What is an administration charge?
An administration charge is a fee demanded by the landlord or their manager for specific services provided on the request of, and for the benefit of, specific leaseholders in relation to their property, and not to all leaseholders.
The lease sets out what an administration charge covers.
Typically, administration charges are levied for:
- dealing with applications for approvals required by the lease, for example in relation to consent for:
- the sale or transfer of ownership of the property;
- alterations to the property;
- keeping of pets;
- producing documentation and providing information exceeding that which would be reasonably charged through the management fee, such as copies of insurance policies, or responses to pre-sale enquiries during a property sale; and
- contributions towards costs incurred by the landlord as a result of a breach or alleged breach of the lease by a leaseholder, whether because of late payment of rent or breach of a covenant.
The admin charge is just one of various costs you should expect to pay as a leasehold owner.
Is the administration charge fixed or variable?
Your lease will tell you whether your administration charge is fixed or variable.
If the charge is fixed, it may also give a formula for increasing a fixed charge over time.
Many leaseholders will find that the amount they pay as administration charge depends on the particular service provided, and the costs incurred by the landlord in delivering that service.
It is common for a lease simply to state that an administration charge is payable, without giving the amount. This would imply that it is variable.
Whether the charge is fixed or variable, it must be reasonable.
How can an unreasonable administration charge be challenged?
Leaseholders have the right to challenge administration charges they deem unreasonable at a First-tier Tribunal (Property Chamber) (FTT).
Before initiating this step, they might wish to seek advice from a legal professional, such as a specialist leasehold solicitor, who can offer guidance and help in understanding the processes involved.
Why is consent required for alterations?
Consent is required for alterations and extensions to ensure the leaseholder's modifications do not negatively impact the property or contravene the lease terms.
In many cases, the leaseholder needs to pay an administration charge for obtaining this consent, reflecting the landlord's costs in considering the request and potentially amending the lease.
When a leaseholder is selling their property can the landlord make an administration charge for dealing with pre-sale enquiries?
A landlord can levy an administration fee for handling pre-sale enquiries when a leaseholder is selling their property.
This charge should reflect the landlord's reasonable costs for providing necessary information to potential buyers. However, the leaseholder retains the right to challenge the amount if it appears excessive.
Extracts from the relevant law
Section 158 and Schedule 11(4)(1) of the Commonhold and Leasehold Reform Act 2002 state:
A demand for the payment of an administration charge must be accompanied by a summary of the rights and obligations of tenants of dwellings in relation to administration charges.
Right to withhold
A tenant may withhold payment of an administration charge which has been demanded from him if (the requirement to provide the summary) is not complied with in relation to the demand...Where a tenant withholds an administration charge under this section, any provisions of the lease in relation to non-payment or late payment of administration charges do not have effect to the period for which he withholds it.
Requirement to provide information about charges in a prescribed format
Both the form and content of the summary are set out in the Act.
The content of the summary reflects the introduction of the FTT in substitution for the Leasehold Valuation Tribunal, which was the body that was in existence when the law was enacted.
Form and content of summary of rights and obligations
The summary of rights and obligations which must accompany a demand for the payment of an administration charge must be legible in a typewritten or printed form of at least 10 point, and must contain—
the title “Administration Charges – Summary of tenants’ rights and obligations”; and
the following statement—
This summary, which briefly sets out your rights and obligations in relation to administration charges, must by law accompany a demand for administration charges. Unless a summary is sent to you with a demand, you may withhold the administration charge. The summary does not give a full interpretation of the law and if you are in any doubt about your rights and obligations you should seek independent advice.
An administration charge is an amount which may be payable by you as part of or in addition to the rent directly or indirectly—
If you are liable to pay an administration charge, it is payable only to the extent that the amount is reasonable:
- for or in connection with the grant of an approval under your lease, or an application for such approval;
- for or in connection with the provision of information or documents;
- in respect of your failure to make any payment due under your lease; or
- in connection with a breach of a covenant or condition of your lease.
Any provision contained in a grant of a lease under the right to buy under the Housing Act 1985, which claims to allow the landlord to charge a sum for consent or approval, is void.
You have the right to ask the First-tier Tribunal whether an administration charge is payable. You may make a request before or after you have paid the administration charge. If the tribunal determines the charge is payable, the tribunal may also determine—
- who should pay the administration charge and who it should be paid to;
- the amount;
- the date it should be paid by; and
- how it should be paid.
However, you do not have this right where—
- a matter has been agreed to or admitted by you;
- a matter has been, or is to be, referred to arbitration or has been determined by arbitration and you agreed to go to arbitration after the disagreement about the administration charge arose; or
- a matter has been decided by a court.
You have the right to apply to the First-tier Tribunal for an order varying the lease on the grounds that any administration charge specified in the lease, or any formula specified in the lease for calculating an administration charge is unreasonable.
Where you seek a determination or order from the First-tier Tribunal, you will have to pay an application fee and, where the matter proceeds to an oral hearing, a hearing fee, unless you qualify for fee remission or exemption. Making such an application may incur additional costs, such as professional fees, which you may have to pay.
The First-tier Tribunal and the Upper Tribunal (in determining an appeal against a decision of the First-tier Tribunal) have the power to award costs in accordance with Section 29 of the Tribunal,Courts and Enforcement Act 2007.
Your lease may give your landlord a right of re-entry or forfeiture where you have failed to pay charges which are properly due under the lease. However, to exercise this right, the landlord must meet all the legal requirements and obtain a court order. A court order will only be granted if you have admitted you are liable to pay the amount or it is finally determined by a court, a tribunal or by arbitration that the amount is due. The court has a wide discretion in granting such an order and it will take into account all the circumstances of the case.