Administration Charges

In order to redress the problem of landlords arbitrarily recovering payments which leaseholders could not challenge as to their reasonableness, Schedule 11 of the Commonhold and Leasehold Reform Act 2002, introduced them as a new legal category, administration charges.

They are neither service charges or ground rent and can be levied for the following:

1. The consideration and granting of approvals under the lease for structural alterations under a Deed Of Variation;
2. Providing subletting consent;
3. Providing consent to sell;
4. Administering late service charge payment (if the lease allows for it);
5. Providing information such as replying to Pre-Contract enquirie during the sale of leasehold propertiest and providing a Sellers Pack;
6. Charges that may arise from dealing with a breach of covenant. The Commonhold and Leasehold Reform Act 2002 has made it possible to levy variable administration charges for breaches of a lease, such as late payment, even if the lease does not specify this;
7. Supply and/or administration of a Deed of Covenant;
8. Providing certified copies of a Share Certificate or a Member Certificate;
9. Remortgage Notice of Charge (including service charge & insurance information);
10. Remortgage Notice of Charge (receipting only);
11. Registration of the assignment, i.e.the change of lessee after a sale.

Fixed or Variable?

Such charges will either be fixed, meaning they are calculated by reference to a formula, or 'variable'.

If the administration charge is fixed then the only way to challenge it is to apply to the LVT for a lease variation on the grounds that either the calculation formula is unreasonable or the adminstration charge specified in the lease is unreasonable.
Any lease variation will however only affect future payments so even if the charge is clearly unreasonable, it will still have to be paid until the variation comes into effect.

If the charge is variable then under s158 of the 2002 Act, leaseholders have the right to ask the LVT whether it is payable. The request can be made before or after payment because the LVT doesn't presume that because the charge has been paid that the issue of reasonableness doesn't arise. If the Tribunal determines that the charge is payable it may also determine:

1. Who should pay it;
2. Who it should be paid to;
3. The amount;
4. The date it should be paid by;
5. How it should be paid.

WITHOLDING PAYMENT

As with service charge demands, under s153 Schedule 11 of the Service Charges (Summary Of Rights And Obligations And Transitional Provision) (England) Regulations 2007 leaseholders are legally entitled to withhold administration charges from the landlord if they do not receive a summary of rights and obligations in respect of these demands otherwise it is not payable. A landlord will not be able to apply to the LVT to dispense with the requirement to serve these summaries and any clauses of the lease relating to non-payment or late payment (i.e. interest charges etc) are deemed to have no effect during the period that administration charges are withheld.