If you have a resident house manager, the rent on his/her flat is typically the largest single item in the service charge.  It is also the item on which the landlord is likely to make the most profit since, very often, the rent he charges is well in excess of the local market rents for comparable properties.

Leasehold law requires all items in the service charge to be “reasonable”.  If it is not (relative to local rents), then you have the right to demand a reduction from the landlord and a rebate for those previous years where he has been overcharging you.

Many people have done this and achieved big reductions (30% to 50%) and rebates; the highest so far is £137,000 at Oakland Court in Worthing. You can read about that on this site here

If you think you are being overcharged, share your concerns with other residents and try to agree on taking action together.  You do not need to form a Residents’ Association but it is worth considering for this kind of joint action.

First, check your lease.  If the lease does not specifically give the landlord the right to charge rent for his flat, then it is unlikely he will be able to do so and you should write and tell him so and ask for a refund.  If it does allow for rent to be charged, then it has to be “reasonable”. It is not difficult to assemble the information necessary to make a claim for a reduction and a rebate of excessive rent.

The first step is to gather information on local rents for comparable flats – and then deduct service charges and ground rents, which would not be payable on a warden’s flat.

The easiest and best situation is if there is a flat in your own development that is let or was recently let.  There is no room for dispute here; the flat is clearly comparable as it enjoys all the facilities that the HM’s flat enjoys.  If it is a one bedroom flat, and the HM’s has two bedrooms, a rule of thumb is that the extra bedroom increases the rent by around 15% so make that adjustment.

If there is no flat let in your development, look for flats to let in similar retirement developments nearby.  Girlings are a nationwide letting agent specialising in retirement flats and have hundreds on their books.  Take a look at www.girlings.co.uk and use their “property search” which allows you to see all flats to let in any county and town.  Remember, however, that as with any other agent these are just asking prices and few deals are done at these levels which should therefore be discounted by 5% to 10%.

If you can’t find comparable retirement flats with similar facilities, then look at rents in the local “open” market for non-retirement flats.  These are easily available from local estate agents.  Make sure that, as far as possible, the flats you consider have similar facilities -car parking, gardens, lifts – since your landlord will inevitably try to talk up the value of his own flats by reference to all the many benefits a tenant would enjoy (for which, by the way, you already pay through your high service charges and should not expect to have to pay again in a premium rent).  A friendly local letting agent may also be prepared to come to your development and put a rental value on a comparable flat.

When you have a good idea of the proper rent for the flat for the current year, use the same rent to go back to the point at which you consider the rent charged ever to have been reasonable in comparison.  You can find these rents in the service charge accounts for previous years.  Most people find it has never been reasonable from the start.   Using these figures you can calculate by how much you have been overcharged over the years and therefore what your rebate should be.

Keep copies of all the information supporting the rent you believe to be appropriate.  Equipped with this, write to your managing agent or landlord, setting out the figures, your sources and your calculations, demanding a rent reduction and a refund.  If you have done your homework well, there should be little room for dispute.

However, you should expect a letter in due course (if no reply within two weeks, chase them) trying to defend their valuation with various arguments about the wonderful facilities of the flat and why it should command a premium rent.  These are usually specious and can be easily refuted if you have done your research thoroughly.

Their letter may include an offer to reduce the rent but to a figure still be above the market rate.  Do not accept this first offer if you believe it to be inadequate compared with your market figures.  We have seen leaseholders prematurely accepting inadequate offers and regretting it later.  You should also ensure that the letter offers a refund reflective of the historical overcharges.  Again, we have seen inadequate refund cheques being sent pre-emptively to leaseholders before any agreement has been reached in a clear attempt to stampede the less well informed into accepting less that they are entitled to.

Hopefully, after some further exchange of letters and revised offers, you will feel able to agree figures with the landlord for a lower rent and an appropriate refund.  Remember, however, that the agreement on the lower rent is likely to cover only past and present financial years, not the future.  Keep your eye on the budgets in future to make sure the landlord does not try to move the rent up again.   Market rents are typically very stable; they do not go up every year as the landlord may try to make you believe.

Be prepared also for the landlord to retaliate to any reduction in the rent by withdrawing financial benefits that you might have had in the past such as the guest room income going into the service the charge account.  Check your lease to see if it allows him to do so.  He may also threaten to impose charges for the use of the (currently free) car park.  Don’t be intimidated by this; most leases do not allow for such charges to be introduced.

If you cannot agree an acceptable rent or refund directly with the landlord, your only recourse is to a Leasehold Valuation Tribunal (LVT).  Anyone can take the dispute to an LVT; it does not have to be a unanimous or even a majority decision of leaseholders but it would be desirable for a significant number of leaseholders to be in agreement on this course of action.

LVTs, while they are supposed to provide accessible justice to the layman, can be stressful so are not to be lightly entered upon.    Typically, the landlord will field a solicitor and a barrister but there is no need to be intimidated by this.   Provided your case is well supported by the facts and the relevant leasehold law, and you have made all reasonable attempts to reach agreement with the landlord “out of court”, it is a reasonable course to ask the LVT to decide the matter.

Finally, where a refund is agreed, the question arises as to how this should be distributed amongst leaseholders.  The fairest is to divide it up according to how long leaseholders have owned their leases and the “lease fraction” applicable to their flat (1 bed or 2).

If possible, advise anyone who has moved on (or their estates), of their entitlement so that they can claim too.  Anything balance not attributable to anyone should be paid into the service charge account for the benefit of all leaseholders.

In the past, some landlords have retained any such balance for themselves “in case a claim is made on us at some later date”.  They have little justification to do so and are simply keeping it for their own benefit..

For advice on taking this or any other matter to an LVT, contact the Residential Property Tribunal Service at www.rpts.org.uk or call 0845 600 3178

Related posts:

Ground rent doubled on mum’s flat Service with a snarl: anatomy of a leasehold ground rent demand Pensioners win epic £137,000 victory over warden’s flat rental Heirs of empty retirement leasehold flat now face doubled council taxes … on top of plummeting re-sale value, on-going service charges and an exit fee if it ever does sell