Landlords challenged at Tribunal found to be overcharging on service charges

A left-wing group claims social and private landlords are “getting away with large-scale financial exploitation” over service charges.

A survey by Social Housing Action Campaign (SHAC) claims that in cases where service charges were challenged at the First-tier Tribunal (FTT), more than 63% of landlords were found to be overcharging.

The figure rises to more than 66% for housing association landlords.

Landlords admitting overcharging only after a tribunal claim has been lodged

SHAC says service charges are paid by both private tenants and other residents, including shared owners and leaseholders, for services such as communal cleaning, lighting and heating.

For some private tenants, these costs are included within their rent, while others pay a separate service charge. Shared owners and leaseholders typically pay service charges in addition to their mortgage or ownership costs.

According to the findings, 238 judgements were reviewed over service charges and the majority of cases at FTT were brought against private landlords.

The landlord profile breaks down as 189 private landlords and/or their managing agents (79.4%), followed by 33 housing associations (13.9%), 15 councils (6.3%).

More than 63% of private landlords were found to be overcharging, while councils were found to be overcharging in 40% of cases.

In the report, SHAC claims: “For each case heard, many more are settled out of court, with landlords admitting overcharging only after a tribunal claim has been lodged.

“Landlords also routinely threaten claimants that they will demand compensation to cover their high legal costs if the tenant or resident is not successful in proving overcharging.”

Service charge abuse is financially and psychologically devastating

SHAC secretary and cofounder Suzanne Muna told Labour Hub: “Service charge abuse is both financially and psychologically devastating for those affected. The evidence we have collected is stark, and this report is critically important in providing hard evidence of the widespread financial hyper-exploitation of tenants and residents by landlords. The cases that ended up at Tribunal are just the tip of a mountain.

“This abuse has been going on under the noses of one housing minister after another for more than a decade.

“All have chosen to turn a blind eye. It is a massive disservice to tenants and residents who pay directly, and is also draining the Housing Benefit budget when it is used to pay for services which are non-existent. We urge the government to act now along the lines we recommend.”

Expand Legal Aid

The group is now demanding tenants and residents who dispute service charges to be allowed to pay the contested amount into court.

The report says: “The payment should prevent the landlord designating the tenant or resident as being in arrears. The landlord should be given a timeframe within which they must evidence the legitimacy of the charge. If they are unable to do so, the funds are to be returned to the tenant or resident.”

Other recommendations include expanding and funding Legal Aid to cover housing-related cases and introducing stronger sanctions against landlords who breach the rules.

According to SHAC’s findings, tenants and residents had representation at Tribunal in around 20% of cases and landlords and managing agents had representation in  60% of cases.