Feeling neglected?

The merits of the arguments on either side will, of course, vary from case to case. There is one area though, in which most impartial observers would tend to agree with the tenant’s point of view by default: historic neglect. Take the following scenario as an example.

A large, detached, Victorian mansion house is converted into a number of separate flats, which are let on long leases. The landlord is obliged, under the terms of those leases, to maintain the external structure of the building, with the usual proviso that the maintenance expenditure is recoverable from the tenants through the service charge.

Despite the unequivocal nature of the repairing covenants, however, the landlord chooses to carry out only the bare minimum of repairs. This situation persists for a number of years, until the flank wall of the building begins to give way. It is clear that major repairs are needed, and quickly.

The landlord engages the statutory consultative process, and a quote is chosen. The cost of the repairs run into the hundreds of thousands of pounds. The landlord divides the mammoth repair bill among the tenants in accordance with the service charge provisions in the leases. The tenants refuse to pay, claiming that the level of the service charge is unreasonable.

It would be wrong to conclude, however, that a landlord would be prevented from recovering the service charge in this scenario. Albeit years late, the landlord is doing no more than observing his contractual obligation to maintain the building under the terms of the leases. The reasonableness of incurring the cost of the remedial work cannot depend on how the need for a remedy arose. That was the finding of the Upper Tribunal in the case of Daejan Properties Ltd v Griffin & Anor [2014].

Tenants do have a remedy available to them in this situation, albeit one more involved than simply refusing to pay the charge (a serious breach of the lease).

If a tenant can show that the inflated cost of the remedial work could have been avoided if the landlord had carried out the remedial work at the appropriate time, they will prove that the landlord has caused them to suffer a loss. That loss can then be set off against the sum demanded by the landlord in the form of a counterclaim.

If the landlord has neglected to carry out the repairs for an appreciable period of time, then the value of the counterclaim will have the potential to limit the landlord’s ability to recover his expenditure quite significantly.

The question of whether a loss has occurred, however, is one of fact and thus a matter for evidence. It is vital, therefore, that any tenant thinking about challenging their service charge in this way obtains specialist valuation advice.

Tribunal proceedings should be considered only as a last resort. It is to be hoped that greater awareness of the potential for challenge on this point will encourage landlords to adopt a more proactive approach to repairs. Neglecting the issue could prove to be a costly mistake.