Residential long leasehold update: Clarity on forfeiture and service charge costs, and section 20 consultations

17th December 2021

As 2021 draws to a close we have some much-needed clarity on some important issues relating to long residential leases. For landlords (and lenders with leasehold securities) two judicial decisions [1] should make the law and practice regarding the recoverability of service charges and legal costs clearer. These cases have confirmed the following:

• A landlord’s costs of proceedings to determine the amount of service charge payable by a tenant to enable service of a section 146 notice [2] are contractually recoverable under a lease as costs incurred ‘for the purposes of or incidental to the preparation and service of a section 146 notice’ [3].

• However, a landlord’s costs in respect of proceedings to determine the level of service charge payable are not costs ‘of employing professional advisers and agents as shall be reasonably required in connection with the management of a building’ [4] .

• Section 20 of the Landlord and Tenant Act 1985 provides that a tenant cannot be charged more than £250 via a service payment in respect of “qualifying works” unless the landlord complies with prescribed consultation requirements [5]. Wynne v Yates confirms that, where a landlord has consulted but an original contractor fails to complete works, the landlord does not need to re-consult before engaging another contractor to conclude matters, even if the cost would increase.

How we can help

Walker Morris’ Housing Management & Litigation Team has a wealth of experience advising a broad range of clients, including leading lending institutions and national private and public sector landlords. The Team specialises in the resolution of contentious issues in respect of residential tenanted properties. Please do not hesitate to contact Karl Anders or Pawan Pandit for any further advice or information.

Please do not hesitate to contact Karl Anders, Pawan Pandit or Asia Munir for any further advice or information.

[1] Kensquare Ltd v Boakye [2021] EWCA Civ 1725; Wynne v Yates [2021] UKUT 278 (LC)

[2] as a pre-cursor to pursuing forfeiture of the lease

[3] a common provision in most residential long leases

[4] a common service charge item of expenditure in a residential long lease

[5] subject only to the landlord obtaining statutory dispensation from the need to consult from The Property Tribunal