When a landlord wishes to recover costs from residential tenants via service charges in respect of qualifying works or services, the Services Charges (Consultation Requirements) (England) Regulations 2003 require that the tenants must be consulted in certain circumstances. These are when the amount that the tenant is required to contribute for services exceeds £100 and the term involved is more than 12 months. If the landlord fails in its obligation to consult, the maximum contribution of a tenant is capped at £100. Similar rules apply where building works are needed, but in that case the cap is £250.
Recently, a case came to court in which many issues were considered, one of which was the operation of the cap where there is a head tenant with a number of subtenants. A social landlord was a tenant of a headlease and had granted underleases of 79 housing units. The landlord wished to impose a charge on the tenants of more then £160,000 for various works. The tenants opposed the charge. The question at issue was whether the £100 cap applied only to the headlease or applied in respect of each individual housing unit.
The issue turned on the wording of the 1985 Landlord and Tenant Act, which at Section 18 provides that a service charge will be payable by the tenant of a ‘dwelling’, i.e. a part of a building occupied or intended to be occupied as a separate dwelling.
The service charge was not therefore capped at £100. Any cap had to be applied with reference to the number of units.
Paddington Walk Management Ltd. v Governors of Peabody Trust.