The Service Charge Summit - A Delegate's View 

The ‘contra proreferentem’ rule, a standard in contract law, states that if a clause in a contract appears to be ambiguous it should be interpreted against the interests of the person who drafted the contract; always the landlord in relation to a lease. The aim is to discourage people from including ambiguous or vague wording in contracts by penalising them if they become disputed.

The shift came to a head in the recent case of Arnold v Britten, which found that increasing the service charge by a fixed rate of 10% per annum (compounded) did not fall within the statutory meaning of ‘service charge’. Bizarrely, this case will result in future service charges of over £1,000,000 per year.

This shift has also been evident in other cases, in particular Wrigley v Landchance Property Management Limited and Green v 180 Archway Rd Management. Here the Upper Tribunal made it clear that, respectively, accounting rules and insurance provisions within a lease must be adhered to for the sums to be recoverable from the tenants, however impractical such contractual steps may be.

Essentially, the key issue to be considered by landlords and management companies is to ensure that their procedures when dealing with any

mechanisms under a lease, whether it be estimating a service charge budget or certifying accounts, are reviewed and are compatible in each instance. It

may be an arduous task but failure to comply will evidently result in penalties from the Court should a dispute arise.

The law relating to service charges is fast-moving and is crucial to the smooth and efficient running of residential leasehold property. The day’s main aim was to discuss strategies for dealing with issues which challenge the service charge world in a series of seminars and break out sessions, covering case law updates, major works projects and areas of best practice.