A recent decision of the Court of Appeal as to exactly what a tenant has to pay in respect of a service charge will be of concern to both landlords and tenants.
The usual principle behind a long lease of a flat or apartment is that the landlord is responsible for repairing the main structure and foundations and for insuring the building. In return the tenant pays a service charge to reimburse the landlord for doing this. The landlord will not be expected to be out of pocket for taking on this responsibility.
This was considered in the recent case of London Borough of Hounslow v. Waaler. The Council was landlord of Mr Waaler's flat. The Council decided that it wanted to replace the windows and cladding of the building, and was expecting to recover the cost by adding it to the service charge. Mr Waaler disagreed and stated that the Council had not acted reasonably in deciding to do this work. The issue was whether the costs of the works to the windows were "reasonably incurred" for the purposes of the Landlord and Tenant Act 1985 s.19(1)(a). There was a fine line between repair and improvement that needed to be considered.
The Court of Appeal agreed with Mr Waaler that the Council had not acted reasonably and therefore was unable to recover its expenses. Good news for tenants of the Council. Bad news for Council tax payers who will now have to pick up the bill.
This decision will act as a warning to all landlords that they must be careful when managing blocks of flats, and that they need to take appropriate advice in what is a complex area of law.