Most tenants of residential premises benefit from protection against excessive service charges under the Landlord and Tenant Act 1985 (the LTA 1985). Section 18 of the LTA 1985 defines “service
charge” as an amount that is:
1. Payable by a tenant of a “dwelling” as part of, or in addition to, the rent; and
2. Is payable directly or indirectly for services, repairs, maintenance, improvements, insurance or the landlord’s management costs; and
3. Varies, or may vary, according to the relevant costs
What is a dwelling?
Section 38 LTA defines dwellings as “a building or part of a building occupied or intended to be occupied as a separate dwelling, together with any yard, garden, outhouses and appurtenances belonging to it or usually enjoyed with it.
The decision in Phillips v Francis [2010] EWHC B28 related to a chalet park in Cornwall. The High Court decided that the term “dwelling” was not limited to properties occupied as principal homes and, provided that the requirements of section 38 are met, there is no reason why holiday accommodation let on a lease does not qualify.
What are the consequences of sections 18 to 30 LTA 1985?
The LTA 1985 provides a number of key rights for residential tenants, which include the following:
1. The landlord may only include costs in the service charge to the extent that they are reasonable
2. The amount of any advance payment of service charge must be reasonable
3. If the lease entitles the landlord to demand an administration charge which is variable, the amount of that charge must be reasonable
4. The landlord must consult with the tenants before entering into an agreement for more than 12 months or carrying out works above a threshold of £250 per property, unless the landlord obtains a dispensation from the consultation requirements
5. Tenants do not have to pay service charges or administration charges unless the landlord includes key information in the demand for those charges
6. Tenants do not have to pay service charges in respect of costs which were not demanded within the statutory deadline for issuing service charge demands.
What does this mean for me?
If you are letting holiday accommodation other than on short term holiday lets, you need to consider whether the LTA 1985 applies to you. A failure to comply with the requirements of the LTA, which are detailed, can mean that you are not able to recover service charges, even where you have already supplied the services at your own costs, which could prove to be a very expensive mistake!
Although it is possible to ask for retrospective dispensation in the case of the requirement to consult on works, dispensation is in the discretion of the Tribunal and, even if dispensation is granted, that dispensation may well be conditional on the landlord absorbing some of the costs.