Leaseholder challenges unfair service charge – a case study

If a landlord, freeholder or managing agent is planning to use service charge to fund major works or enter into a long-term agreement, they must consult leaseholders first. If this process is not followed, leaseholders can challenge the demand. The following case study provides an example of this, highlighting how Section 20 protects leaseholders and ensures accountability of managing agents.

The leaseholder’s problem

Our client is a leaseholder in a residential block. The managing agents announced that the service charge would be increased by 100% to cover major works, which were budgeted at £32,500. However, the demand for payment was issued without consulting the leaseholders. 

The rules of Section 20

As per Section 20 of the Landlord and Tenant Act 1985, landlords are required to consult leaseholders if:

• The landlord, freeholder, or managing agent proposes major works (qualifying works) and any one leaseholder’s contribution will exceed £250, or

• The landlord proposes a long-term agreement (over 12 months) where any one leaseholder’s contribution will exceed £100 per year.

If the consultation process is not carried out, the landlord may only recover £250 per leaseholder, unless the Tribunal grants dispensation.

Our advice to the client

As the managing agent did not follow the statutory procedure, we advised the client to challenge the demand. Under Section 20, our client was only liable to contribute up to £250 for the work, unless proper consultation occurred or dispensation was granted. We advised our client to withhold the remaining balance until the matter is resolved. 

The client could also make an application to the First-tier Tribunal for a determination that the additional charges are not payable (under Section 27A of the Act). If the works are genuinely required, the landlord must restart the process properly with a Section 20 consultation.

As a result of this advice, the client avoided paying thousands of pounds in unlawful charges.

Protecting leaseholders’ rights

This case highlights the importance of the Section 20 consultation procedure as a statutory safeguard for leaseholders; it protects them from unreasonable service charges, gives them a right to be consulted and an opportunity to influence decisions (e.g. by submitting observations and nominating contractors).

Here for you

At Attwaters, we provide clear, practical advice on Section 20 consultations and help leaseholders challenge unfair service charge increases. We also guide management companies on their responsibilities, ensuring they act within the law and avoid disputes.

To find out how our specialists can help, get in touch on disputeresolution@attwaters.co.uk or call 0203 871 0110.