Increasing numbers of property developments contain a residential element sold off on long leases and a commercial element let on market rent terms. Those used to managing commercial leases may not realise how highly regulated the collection of residential rent and service charge is – Recent regulations have now revised the form of demand to be used when collecting residential ground rent and it is important to keep up to date in order to collect money due efficiently.

Residential Ground Rent

Ground rent demands under those residential leases originally granted for a term of 21 years or more now need to comply with the revised regulations (in force from 26 April 2011) – follow this link to see what to change.

Residential Service Charge

Residential service charge recovery will always depend on the terms of the lease but, regardless of what the Lease says, in order to recover all service charge costs, landlords must also comply with the following:

  • Costs must be reasonably incurred
  • Services must have been carried out to a reasonable standard
  • The service charge demand must have been made within 18 months of the expenditure
  • Services provided under a long term contract or arrangement will be capped at £100 per residential tenant each year unless a statutory process of consultation has been complied with
  • Similarly, one-off service costs are capped at £250 unless a very similar consultation process has been completed before the costs were incurred
  • Service charge paid on account to the landlord must be held in trust

Service charge demands have to contain specified information – if not, the landlord cannot pursue the tenant for the service charge due. Lack of information can be rectified but the 18 month rule will kick in if something has been overlooked for too long. The demand must contain –

  • The name and address of the landlord
  • If the address is not in England and Wales, an address for the service of notices on the landlord in England and Wales (including an address for the service of court proceedings)
  • A summary of the relevant rights and obligations of the tenants in relation to Service Charge.

To ensure maximum recovery all landlords must comply with these regulations. Intermediate landlords also need to ensure their superior landlords comply where they need to recover the costs from the long residential leaseholders.