Q&As

Do service charge funds need to be held in a designated deposit/trust account?

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Produced in partnership with Helen Galley of XXIV Old Buildings
Published on LexisPSL on 07/12/2017

The following Property Disputes Q&A produced in partnership with Helen Galley of XXIV Old Buildings provides comprehensive and up to date legal information covering:

  • Do service charge funds need to be held in a designated deposit/trust account?

Where section 42 of the Landlord and Tenant Act 1987 (LTA 1987) applies ie the premises let are residential and two or more tenants are required by the terms of their leases to contribute towards the same costs being the costs of providing services, then the landlord holds the funds paid pursuant to the service charge obligation and any investments representing the same either in a single fund or in two or more separate funds on trust to apply them to the cost of the service provided pursuant to the leases.

The extent of services covered by the obligation will be determined by construing the provisions in the lease and the extent to which service charges can be recovered will be governed by the terms of the lease and also subject to statutory regulation under the provisions of the Landlord and Tenant Act 1985 (LTA 1985) and LTA 1987.

Most leases provide for tenants to pay advance service charges which are monthly or quarterly or other periodic payments during the course of the service charge year based on a bona fide estimate of the cost the landlord will incur in c

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