What is an administration charge?
An administration charge is an amount payable to the landlord or manager by a leaseholder for a service that is provided directly in relation to their individual property and is therefore not covered by any aspect of the service charge.
What does the administration charge apply to?
An administration charge can be made by the landlord or manager in respect of the following:
- Applications for, and subsequent granting of approvals under the lease, for example:
- Consent for the sale or transfer of the leasehold property.
- Consent for alterations to the property.
- Consent relating to the keeping of pets.
- Consent for sub-letting (please seek specific advice in respect of this matter).
- Provision of information or documents exceeding what would reasonably be covered by management fees (which are part of service charges).
- A contribution towards the costs relating to late payment of service charges or other amounts the leaseholder is required to pay under the terms of the lease or other contract.
- A contribution towards costs of any action the landlord may have to take relating to a breach, or alleged breach, of a covenant in the lease.
A charge can be made by the landlord for the costs of varying leases but this is not regarded as an administration charge in the same way as the above items. The Leaseholder Association (LA) suggests that specific advice is sought in these circumstances.
For further information please see the LA information sheets: 104 Management Fees, 110 Lease Variations, 119 Leaseholders’ Rights and Obligations, 125 Pets.
Is the administration charge fixed or variable?
The lease may specify a fixed administration charge and, if so, it may also include a formula for increasing the charge. In some cases the lease may say that the leaseholder must pay a proportion or the full amount of the costs the landlord has incurred in providing the service. However, it is far more common for the lease just to say that an administration charge is payable without specifying the sum, which implies the amount is variable and therefore it must be reasonable. Regardless of whether the administration charge is fixed or variable, the leaseholder is only be required to pay a reasonable amount
Can leases that specify fixed administration charges be varied?
In cases where the lease states a fixed amount for the administration charge or a formula to calculate it, the leaseholder has a contractual obligation to pay the amount demanded. However, either the leaseholder or the landlord could apply to a First-tier Tribunal (FTT) to vary the leases to try to ensure an administration charge is reasonable. The leaseholders may consider the lease requires a level of administration charge that is excessive for the service they receive and alternatively the landlord may regard the level of administration charge they can demand as insufficient to cover their costs. Lease variations are not usually easy to achieve, but this may be a practical alternative to making an annual application to an FTT for a decision on whether the level of administration charge specified in the lease is reasonable. (Please see the LA information sheet 110 Lease Variations)
What information must be provided when demanding an administration charge?
The legislation requires the landlord or manager to send the leaseholder a summary of their rights and obligations with any demand for an administration charge. If the landlord fails to provide the summary the leaseholder can withhold the full amount of the administration charge until it is provided. This summary, which is in a prescribed form, sets out some basic advice regarding administration charges and informs the leaseholder how they can challenge the amount demanded and whether the charge is payable.
When might an administration charge not be applicable?
The landlord should not seek an administration charge for every request for information that is received if these costs are covered by the management fee, which is part of the service charge. (Please see the LA information sheet 104 Management Fees).
With regard to disability related adaptations legislation is evolving and specific advice should be sought in respect of charges for considering and/or granting consent. (Please see the LA information sheet 120 Disability Adaptations).
How can an administration charges be challenged?
If a leaseholder is unhappy with the amount of an administration charge or does not believe it is payable they should first obtain professional advice. Advice from the LA may be helpful for leaseholders to decide how to proceed which could be by negotiation with the landlord, using their complaint procedure or by an application to a court or FTT.
Why is consent required for alterations?
Many leaseholders may consider that they can make alterations to their property or take action such as sub-letting without informing any other party. However, in the vast majority of leases there are covenants requiring consent, which the leaseholder must comply with. Failure to obtain consent might result in action by the landlord for breach of covenant and the leaseholder may be required to re-instate which could prove costly.
If the leaseholder makes alterations to their flat with the landlord’s consent does the lease need to be varied?
If the layout of the flat is changed the original lease plans might not correspond to the new layout of the flat which means some terms of the lease may need to be varied. In these circumstances a Deed Of Variation (DOV) would usually just require an amended plan although some terms in the lease may need amendment as well. The DOV would need to be drafted by a solicitor, signed by the parties and sent to the Land Registry. If the leaseholder did not go through this process of obtaining a DOV they may find there are problems at a later date when trying to sell the flat.
When a leaseholder is selling their property can the landlord make an administration charge for dealing with pre-sale enquiries?
In most cases the solicitor acting for the buyer would send enquiries to the landlord of leasehold property or the landlord’s managing agent. In these cases the landlord or manager may make a reasonable administration charge.
The Law Society has published a template form of enquiries relevant to purchasers of leasehold property (Form LPE1- Please see the LA Information Sheet 101 Buying a Leasehold Flat). A typical charge from managers to complete these enquiries is £100-£300. If the lease specifies a fixed administration charge for handling a resale by way of a transfer fee, this fee must still be reasonable and no additional charge should be made.
Please see the LA information sheet 101 Glossary for a precise explanation of the terms used in this information sheet. Whilst the above provides general information on this subject it is strongly recommended that leaseholders obtain independent professional advice before proceeding with any formal action to challenge administration charges.
Disclaimer: This is a very general explanation of the subject. Where issues are not governed by statute the information is our opinion or best practice. You are advised to seek professional advice before acting on the guidance contained herein. Whereas The Leaseholder Association endeavours to ensure that published information is correct, it does not warrant its completeness or accuracy. The Leaseholder Association assumes no responsibility or liability for any injury, loss or damage incurred as a result of any use or reliance upon the information and material contained herein.
Info Sheet: 106/2/15 © Copyright