The costs that are incurred by the landlord or management company must be “reasonably incurred” not “reasonable” in amount.
The landlord, management company and tenant can apply to the Tribunal for a determination as to whether a service charge (or proposed service charge) is reasonable. There is no definition as to what is reasonable and each case will be determined on its own facts. As a landlord it is important that you have evidence to justify the decisions you have made to demonstrate that the costs have been reasonably incurred.
The Tribunal will also determine, upon request:
- whether the service charge is payable under the lease;
- who is to pay the service charge and who they are to pay it to;
- when the service charge is payable; and
- how the service charge is to be paid.
An application can be made whether or not the service charge has been paid, for costs that have already been incurred and for estimated costs.
An application cannot be made if the charges have been agreed or admitted or if the matter has already been determined by a Tribunal.
Net week, read our next blog in this series to find out when a landlord needs to consult with a tenant before incurring certain charges that it wants to recover through the service charge.