Estimated vs. Actual Service Charges

[MichaelD1981]

We leaseholders pay estimate service charges in advance.

This is not a problem, however this is the third year in a row that our landlord has delayed mailing statements reflecting actual expenditure.

The past two years we received our actual expenditures some six months after the statement year closed.

What are our rights here? We're not sure why they do this every year, however service charges have increased markedly each year (far outstripping inflation) so we're understandably concerned.

[andydd]

We leaseholders pay estimate service charges in advance.

This is not a problem, however this is the third year in a row that our landlord has delayed mailing statements reflecting actual expenditure.

The past two years we received our actual expenditures some six months after the statement year closed.

What are our rights here? We're not sure why they do this every year, however service charges have increased markedly each year (far outstripping inflation) so we're understandably concerned.

..off the top of my head I think the L & T Act says you should be sent them within 6 months.

Andy

[Gordon999]

The summary of annual accounts should be available within 6 months from end of the reporting period and if more than 4 flats in the block, the accounts must be audited by a chartered accountant.

After receipt of the accounts, a leaseholder may request in WRITING for access to inspect all the vouchers and documents relating to the service charge accounts. This access must be provided within 30 days and photocopy of the documents may be takened for a small charge.

[dominic]

The summary of annual accounts should be available within 6 months from end of the reporting period and if more than 4 flats in the block, the accounts must be audited by a chartered accountant.

Gordon, I don't think this is quite correct. What you descibe here is how a freeholder must respond to a s.21 LTA 1985 request, which is intiated by the lessee.

As to the freeholder's obligations to provide the actual accounts, look to the lease. However, if the freeholder does take more than 6 months to make a demand for actual expenditure after the end of the 12 month financial period, the lessee may be relieved of his liability to pay such demands under s.20B of the same Act, as those charges may have been incurred more then 18 months before the demand to the lessee.

[Gordon999]

This is an extract from the publication ( No. 14 ) on "Service Charges " from www.lease-advice.org

"Summary of service charges accounts
Leaseholders have a statutory right to seek a summary of the service charge account from the landlord under section 21 of the Landlord and Tenant Act 1985. The request must be in writing and can be sent direct to the landlord or to the managing agent. It can require a summary of the 'relevant costs in relating to the service charges payable' in respect of the last accounting year, or where accounts are not kept by accounting years, the past 12 months preceding the request.

Where a landlord has received such a demand he must provide the summary within one month (or within six months of the end of the 12-month accounting period, whichever is the later).

The summary should show:

how the costs relate to the service charge demand, or if they will be included in a later demand;
any items for which the landlord did not receive a demand for payment during the accounting period;
any items for which a demand was received and for which no payment was made during the accounting period;
any items for which a demand was received and for which payment was made during the accounting period; and
whether any of the costs relate to works for which an improvement grant has been or is to be paid.
Where the service charge is payable by the leaseholders of more than four dwellings, the summary must be certified by a qualified accountant as a fair summary and sufficiently supported by accounts, receipts and other documents produced to the accountant. Where the landlord is a public sector body, one of their officers who is a qualified accountant may certify the summary, but otherwise the accountant must be independent of your landlord.

Rights to further information (inspecting accounts and receipts)
As well as receiving the summary, the leaseholder has the right under section 22 of the Landlord and Tenant Act 1985 to inspect documents relating to his service charge as a follow-up to provide more detail on the summary. Within a period of six months from receipt of the summary, the service charge payer (or the secretary of a recognised tenants' association) may write to the landlord requiring him to allow access to and inspection of the accounts, receipts and any other documents relevant to the service charge information in the summary and to provide facilities for them to be copied.

Facilities for inspection must be provided within one month of the request, and must be available for a period of two months.

There are further rights of investigation of service charges and management provided by the right to a management audit under the Leasehold Reform Act 1993 and the right to appoint a surveyor under the Housing Act 1996. Full details of those rights are set out in our leaflet 'Appointment of a Surveyor, Management Audits'.

Failure to provide a summary or allow access to further information
Where a landlord fails without reasonable excuse to comply with either a request for a summary or to inspect supporting documents they commit a summary offence on conviction and are liable for a fine of up to £2,500 (level 4 on the standard scale). The local housing authority has the power to bring proceedings, or they can be brought by the leaseholder. Local authorities are exempt from prosecution."

[jeffrey]

Whenever dealing with any reference material on the 1985 Act, take care with the Act's text. Some alterations* are in force; some are not.

*- deletions, amendments, and insertions.