Landlord & Tenant Flashcards
What one thing should always be referenced first in LL & TT matters?
THE LEASE
Provide a brief definition of what a service charge is
Landlords charge service charges to recover their costs in providing services to a building. The way in which your service charge is organised (for example, what it covers and how it is worked out) is set out in your lease
List three things that govern service charges
- The Landlord & Tenant Act 1985
- RICS Service Charge Residential Management Code (3rd Ed.)
- RICS Service Charges In Commercial Property (1st Ed.)
Summarise Section 18 of the 1985 Act
Section 18 defines what is meant by a Service Charge and also what counts as a ‘relevant cost’ for the calculation of a Service Charge:
- Payable, directly or indirectly, for services, repairs, maintenance or insurance or the landlord’s costs of management
- Variable (Arnold vs Britain)
- For costs payable during the SC period
Summarise Section 19 of the 1985 Act
Section 19 provides protections for the leaseholder.
Rules that service charges are only payable to the landlord to the extent that they are reasonable.
If a leaseholder feels the amount they are paying is unreasonable, they have the right to take their complaint to the First-tier Tribunal
Service charges are only payable for the provision of services or works that are of a reasonable standard
Summarise Section 20 of the 1985 Act
S20 is intended to protect leaseholders from paying unnecessarily large sums for work carried out to their building
In summary it says that a leaseholder’s contribution to the cost of work will be capped if the landlord or their agent fails to follow set consultation procedures first
Major works: must consult if carrying out work which will cost any one leaseholder more than £250. This includes repairs, maintenance and improvements to your building and estate.
Long term qualifying agreements: must consult if any one leaseholder contributes more than £100 towards a contract exceeding 1 year
At which three stages may the landlord have to serve notices during the Section 20 consultation process?
- Pre-tender stage (Notice of Intent)
- Tender Stage (Notification of Proposals / Quotes)
- Award of Contract (Reasons for Award)
Summarise the time restrictions during the Section 20 consultation process
- Notice of Intent - 30 day consultation period - TTs can make observations and nominate contractors in this time
- Tender stage - 30 day consultation period - TTs have a further 30 days to respond to the proposals
- Notice of Reasons (only generally submitted if the cheapest estimate is not instructed - must be within 21 days of entering into the contract)
What is the Tribunal’s role in Section 20 disputes?
The purpose of the Regulations is to ensure that lessees are protected from
(a) paying for inappropriate works, or
(b) paying more than would be appropriate
Tribunal should focus on whether the lessees were prejudiced in either respect by the failure of the landlord to comply with the Regulations
While the legal burden is on the landlord throughout, the factual burden of identifying some relevant prejudice is on the lessees
What is the key piece of case law regarding Section 20 consultation?
Daejan v Benson (2013)
- Supreme Court
Found that the purpose of the Regulations is to ensure that lessees are protected from
(a) paying for inappropriate works, or
(b) paying more than would be appropriate
Dispensation should not be refused solely because the landlord seriously breached, or departed from, the consultation requirements.
The legal burden of proof in relation to dispensation applications is on the landlord. The factual burden of identifying some “relevant” prejudice that they would or might have suffered is on the tenants.
Within what time period must landlords serve service charge demands? Which section of the Act determines this?
Section 20B(1) of the Landlord and Tenant Act 1985 provides that a service charge demand must be issued within 18 months of the costs making up the service charge being incurred.
Landlords may serve a notice advising Tenants that costs are going to be incurred and that the Tenant will subsequently be required to contribute to them by way of a service charge payment – Section 20B(2) Landlord and Tenant Act 1985.
Under what section of The Act can residents apply to form a residential association?
A residents’ association may ask a landlord for recognition under section 29, and, if the landlord declines recognition, the association may apply to the First-tier Tribunal for recognition
What steps must you take when depositing client money into a bank account?
- You must open one or more client bank accounts which should be held at a recognised bank
- On opening a client bank account, you should give written notice to and seek written confirmation from the bank or building society that:
a) all money standing to the credit of that account is client money
b) the bank or building society is not entitled to combine the account with any other account or to exercise any right of set-off or counter-claim against money in that account in respect of any sum owed to it or any other account of yours; and
c) any interest payable in respect of sums credited to the account should be credited to that account. - You must inform those whose money is being held the name of the account and address of the institution
- The client must have access to the account
- The account name must state ‘client’ within it
Name 4 key changes within the proposed update to the RICS Service Charge Residential Management Code
- Introduction of Housing Associations (previously excluded from the legislation)
- Introduction of recommendations relating to event fees (following the law commission recommendation)
- Promotion of PPM / Lifecycle costing plans to inform reserve fund contributions
- Suggests industry standard cost headings in budgets and accounts to improve transparency
Under what circumstances is VAT not payable by residential leaseholders on the employment costs of site staff?
No VAT is chargeable where a landlord employs site staff directly, however it is where they are employed by a third party i.e. a managing agent or facilities management company.
The test of who owns the interest is what happens if the lease was forfeited – who would it return to? If there is a Resident Management Company (RMC) or Right to Manage (RTM) company that employs the staff and the lease was forfeited, then the interest would normally fall to the landlord.
What is the name of the HMRC document that provides the ‘clarification’ regarding VAT on staff salaries?
VAT Notice 48
What is the difference between a sinking and reserve fund?
Sinking Fund - collected to fund specific works that are required periodically (i.e. long term maintenance / roof repairs etc). Should be calculated using lifecycle costing.
Reserve Fund - collected to help management companies prepare for, and manage unexpected expenditure that the service charge budget could not account for.
What time limits apply to property managers when administering commercial service charges?
What document requires this?
Budgets should be issued at least one month prior to commencement, and reconciled accounts issued within four months of the end of the service charge year in question.
Service charges in commercial property, 1st edition, 2019
What is the definition of a ‘long lease’?
Leases with a term of more than 7 years have to be registered with the Land Registry.
A residential long lease is granted by a Freeholder, to a Leaseholder.
What does a Section 20 Notice of Intent need to contain?
- Description of the works / or where and when a description of the works can be inspected
- Reasons for carrying out the works
- Where and when leaseholders can submit observations and recommended contractors
Which Act and Section require that a demand for the payment of a service charge must be accompanied by a summary of the rights and obligations of tenants of dwellings in relation to service charges?
Commonhold and Leasehold Reform Act 2002, in Section 153
What are the main requirements / rights which must be provided to tenants with a service charge demand under Section 153 of the Commonhold and Leasehold Reform Act 2002?
- Right for determinations through the FTT
- Section 153 provides detailed guidance on the powers of the FTT in relation to service charges, the requirement for a leaseholder to pay an application fee to the FTT, the ability to request a lease variation through the FTT - The right to request a detailed breakdown of costs from the FTT (The summary must be given to you within 1 month of your request or 6 months of the end of the period to which the summary relates whichever is the later)
- You have the right, within 6 months of receiving a written summary of costs, to require the landlord to provide you with reasonable facilities to inspect the accounts, receipts and other documents supporting the summary and for taking copies or extracts from them.
- You have the right to ask an accountant or surveyor to carry out an audit of the financial management of the premises containing your dwelling
- The rights include an overview of the Landlord’s right to forfeiture for non-payment of service charges
Which Section of the Landlord & Tenant Act 1985 provides Tenants with a right to inspect supporting accounts in relation to their service charge?
Section 22
Please talk through the process of issuing service charge demands.
- Read the lease - will set out:
- The service charge period
- Payment terms (annual / quarterly etc)
- Service terms (by post / recorded delivery etc)
- Must be in writing
- Must include Name & Address of Landlord (S47 & 48)
- Must include summary of Tenant’s rights & obligations
- Must be within 18 months
