UK Landlord Forum / Life

Hi,

I am a first time landlord. I asked my tenant to pay service charge and ground rent for the building on top of rent. They made the payments to the management company on my behalf, the bill was in my name. They are now requesting this money back saying that it is a banned fee under the 2019 Act. They say they will pursue this case in the First Tier Tribunal. Should I refund them the money or go to the Tribunal?

Thank you

Interestingly... for I have never even contemplated passing on the Service Charge to the Tenant (never mind the Ground Rent - go you!) it seems, to me, that the Tenant Fees Act is silent on this matter. In that it does not appear in either permitted or prohibited fees.

Even though I would never change my ways, I would be interested in other thoughts on this.

Likewise, I would be asking the Tenant to show you the section of the Tenant Fees Act that comments on this. I wonder if they are able to do that. If so, please pass it back here.

thank you for your reply.

The tenant is arguing that while service charge and ground rent are not explicitly banned, landlords can only charge a predefined list of fees, more or less just rent, and service charge + ground rent are not on the list. So, if it is not on the list of allowed fees it is not allowed.

They are referring to the bottom paragraph of this section which makes all fees not on the list illegal.


You cannot require a tenant (or anyone acting on their behalf or guaranteeing their
rent) to make certain payments in connection with a tenancy. You cannot require
them to enter a contract with a third party or make a loan in connection with a
tenancy.
The only payments you can charge in connection with a tenancy are:
a) the rent
b) a refundable tenancy deposit capped at no more than five weeks' rent where
the annual rent is less than £50,000, or six weeks' rent where the total annual
rent is £50,000 or above
c) a refundable holding deposit (to reserve a property) capped at no more than
one week's rent
d) payments to change the tenancy when requested by the tenant, capped at
£50, or reasonable costs incurred if higher
e) payments associated with early termination of the tenancy, when requested
by the tenant
f) payments in respect of utilities, communication services, TV licence and
council tax; and
g) A default fee for late payment of rent and replacement of a lost key/security
device, where required under a tenancy agreement

If the fee you are charging is not on this list, it is a prohibited payment and you
should not charge it. A prohibited payment is a payment outlawed under the ban.

But if it's mentioned in your AST, then it actually seems like that might be arguable, if still not very reasonable (in my eyes).

See something like... https://www.homeviews.com/buying/what-is-a-service-charge-why-do-i-pay-it ...this may all come down to what's in your AST, actually, and that interests me a little bit. My quarterly service charge is running at £892 for my swanky inner city apartment... if I could dislodge that from my shoulders and put in onto shoulders which appear to simply not care about money (not even their rich parents do, seemingly) I wonder how mercenary my behaviour could become.

The article claims it was Posted on 21st March 2023.

I think the tenants are right.

https://blog.home-made.com/service-charge-ground-rent-guide/#if-i-let-my-leasehold-property-can-i-ask-my-tenants-to-pay-the-service-charges-and-ground-rent

If I let my leasehold property, can I ask my tenants to pay the service charges and ground rent?
The Tenant Fee Act prohibits landlords from charging any fees to tenants other than those specifically permitted under the act (e.g. the rent, a refundable tenancy deposit, costs incurred by changing the tenancy agreement or terminating it early). This means that you cannot make it a condition of the tenancy agreement that your tenants accept responsibility for your charges as the leaseholder.

The fees owed to the freeholder must be covered by the rental income you make from the tenancy or paid out of pocket. If you have higher service charges because the freeholder provides several amenities for residents throughout the wider building, then your property should generally command a higher value on the market commensurate with these extra perks.

thank you both,

this is what I thought. They did not seem to care about money, I did not put in the AST. They just agreed to pay it via email.

I don't understand why you did this in the first place? It seems a very odd way of going about things.These costs should have been taken into consideration when setting the rent.Is the actual rent lower than market rates for your area,to compensate for this extra cumbersome arrangement?

No, I thought it was the standard practice. This is my first time being a landlord

Quote from: Inspector on June 27, 2023, 06:22:16 AMThis means that you cannot make it a condition of the tenancy agreement that your tenants accept responsibility for your charges as the leaseholder.

Don't get me wrong, I like this answer better... it is the way it should be. I'd not argue that.

But we still just have two discrete pages on the Internet effectively saying the opposite thing... and neither is a .gov one.

Quote from: danny2000 on June 27, 2023, 08:34:40 AM
No, I thought it was the standard practice. This is my first time being a landlord

It's standard practice in commercial property leases, where the lease runs for a couple of decades and rent reviews are years apart. the difference with an AST is you can put the rent up (within reason) every year so that gives you the ability to cover off any increase in the service charge. Barring massive costs that you can't pass on, the long term result is the same; the tenant pays. It just gets rolled into one rent figure rather than potentially being hidden at the outset.

Quote from: Hippogriff on June 26, 2023, 09:21:13 PM
Interestingly... for I have never even contemplated passing on the Service Charge to the Tenant (never mind the Ground Rent - go you!) it seems, to me, that the Tenant Fees Act is silent on this matter. In that it does not appear in either permitted or prohibited fees.

The way the act works is that all fees are prohibited, and then certain fees are allowed.
So not being mentioned means they're not allowed.

That has always been my working assumption... yet clearly there are relatively current websites out there advising that it's possible to charge this (if it's mentioned in your AST). So, even though this OP made his own assumption from the get-go without investigation, anyone who actually did do some limited research into this might still come away confused enough to give it a shot, if they were so inclined.

People assume that what they find is probably correct, while now I think it's sensible to assume that you're being misled until you can form your own view of the different "facts" and opinions available.