OK, here is the theory:
The Commonhold and Leasehold Reform Act 2002 introduced rights relating to administration charges. These are defined in the 2002 act as ‘an amount payable by a tenant as part of or in addition to rent, which is payable directly or indirectly for:
- the grant of approvals under the lease or applications for such approvals;
- for or in connection with the provision of information or documents by or on behalf of the landlord or a party to the lease other than the landlord or tenant;
- costs arising from non-payment of a sum due to the landlord;costs arising in connection with a breach (or alleged breach) of the lease.’
Any administration charge the landlord asks for ought to be reasonable and the landlord must provide a summary of your rights and responsibilities relating to administration charges with the demand. If the summary is not included, you do not have to pay the charge until the landlord issues the demand with the summary.
Now, here is some practice:
Administration charges cover a multitude of sins by the freeholder: inflated legal costs; dreamed up sub-let fees; assorted fees on re-sale of a leasehold property.
The most serious are the administration charges that apply to the freeholder deploying a first-rate legal team utterly to destroy a leaseholder litigant in person who is under the impression that the property tribunal is some sort of informal redress forum.
People’s lives are ruined here. Like Dennis Jackson, who suddenly found he was looking at an £85,000 administration charge for the freeholder’s legal team when he thought property tribunal costs could not exceed £500. He had his £800,000 Battersea flat forfeited at Wandsworth County Court – the hearing took 10 minutes – which took the combined efforts of LKP, Sir Peter Bottomley, Tidjane Thiam – then CEO of Prudential, which had just lost its £160,000 equity release mortgage – to overturn. (The idea that judges go out of their way to avoid residential lease forfeiture is not our experience at all.)
Here is an example of a landlord’s debt collectors halving their costs once this issue came to public attention thanks to LKP:
In some cases, your lease may also allow your landlord to recover from you legal costs arising as a result of court action or a tribunal decision. These costs may arise as a result of you:
- failing to pay an amount that was due to the landlord; or
- breaking (or allegedly breaking) the terms of the lease.
If the costs result from one of the situations listed above, they will be classed as an administration charge. Administration charges should be reasonable, and you can challenge them by applying to the tribunal for a decision if you do not believe they are fair. However, as with service charges, you cannot challenge an administration charge which:
- you have already agreed or admitted responsibility for paying;
- has been (or will be) referred to arbitration following a dispute; or
- has already been decided by a court or tribunal.
Application Form – Liability or Variation of an Administrative Charge:
Administration charges cover the freeholder’s legal costs and can be devastating for a leaseholder in a dispute:
Dennis Jackson, a leaseholder of an £800,000 flat In Battersea was hit with a legal bill of more than £80,000 following a service charge dispute involving £6,000.
He thought that legal costs in the property tribunal were capped at £500 – one of many leaseholders misled by the advice of the Leasehold Advisory Service at that time:
Relevant forms for leaseholders in England: