In the multifaceted domain of property management, the intricacies of residential service charges present a perpetual challenge for landlords. Recently, I had the privilege of engaging in a dialogue with Alison Greene, an accomplished property manager with over twenty years of experience, to delve into her insights on ensuring that service charges adhere to the mandates of being “reasonably incurred” and meeting a “reasonable standard” as dictated by the Landlord and Tenant Act 1985.
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Alison Greene oversees a diverse portfolio of residential properties across southern England and has encountered numerous hurdles concerning service charges. She noted, “A prevalent issue we face is leaseholders questioning the fairness of the charges,” underscoring a widespread concern among landlords and managing agents. “The crux lies in ensuring transparency and maintaining a standard that not only satisfies legal obligations but also fosters trust with tenants.”
The Landlord and Tenant Act 1985 is explicit in stipulating that landlords can only include costs in the service charge if they are reasonably incurred, and the associated works or services conform to a reasonable standard. Alison emphasised, “It transcends merely ticking a legal checkbox; it’s about ensuring that the services provided genuinely mirror the costs and quality anticipated by tenants.” This necessitates landlords to meticulously scrutinise every element incorporated in the service charge. Alison recounted an occasion where her team had to reassess their strategy after a leaseholder sought a Tribunal determination. “We needed to substantiate that our decision-making process was robust and that the charges mirrored market rates,” she explained.
Alison further elucidated the necessity of the two-stage test for reasonableness, as showcased in the Forcelux Ltd v Sweetman and Parker case. “Initially, we assess whether our decision-making process was rational, considering all pertinent factors. Subsequently, we evaluate whether the charges are consistent with prevailing market evidence.” This often involves soliciting quotes from multiple suppliers. “We don’t invariably choose the cheapest option,” Alison clarified. “Instead, we seek the best value, considering work quality and the service provider’s reliability.”
Advance payments demand careful consideration. Section 19(2) of the LTA 1985 mandates these payments to be reasonable. Alison recounted a scenario where they had to adjust the advance payment framework following a challenge. “Initially, we required a lump sum payment for remedial works, but after feedback, we restructured it to more manageable instalments.” The 2019 Avon Ground Rents Ltd v Cowley case underscores the necessity for flexibility and context-based decision-making. “There’s no one-size-fits-all solution,” Alison emphasised. “It’s about understanding each property’s specific circumstances and its leaseholders.”
Alison champions proactive measures to avert disputes over service charges. “Maintaining detailed records is paramount,” she advised. “We document every decision, from contractor appointments to maintenance schedules, to demonstrate our actions are justified.” Effective communication is equally vital in nurturing positive tenant relationships. “We involve leaseholders in decision-making processes, encouraging feedback and promptly addressing concerns,” Alison added. This open dialogue not only mitigates Tribunal disputes but also ensures tenants feel valued and heard.
Her team consistently reviews contracts and service providers to guarantee value for money. “We adhere to our service standards and avoid committing to unrealistic timelines,” she stated. “This not only satisfies tenants’ expectations but also strengthens our reputation as responsible landlords.” Alison’s experience reinforces the importance of balancing legal compliance with tenant satisfaction. “Ultimately, it’s about integrity,” she concluded. “By ensuring that service charges are reasonable and justifiable, we build trust and create a harmonious living environment for everyone involved.”
The insights Alison shares serve as a practical guide for landlords navigating the complexities of service charges. They underscore the importance of transparency, thorough planning, and open communication. As evidenced by Alison’s experiences, adhering to the principles of reasonableness not only satisfies legal requisites but also cultivates a positive relationship with tenants, benefiting the entire community. Through her wisdom and experience, landlords can glean valuable strategies for managing service charges effectively, promoting a cooperative and mutually beneficial living environment.
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