Residential service charges can be something of a minefield for  investor landlords. The statutory provisions designed to protect tenants from excessive service charges brought into force by the Landlord and Tenant Act 1985 (LTA1985), were supplemented by regulations introduced through the Commonhold and Leasehold Reform Act 2002 (CLRA2002). The result is a complex web of rules and regulations which can sometimes be difficult to interpret.  

Recent cases have centred on two aspects of the service charge regulation; the concept of reasonableness and the requirement to consult before incurring expenditure in relation to large-scale works or entering into long term agreements. Whilst these provisions were put in place to protect tenants from unscrupulous landlords, both these concepts illustrate the inherent conflict of interest between the parties; landlords will generally have a long-term interest in maintaining the building, whereas the flat tenants often have a shorter term view.  

What is reasonable?
Section 18 of LTA1985 requires all costs within the service charge to have been 'reasonably' incurred and any works/services provided to be of a 'reasonable' standard. There is no statutory definition of reasonableness and tenants have the right to challenge service charge costs by application to the First Tier Tribunal, whether or not the relevant cost has actually been paid.