Administration charge demands need a summary of rights: eight demands worked

A managing agent sends a leaseholder a £150 charge for approving a sublet. The leaseholder does not pay, and the agent adds a late fee. Was the demand valid? That depends on one attachment that is easy to forget on the smaller, non-service-charge demands.

What the source says

Schedule 11, paragraph 1, defines an administration charge as an amount payable by a tenant of a dwelling as part of or in addition to the rent. The page lists examples such as approvals under the lease, providing information, late payment and breach of covenant. A variable administration charge is one that is neither specified in the lease nor calculated by a formula in the lease.

Paragraph 2 says a variable administration charge is payable only to the extent that the amount is reasonable.

Paragraph 4 is the one that catches demands out. A demand for an administration charge must be accompanied by a summary of the rights and obligations of tenants of dwellings. If it is not, the tenant may withhold payment of the demanded charge, and while it is withheld the lease terms about late payment (including any late fee) do not apply to that period. The paragraph allows regulations to set the form and content of the summary.

Paragraph 5 lets either side apply to the tribunal for a decision on whether an administration charge is payable, whether or not it has been paid.

Eight demands, worked

An invented month of administration charge demands for one block. The late fee is an invented £25 per late item; it is not from any source.

Total demanded: 90 + 150 + 216 + 75 + 120 + 264 + 180 + 60 = £1,155.

Withheld, by the summary rule: 150 + 264 + 60 = £474.

Payable on time: 1,155 - 474 = £681. Check: 90 + 216 + 75 + 120 + 180 = 681.

Late fees lost while the withholding lasts: 3 items x £25 = £75.

So three of eight demands, 37.5 per cent by number, hold up 41 per cent of the value (474 / 1,155 = 0.4104). One missing attachment on the larger items does the damage, because demand 6 alone is £264.

What goes wrong

• Attaching the summary to the service charge demand and forgetting it on the sublet, alteration and information-fee demands.
• Assuming a charge named in the lease cannot be challenged. Reasonableness (paragraph 2) is aimed at variable charges, and the line between specified and variable is worth checking against the lease.
• Adding the late fee anyway. The lease late-payment terms do not apply while the charge is lawfully withheld.

A simple check to run before sending

1. Is the charge an administration charge (an approval, information, late payment or breach item)?
2. Is the amount fixed in the lease or open to the agent's judgement?
3. Is the summary of rights attached, in the form the regulations require?
4. Is the amount one the agent could show to be reasonable?

For the service charge side of the same rule, see the service charge demand validity checker, the service charge arrears letter template and whether legal costs can be recovered through the service charge.

What I did not read

I did not read the Administration Charges (Summary of Rights and Obligations) (England) Regulations 2007 or the form of the summary itself, so I say nothing about its wording or type size. I did not read any case law on what counts as reasonable, nor the paragraph 5A provisions on tribunal costs. I did not read a particular lease. The eight demands, the amounts and the £25 late fee are invented examples.

Overlyft builds AI staff who join your block management team and check each outgoing demand against a list: charge type, summary attached, late fee wording. They hold back anything that fails for a property manager to approve before it is sent.

This is general information, not legal advice. Check the legislation and take advice on a particular lease or demand.