30/01/2025
Author : MaryAnne Bowring
During times of heated arguments about service charges, it is usually tenants, leaseholders, and homeowners who are left wondering where they can find help. The First-tier Tribunal (Property Chamber) in the UK is responsible for disputes that can lead to service charges, but when it comes to service charges for houses (not flats or apartment blocks), can it be intervened by the Tribunal in such cases?
This piece will take you through the question of whether the Tribunal has the power to adjudicate service charges for houses, shed legal light on planning laws, and demystify under which conditions homeowners implement Tribunal recommendations.
What Are Service Charges?
Service charges are those customarily paid fees by homeowners or tenants to cover the cost of maintaining and managing the communal areas or services within a development. They are comprised of the following charges:
Even though service charges are predominantly linked to leasehold property, they can also be levied in exceptional cases on houses, particularly those that are part of a managed estate or a shared ownership scheme.
The First-tier Tribunal (Property Chamber), which will be termed as Tribunal in this text, is an independent adjudicative body that typically handles cases of landlord-tenant disputes and leaseholders. It is established for the purpose of providing a platform for peacefully settling a variety of real estate controversies, e.g., service charges, repair obligations, and lease terms. The Tribunal is commonly used to settle disputes wherein developing parties claim that a given charge is unfair or illegal, particularly when the charges are in controversy. The tenant or leaseholders are disturbed by what they perceive as unjust or unacceptable charges.
Jurisdiction of the Tribunal over Service Charges for Flats vs. Houses
By and large, leasehold flats have been the most frequent among the types of property where tribunals perform the resolution of disputes over service charges. Generally, leaseholders must pay a service charge as part of their lease unless it's explicitly stated in the lease. On the other hand, houses put forward the more complex option due to their freehold or leasehold nature, where service charges can be different in each of these properties.
By and large, leasehold flats have been the most frequent among the types of property where tribunals perform the resolution of disputes over service charges. Generally, leaseholders must pay a service charge as part of their lease unless it's explicitly stated in the lease. On the other hand, houses put forward the more complex option due to their freehold or leasehold nature, where service charges can be different in each of these properties.
1. Service Charges for Leasehold Houses
Although it is true that in leasehold house cases, the Tribunal has jurisdiction in some cases, the property is not totally the homeowner's in the conventional sense. That is, it is the house that is being owned but the ground that is being rented from a freeholder or landlord, usually for a long period (say 99 or 125 years). These types of properties can have service charges just like flats, and in most cases, the lease will state what needs maintenance so communally held areas or off-road access roads, gates, and private gardens are kept on track.
One of the most common benefits that leasehold homeowners can enjoy is the provision for the maintenance of communal areas and infrastructure. The homeowners can make the dispute open at the First-tier Tribunal. The Tribunal will check if the charges are acceptable and have the correct procedure usually included by informing the customers of what will be the costs related to the lease. In general, the Tribunal will have authority over service charge disputes for leasehold houses if the following conditions are met:
The lease specifically provides for a service charge to cover communal or shared services. The disagreement is associated with the fairness, reasonableness, or legality of those charges.
The situation becomes more complicated when it comes to freehold houses since freeholders typically own both the land and the property outright. By and large, freehold homeowners do not pay service charges until they are included in a managed estate or have consented to certain covenants in the deeds of their property.
For instance, in a freehold housing area that is part of a communal arrangement, homeowners of freehold houses that use a private road, communally landscaped areas, or have other common areas may have to pay a service charge. These charges can be used to cover maintenance costs for shared areas or facilities. Nevertheless, freehold homeowners are ordinarily not liable to pay service charges if no legal agreement exists in the community or no other management entity, like an estate management company, charges the related fees.
Suppose a freehold homeowner is requested to pay a service charge in return for being a part of a communal arrangement, and they enter into a dispute with the parties involved (e.g., because of the amount or scope of the charge). In that case, they may go to court or seek legal advice for that. In particular instances, the Tribunal may not have a say when the service charges are explicitly agreed upon in a legal agreement or deed, as they may be adopting exclusive civil court dispute resolution, which in turn excludes the Tribunal from the process.
3. Common hold Properties
Another example where the Tribunal could have jurisdiction over houses' service charges is in common hold properties. Common hold is an alternative form of property ownership in which individual homeowners own the freehold of their unit but share ownership of communal areas (such as shared gardens, roads, or parking). Common hold is more common in flats, but it can apply to houses as well. In common hold developments, homeowners are collectively responsible for maintaining common areas, and service charges are often levied for this purpose. In this scenario, if a dispute arises about the service charges, the Tribunal could have jurisdiction to resolve the matter.
To summarize, whether the Tribunal has jurisdiction over service charges for houses depends on several factors:
Type of Property Ownership: In the case of leasehold houses, it is more likely that the Tribunal will have jurisdiction or in cases where the homeowner is bound to pay a levy as per the lease. Freehold properties, unless the property is part of a managed estate with an agreed service charge, are less likely to fall under the Tribunal's jurisdiction. Nature of the Dispute: The Tribunal has jurisdiction if the dispute concerns whether the service charges are reasonable, properly calculated or in line with the terms of the lease or other formal agreement.
Formal Agreements or Covenants: Freehold homeowners are sometimes required to pay service charges for the upkeep of common areas and facilities that the property company manages. Occasionally, the terms of the title deed will be appended by certain covenants or by some form of contract that may burden freehold homeowners to pay service charges. In this scenario, the Tribunal could be competent if the service charge is under dispute.
To conclude, the First-tier Tribunal does have the power to decide over service charges and easements for houses; however, this depends on the nature of the property and the terms of the agreement between the homeowner and the property owner.
In the case of leasehold houses, the Tribunal can be involved in solving disputes over service charges in the same way they do so for flats. Nevertheless, for freehold houses, service charges are less frequent and are generally linked to special agreements or are paid in common interest areas. In such instances, the distressed homeowners may have to find an agreement via the civil court or, in the worst-case scenario, through a legal counsellor if the Tribunal is not the competent authority.
If you are a homeowner who is entangled in a dispute over service charges for a house, it is crucial to get acquainted with the legal framework and consult with a lawyer to decide which approach will work best. Whether through the Tribunal or some other legal way, there are available paths to ensure fairness and transparency in service charge systems.
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