Oliver Radley-Gardner surveys the risks surrounding residential service charge regulation
In Cadogan v Sportelli [2007] EWCA Civ 1042, the lands tribunal set a generic deferment rate within Prime Central London (PCL) for leases with more than 20 years left to run for the purposes of valuing the landlord’s interest under the Leasehold Reform, Housing and Urban Development Act 1993.
The tribunal’s entitlement to set a generic rate was confirmed on appeal, and it was hoped this would end deferment rate disputes within PCL, and reduce disputes outside, by setting a default rate from which departure had to be justified. The generic PCL rate was set at 4.75%.for houses and 5% for flats.
Repairing obligations, and the administration and collection of service charges, make flats a riskier investment proposition ( Sportelli ). In Zuckerman v Calthorpe Estates Limited [2011] L & TR12 (UT), the tribunal decided this did not sufficiently reflect the risk associated with flats. The Sportelli deferment rate for flats was increased to 5.25% to reflect the additional burdens and risks to landlords of flats arising out of the Service Charges (Consultation Requirements)
