February 5, 2014 2:03 pm

House Rules: property law and challenging service charge demands

Keeping tenants in check, community strategies to reduce energy use, and how to challenge service charge demands
Illustration by James Ferguson depicting property law©James Ferguson

1. Keeping your tenant in check

I own a small investment property. My tenant wants to make some alterations as part of a refit. Do I have to say yes? It depends what the lease says. Usually tenants can make non-structural alterations if they get consent. Structural changes are generally forbidden.

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If I am happy with structural alterations, can I give consent even though the lease doesn’t allow them? Yes, but be careful. You should put any consent in a formal document (known as the licence to alter), so there are no arguments later. If your tenant is backed up by a guarantor, make sure they sign the licence, to confirm they agree to the alterations. The Court of Appeal recently agreed that a guarantor had been released, because the landlord had allowed the tenant to make alterations that could have increased the guarantor’s liabilities under the lease without getting the guarantor to sign the licence to alter. Don’t let that happen to you, as it will mean your guarantor isn’t liable if your tenant doesn’t pay its rent.

What if there isn’t a guarantor? The main point to consider is whether this is a one-off consent or whether you are changing the lease to allow structural alterations in future as well. Let your solicitor know so the deal can be documented correctly.

Anything else I need to be aware of? If your own interest in the shop is leasehold, check the terms of your own lease, in case you need to get your landlord’s consent as well.

2. New strategy for community energy

I’ve heard that some communities have been getting together to reduce their energy bills. Is this something my community can do too? Yes. On January 27 2014 the Government launched the UK’s first Community Energy Strategy. The aim is to help communities to take more control of the energy they use, to cut their bills and tackle climate change. It also recognises the wider social and economic benefits of community energy.

What does the Community Energy Strategy involve? The strategy focuses on the four main types of energy activity that communities can get involved in:

generating energy (both electricity and heat) through community-owned renewable energy projects

reducing energy use by sharing energy-saving advice and tips on how to change everyday energy behaviour

managing energy better by helping people engage with new technology such as smart meters

getting together to buy energy and negotiate better rates from suppliers

That all sounds very worthy but what’s in it for me? According to the Department of Energy and Climate Change, over 21,000 households have already switched energy supplier under the Cheaper Energy Together scheme and made an average annual saving of £131. Communities that develop their own renewable energy projects can also generate income for themselves through feed-in tariffs for electricity generation and renewable heat incentive payments for heat generation.

Are many communities likely to get involved? DECC estimates that since 2008 over 5,000 community energy groups have already been active across the UK and that by 2020 schemes involving local communities could supply enough electricity for 1 million homes. Local authorities have a key role as “trusted intermediaries”, so the secretary of state for energy and climate change has also written to all local authority leaders in England calling for more support to be offered to community energy projects.

What happens next and where can I find out more? The Government’s plans include a £10m Urban Community Energy Fund to kick-start community energy generation projects in England; a £1m Big Energy Saving Network fund to support the work of volunteers helping vulnerable consumers to reduce their energy use; a community energy saving competition (email communityenergystrategy@decc.gsi.gov.uk for details); and a “one-stop shop” information resource for people interested in developing community energy projects.

3. Challenging service charge demands

I think the landlord of my flat is demanding too much service charge. Can I challenge it? Yes. The law on residential service charges in England and Wales protects tenants by limiting what landlords can recover. Service charges must be reasonable and in many cases, landlords must consult tenants in advance about planned spending.

Do I have to go to court? Disputes about service charge go to a specialist tribunal. You can ask the tribunal to decide whether the landlord is entitled to what it is demanding.

What if I just refuse to pay? This is a risky strategy. A tribunal recently ruled that tenants who had withheld service charge were liable to pay their landlord’s legal costs. The tribunal decided that the landlord was entitled to the disputed service charge, so by not paying it, the tenants had breached their lease obligations. The lease had a clause allowing the landlord to claim costs it ran up if a tenant was in breach, so the tenants had to pay them.

Can I pay “under protest”? Yes. Even if you have paid service charge, you can still challenge it, as long as you have not agreed it is due. If you make it clear that you dispute the service charge you are paying, you keep your right to challenge without breaching your lease obligations.

Do I have any other options? You should always start by talking to your landlord or its property agents. They must give you access to accounts, bills and other documents, which should help you decide whether or not they are entitled to as much as they are demanding.

Mary Finnigan is a solicitor in the Real Estate department at King & Wood Mallesons SJ Berwin

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