Financial Management & Client Companies

From 1st of October 2007 in England and in Wales 1st October 2007 a summary of leaseholders' rights and obligations must accompany every demand for the payment of a service charge.

The 2002 Act defines certain fees made by landlords and managing agents for things in addition to the service charge and rent as administration charges. If the fee you levy is defined as an administration charge then leaseholders have the right to challenge its reasonableness and payability at a Tribunal and must receive a summary of their rights and obligations with any demand.

There are a number of contractual and statutory restrictions on the recovery of service charges. The statutory restrictions include section 20B of the Landlord and Tenant Act 1985. S20B of the Landlord and Tenant Act 1985 sets an important time limit on the recovery of service charges; it is often referred to as the 18 month rule.

In September 2018, H M Revenue & Customs (“HMRC”) issued Revenue & Customs Brief 6 – VAT Exemption for all domestic service charges, VAT Information Sheet 07/18 – Applying the correct VAT liability on residential domestic service charges, and an amendment to Section 12 Service charges and residential accommodation of HMRC Notice 742 Land and Property.