Section 153 of the Commonhold & Leasehold Reform Act 2002 requires landlords of residential properties to include with demands for service charges a summary of their tenants rights and obligations in relation to those, and similarly in relation to administration charges. Although this Section of the Act came into force in July 2002, giving the government power to make regulations as to what such a summary should contain, those regulations were not made until April 2007 and do not come into force until 1 October 2007. They apply in respect of any service charge demands made by landlords of tenants for sums due on or after 1 October 2007 (but not in respect of any sums due before that date).

An administration charge is an amount payable by a tenant as a consequence of seeking approval from the landlord as required by the lease, or in connection with the provision of information or documents by the landlord under lease or statute, or as a consequence of any failure to make any payment due by the tenant under the lease or in connection with a breach of covenant or a condition of the lease. Such charges are widely defined.

The summaries are lengthy and explain to the tenant what rights they have to, amongst other things, apply to a Leasehold Valuation Tribunal to decide whether the service or administration charges are payable at all, and if so how much and to whom, but not where there has already been an agreement or admission by the tenant that the sum is due or that the matter has been determined previously by a Court or under an agreement to go through arbitration after the lease was made.

The effect of this is that unless and until the summary is provided then any sums that might otherwise be due under the lease from the tenant are not due until the summary is provided. It is therefore absolutely essential that landlords or their managing agents ensure that they have arrangements in place so that in relation to any demands by landlords of tenants for monies due on or after 1 October 2007 are accompanied by the summary that will then be required.

Apparently this provision was introduced by the government because it was considered that many tenants did not know about, or understand, their legal rights. Some landlords may take the view that in summarising a tenant’s rights in this way it may encourage them not to make payment of the sums that as far as the landlords are concerned are due but equally such landlords will not wish to fall foul of the provisions and find that they cannot recover sums demanded where they have not complied and until they comply.

For more information about these regulations contact David Wadsworth a solicitor in the litigation department.