Upcoming Events :
Housing Seminar: Partnerships with the Public Sector – Avoiding the pitfalls
Thu 31 May 2012
Minerva House, 5 Montague Close, London, SE1 9BB
Management company 'can use service charge to recover legal costs'
Wed 01 Feb 2012
Management companies are permitted to recover legal costs they accrue by using service charges, depending on the wording of the lease.
The Plantation Wharf Management Company Ltd v Jackson and another [2011] case went to court as the lease did not explicitly outline whether these expenses could be covered by service charges.
However, the Lands Chamber of the Upper Tribunal decided that the lease was worded in a way that made it permissible for tenants to be required to cover the landlord's legal costs.
The property owner had been trying to recoup funds after suing tenants that had defaulted.
Mark Vinall, a partner at Winckworth Sherwood Solicitors specialising in enfranchisement and leasehold property matters, commented: "This case demonstrates that even where flat leases do not expressly entitle the landlord to recover the costs of enforcement action taken against others as a service charge item it will be implied.
"Flat owners may view this decision as unfair on the basis that the relevant defaulting flat owner alone should bear all costs incurred taking enforcement action against them. Landlords on the other hand will breathe a sigh of relief that they do not stand to be left out of pocket where the defaulting tenant is a straw man, e.g. they have no equity in their flat to fund such costs, particularly if they are a tenant owned management company prone to becoming insolvent in that event."
