Q&As

A residential management company has responsibility for the freeholder obligations of a property which includes three flats (private company limited by guarantee). The secretary alleges that their fellow director who owns the flat above is in breach of covenant (they have the top floor flat and now adopted the loft for their personal use, including putting in a velux window). Can the management company seek legal advice, to be paid from the service charge, and withhold the advice from a fellow director?

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Published on LexisPSL on 09/04/2020

The following Property Q&A provides comprehensive and up to date legal information covering:

  • A residential management company has responsibility for the freeholder obligations of a property which includes three flats (private company limited by guarantee). The secretary alleges that their fellow director who owns the flat above is in breach of covenant (they have the top floor flat and now adopted the loft for their personal use, including putting in a velux window). Can the management company seek legal advice, to be paid from the service charge, and withhold the advice from a fellow director?
  • Recovery of costs of legal proceedings via service charge
  • Under the lease provisions
  • Statutory position
  • Administration charges
  • Does a director have a right to see legal advice obtained by a company?

The general starting point is that a landlord cannot recover the cost of items which are not clearly included in the lease and which are of no benefit to the tenants. As a matter of law, the costs of legal proceedings are only recoverable via the service charge if the wording of the lease allows it.

It will therefore depend upon the interpretation of the relevant lease as to whether the cost of legal advice as to a potential breach of covenant by a tenant is included.

In addition, statute limits the amount that may be recovered from tenants of dwellings by way either of service or administration charges. In both cases, the landlord may recover no more than is ‘reasonable’, notwithstanding any contrary provision in the lease.

Recovery of costs of legal proceedings via service charge

Under the lease provisions

In Geyfords v O’Sullivan, the Upper Tribunal (Lands Chamber) held that the landlord's legal fees in respect of legal proceedings against other tenants were not recoverable as service charge under the terms of the lease. Such costs could not be said to fall within a clause requiring the tenant to contribute to 'all other expenses (if any) incurred…in and about the maintenance and proper and convenient management and running…' of the building.

Statutory position

Under section 20C of the Landlord and Tenant Act 1985, the court or tribunal has discretion

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