Flat Tenants Victorious in Service Charges Challenge

Flats         Service charges are a burden on residential tenants and the onus is on landlords to prove that expenses have been reasonably incurred. In one case, a tribunal found that insurance premiums passed on to residents of a block of flats over a three-year period were more than £27,000 higher than they should have been.

The case concerned a landlord who had negotiated a block policy in respect of its very large portfolio, which included the block of 16 flats. The residents of one flat challenged insurance premiums totalling more than £36,000 that the landlord had sought to levy on residents between 2014 and 2017. The First-tier Tribunal upheld their complaint and determined the premiums payable at under £9,000.

In challenging that ruling before the Upper Tribunal (UT), the landlord argued that the policy was comprehensive in its cover, suitable for the property and had been negotiated through reputable brokers. In dismissing the appeal, however, the UT noted that the landlord had been wholly unable to explain the mysterious discrepancy between premiums charged to its tenants under the block policy and premiums obtainable for similar cover from other insurers on the open market.

The UT noted that the landlord was not required to show that the premiums were the cheapest that could be obtained on the market. However, it bore the burden of proving that they had been reasonably incurred. In such cases, landlords would be expected to provide evidence of steps taken to assess the market and to explain why a particular policy had been selected. For their part, tenants were entitled to rely on alternative quotes, so long as they were genuinely comparable.

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