMISED Estimated average annual cost the leaseholder would be expected to pay The reference period adopted A statement confirming the restriction and the right to a loan.

9 Improvements S.125(B) Itemised list of work for which costs may be incurred The amount of each item The leaseholders likely contribution to each item The totals The reference period adopted A statement confirming the restriction and the right to a loan.

10 The Reference Period S.125(C) BEGINS Begins on a date not more than 6 months after the S125 Notice ENDS Ends 5 years after that date, OR Where contributions are calculated by an annual period with the end of the 5 th period beginning after that date

11 The Initial Period - Schedule 6 Para 16B(4) BEGINS With the grant of the lease, or If the lease requires costs to be paid for a period prior to the grant of the lease in which case it begins at the beginning of that period ENDS 5 years after the grant, or Where contributions are calculated by an annual period with the end of the 5 th period beginning after the grant

12 Actual limits on service charges Repairs ITEMISED Limited to the amounts notified in the S.125 Notice together with an inflation allowance - 16B(2) WORK NOT ITEMISED For parts of the initial period falling under the reference period the estimated annual average notified in the S.125 Notice 16B(3) For parts of the initial period the average rate of the total years notified in the S.125 Notice 16B(3)

13 Actual limits on service charges Improvements ITEMISED Limited to the amounts notified in the S.125 Notice together with an inflation allowance 16C(4) WORK NOT ITEMISED Cannot be claimed 16C(2)

14 Cases Payne v Barnet LBC (1998) 30 HLR 295 (CA) Purpose of legislation: enable T to identify maximum potential liability

15 Cases Hyams v Wilfred East Housing Co-op Ltd [2007] 1 EG 53 (CH) Liability depends on lease in light of statutory provisions Demands must fall within the reference period Follow the legislation!

16 Cases LB Southwark v Smith [2012] UKUT 295 (LC) Straddling is ok No obligation to carry out works Can charge for previously unplanned work during the initial period Beware giving comfort to leaseholders

17 Questions? The Leasehold Advisory Service Maple House 149 Tottenham Court Road London W1T 7BN Anthony Collins Solicitors LLP Edmund Street Birmingham B3 2ES