Payment of Service Charge and other Monies

Tenants who fall into arrears of rent will often also default on paying their service charge. Whilst the term “service charge” is not itself strictly defined, it often includes the landlord's expenditure on repair, maintenance of common parts or porterage.

The statutory rules relating to service charges payable in respect of dwellings (e.g. Housing Act 1996) do not apply to commercial property, which is governed by the common law and the wording of the lease.

There is an implied term in all leases that the service charges are to be fair and reasonable: Finchbourne Ltd v Rodrigues [1976] 3 All ER 581. This does not apply to a covenant to reimburse the landlords for the cost of purchasing insurance cover where there is no implied term that the sum paid must be fair and reasonable. The tenant's obligation is simply to reimburse the landlord for the sums expended: Havenridge Ltd v Boston Dyers Ltd [1994] NPC 39.

Where a dispute arises, each case will turn on its own facts. Any requisite certification, consultation procedure or supplying of estimates relating to service charges required by the lease must be carried out before the liability to pay arises: Northways Flats Management Co (Camden) Ltd v Wimpey Pension Trustees Ltd [1992] 31 EG 65.

Most leases provide that service charges are reserved as rent, in which case they will be recoverable and will fall due in the same manner. If not so expressly reserved, action may only be taken to recover the money as a simple debt, unless a claim for possession is also made which is based on the failure to pay as a breach of covenant other than the covenant to pay rent. A claim for possession in such circumstances will require service of a notice under the Law of Property Act 1925, section 146 (which is not otherwise required where the service charges are reserved as rents).

Other monies payable to the landlord which are stated in the lease to be recoverable "as if rent" may also be the subject of forfeiture proceedings: Escalus Properties v Robinson [1995] 31 EG 71.

Interest

Leases may include a covenant to pay interest at a specified rate if the rent (or other monies due to the landlord) are not paid on time:

If such a provision is included in the lease, the amount due should be added to the landlord's claim against the tenant.

If the lease does not provide for the payment of interest, the landlord can only claim interest after proceedings are issued pursuant to either the Supreme Court Act 1981, section 35A (for High Court proceedings), or the County Courts Act 1984, section 69 (for County Court proceedings).

Where there is a contractual rate of interest, since judgment has been entered the judgment debt will carry interest from the date of the judgment at the judgment rate rather than contractual rate: section 2(3)(b)(ii) County Courts (Interest on Judgment Debts) Order 1991.

Solicitors Birmingham
Fawcett & Pattni Solicitors. A specialist firm of Family Law firm of

 Solicitors in Birmingham

,

 Solicitors in Walsall

,

 Solicitors Birmingham

,

 Solcitors Walsall